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| | Page 1, 2, 3, 4, 5 | Fed to Purchase U.S. Commercial Paper to Ease Crunch
| Anonymous Coward
User ID: 519725
10/7/2008 11:29 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
This is the silent theft of money right now. They will prop the market up and keep it semi stable until they have their hooks in every aspect of life in this country, owning every sector. Then pull the plug before the masses catch on. This is DOOM x 10000000
the part you left out is the conversion by the wealthy elite of their soon to be worthless paper money into real assets before the whole thing folds.
That process is happening now. Quoting: Anonymous Coward 519619
There was an article on GLP yesterday from the WSJ saying the rich were buying up the physical gold and silver to get rid of their worthless paper. They said that was the reason there is very little physical gold and silver on the market. |
| loosecannon 
User ID: 519718
10/7/2008 11:29 AM
 | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
Look at Zimbabwe. They pursued this same monetary path. Quoting: Anonymous Coward 519619
But they were in a completely different circumstance. They were not trying to cool off an overheating dollar, they weren't monetizing petro currency, they didn't have half the world invested in their debt.
The USA today exemplifies the adage "when you owe the bank $10,000 and default, you are in trouble. When you owe the bank $10,000,000 and default the bank is in trouble."
We owe the world $4.5 trillion. Figure it out. |
| Anonymous Coward
User ID: 481210
10/7/2008 11:30 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
Omega:
With treasury securities losing value, what are nations around the world who hold large amounts of them liable to do? I'm thinking specifically of China. |
| The Analog Guy
User ID: 74180
10/7/2008 11:31 AM
 | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
Ok, so you are saying inflation into possible hyper-inflation. But why do it this way? Wouldn't it hurt the rich as much as the middle and lower income classes? Quoting: Anonymous Coward 509660
Notice all the billionaires scarfing up gold as a hedge against hyperinflation? In Weimer, the currency was reduced to absolutely worthlessness. Hard items...gold silver land still had intrinsic value. The currency had NO value.
[link to www.cafepress.com]
"If a man could understand all the horror of the lives of ordinary people who are turning round in a circle of insignificant interests and insignificant aims, if he could understand what they are losing, he would understand that there can be only one thing that is serious for him—to escape from the general law, to be free. What can be serious for a man in prison who is condemned to death? Only one thing: How to save himself, how to escape: nothing else is serious-Gurdjieff |
| loosecannon
User ID: 519718
10/7/2008 11:31 AM
| | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
No big deal.
Well, no big deal except that the new currency is always devalued relative to the old currency causing a hyperinflationary event. So your "paper wealth" is reduced by the amount of the devaluation, unless your wealth is in real assets. Quoting: Anonymous Coward 519619
Agreed, but our "paper wealth" was always an illusion. |
| Anonymous Coward
User ID: 519619
10/7/2008 11:33 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
No big deal.
Well, no big deal except that the new currency is always devalued relative to the old currency causing a hyperinflationary event. So your "paper wealth" is reduced by the amount of the devaluation, unless your wealth is in real assets.
Agreed, but our "paper wealth" was always an illusion. Quoting: loosecannon
Which is the reason why smart people, right now, are converting their paper wealth into real assets. |
| Anonymous Coward
User ID: 455142
10/7/2008 11:33 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
I still don't understand...
how does the Fed purchasing commercial paper risk a Wiemar situation?
They are buying the unsecured liabilities of bankrupt corporations, and the taxpayers are on the hook to pay.
This is illegal, so they structured what they call an SIV, to get around it....effectively now making up new laws as they go.
This is but one element of a massive money printing campaign and the bottom line is that the people cannot repay the debt, so the debt is no good. If the debt is no good then the currency is no good and there is a hyperinflationary spiral.
Look at Zimbabwe. They pursued this same monetary path. Quoting: Anonymous Coward 519619
Thank you for the excellent explanation. I think I understand now.
 |
| Anonymous Coward
User ID: 390840
10/7/2008 11:35 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
holy freakin' crap. the Fed pretty much now has absolute control over Congress, the Treasury, the economy, currency, inflation tax, homes and mortgages, banks, insurance companies, and private business. Quoting: yourwaysucks
"Give me control of a nations currency and I care not who make its laws.
--that Rothschild fucker-- |
| Anonymous Coward
User ID: 519619
10/7/2008 11:36 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
I still don't understand...
how does the Fed purchasing commercial paper risk a Wiemar situation?
They are buying the unsecured liabilities of bankrupt corporations, and the taxpayers are on the hook to pay.
This is illegal, so they structured what they call an SIV, to get around it....effectively now making up new laws as they go.
This is but one element of a massive money printing campaign and the bottom line is that the people cannot repay the debt, so the debt is no good. If the debt is no good then the currency is no good and there is a hyperinflationary spiral.
Look at Zimbabwe. They pursued this same monetary path.
Thank you for the excellent explanation. I think I understand now.
You're welcome. I'll add this link to show what the ultra rich are doing right now.
Wealthy investors hoard bullion
By Javier Blas in Kyoto
The Financial Times, London
September 30 2008
Investors in gold are demanding "unprecedented" amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen. Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.
Address : < [link to www.ft.com] |
| Anonymous Coward
User ID: 455142
10/7/2008 11:39 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
No big deal.
Well, no big deal except that the new currency is always devalued relative to the old currency causing a hyperinflationary event. So your "paper wealth" is reduced by the amount of the devaluation, unless your wealth is in real assets.
Agreed, but our "paper wealth" was always an illusion.
Which is the reason why smart people, right now, are converting their paper wealth into real assets. Quoting: Anonymous Coward 519619
Ok, considering that gold is out of the price range of most people to buy in any significant quantities, and silver is getting difficult to acquire...
