The Fed Has Run Out Of Money !!!!!!!

dopester

Generali wrote: »

The Fed and Treasury need to tread very carefully here. At the moment, US short term T-Bill rates are at their lowest since Pearl Harbor (0.02% yesterday at one point) but if they keep this up the bond vigilantes will be out in force.

Bring back Paul Volcker.

Even an "easy money" policy which led to negative T-bill rates in 1933 did not prevent deflation.

The markets can withhold a trillion dollars faster than the US Government can print it. Any determined inflationary policy that really spooks the markets will see holders of US Treasuries dump them.

There won't be any helicopter money. Turning on the presses at high speed destroys more wealth than it creates. They can create liquidity by creating debt, but that isn't the same as creating capital. We've already had seen the US does have a limit in letting Lehman go to it's fate.

dad-of-4

dopester wrote: »

The markets can withhold a trillion dollars faster than the US Government can print it. quote]

the US government doesn't print money, the federal reserve does, and lends it to the US government.

the fed is a private bank with a printing press.

Generali

dopester wrote: »

Even an "easy money" policy which led to negative T-bill rates in 1933 did not prevent deflation.

The markets can withhold a trillion dollars faster than the US Government can print it. Any determined inflationary policy that really spooks the markets will see holders of US Treasuries dump them.

There won't be any helicopter money. Turning on the presses at high speed destroys more wealth than it creates. They can create liquidity by creating debt, but that isn't the same as creating capital. We've already had seen the US does have a limit in letting Lehman go to it's fate.

I agree wholeheartedly. Of course we're not quite at 1933 levels of desperation yet. Maybe we'll get there, maybe we won't.

Of course if the US had nationalised Lehmans then the 'implicit guarantee' would have moved over to the US investment banks and in an election year there are better (as in more vote winning) ways to spend money than on investment bankers.