What forms of assets should the common man put his cash into? |
| mercury2
User ID: 87375
10/7/2008 11:40 AM
 | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
They are gonna bail EVERYONE!!!! Next up, A US Fed American Express Card-don't leave home without it-and if you miss a payment we'll send a team and burn you out ala WACO.
Wait for it,lol.... Quoting: Omega
omega gets it.
I have a bit of first hand experience. The federal government first got in the business of buying bad paper when they agreed to purchase defaulted student loans, "guarantee" them as it were. So that the lenders could lend to anyone and everyone, knowing that if the student didn't pay, the government would bail them not just for the principle they were out, but for the interest too.
So when I was too broke to pay my student loan, the Department of Education bought it and as I said, bailed the lender for the whole thing, no discount, it's not like they paid them x cents on the dollar, they paid them the whole figure, as far as I know anyway!
So once the government is holding your debt, whatever kind it is, they can change the rules in any way at any time. It's their game and they aren't accountable. They changed it so there was no statute of limitations, when there had been such a thing when I took out the loans. They added ten thousand dollars in "collection fees" for a loan that had only been eleven thousand dollars in principle in the first place. They don't have to go to court to garnish your wages, it's "administrative wage garnishment" and they just send a note to your employer, end of story, you are garnished.
Everything will be like the rules for child support collection, you wait, this is what they've been practicing for, everyone is so rabidly in favor of the "deadbeat dad" laws that are so Orwellian and Kafkaesque, but I could see right away that there's really nothing to stop them from doing that to everyone, for everything, why shouldn't they? What's to stop them? It doesn't stop them in the case of child support collection, why should anything else be legally any different? People are so trusting and naive. |
| Anonymous Coward
User ID: 519619
10/7/2008 11:41 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
No big deal.
Well, no big deal except that the new currency is always devalued relative to the old currency causing a hyperinflationary event. So your "paper wealth" is reduced by the amount of the devaluation, unless your wealth is in real assets.
Agreed, but our "paper wealth" was always an illusion.
Which is the reason why smart people, right now, are converting their paper wealth into real assets.
Ok, considering that gold is out of the price range of most people to buy in any significant quantities, and silver is getting difficult to acquire...
What forms of assets should the common man put his cash into? Quoting: Anonymous Coward 455142
Raw rural land in a low tax state bought with cash (no mortgage) is an excellent idea. You can buy great land for 4k per acre. |
| Anonymous Coward
User ID: 390840
10/7/2008 11:41 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
I still don't understand...
how does the Fed purchasing commercial paper risk a Wiemar situation?
They are buying the unsecured liabilities of bankrupt corporations, and the taxpayers are on the hook to pay.
This is illegal, so they structured what they call an SIV, to get around it....effectively now making up new laws as they go.
This is but one element of a massive money printing campaign and the bottom line is that the people cannot repay the debt, so the debt is no good. If the debt is no good then the currency is no good and there is a hyperinflationary spiral.
Look at Zimbabwe. They pursued this same monetary path.
Thank you for the excellent explanation. I think I understand now.
You're welcome. I'll add this link to show what the ultra rich are doing right now.
Wealthy investors hoard bullion
By Javier Blas in Kyoto
The Financial Times, London
September 30 2008
Investors in gold are demanding "unprecedented" amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen. Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.
Address : < [ link to www.ft.com]
It will be quite interesting to see the reaction on their face when they realize gold bullion doesn't taste very good. It's been quite entertaining watching and I'm sure the show will get much more entertaining with time. |
| Anonymous Coward
User ID: 511006
10/7/2008 11:45 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
They are gonna bail EVERYONE!!!! Next up, A US Fed American Express Card-don't leave home without it-and if you miss a payment we'll send a team and burn you out ala WACO.
Wait for it,lol....
omega gets it.
I have a bit of first hand experience. The federal government first got in the business of buying bad paper when they agreed to purchase defaulted student loans, "guarantee" them as it were. So that the lenders could lend to anyone and everyone, knowing that if the student didn't pay, the government would bail them not just for the principle they were out, but for the interest too.
So when I was too broke to pay my student loan, the Department of Education bought it and as I said, bailed the lender for the whole thing, no discount, it's not like they paid them x cents on the dollar, they paid them the whole figure, as far as I know anyway!
So once the government is holding your debt, whatever kind it is, they can change the rules in any way at any time. It's their game and they aren't accountable. They changed it so there was no statute of limitations, when there had been such a thing when I took out the loans. They added ten thousand dollars in "collection fees" for a loan that had only been eleven thousand dollars in principle in the first place. They don't have to go to court to garnish your wages, it's "administrative wage garnishment" and they just send a note to your employer, end of story, you are garnished.
Everything will be like the rules for child support collection, you wait, this is what they've been practicing for, everyone is so rabidly in favor of the "deadbeat dad" laws that are so Orwellian and Kafkaesque, but I could see right away that there's really nothing to stop them from doing that to everyone, for everything, why shouldn't they? What's to stop them? It doesn't stop them in the case of child support collection, why should anything else be legally any different? People are so trusting and naive. Quoting: mercury2
This has me scared because I am currently a student. If the SHTF and I am unable to get any more aid, or the college goes under, or things just collapse in general, this could be very bad. |
| Anonymous Coward
User ID: 481210
10/7/2008 11:48 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
No big deal.
Well, no big deal except that the new currency is always devalued relative to the old currency causing a hyperinflationary event. So your "paper wealth" is reduced by the amount of the devaluation, unless your wealth is in real assets.
Agreed, but our "paper wealth" was always an illusion.
Which is the reason why smart people, right now, are converting their paper wealth into real assets.
Ok, considering that gold is out of the price range of most people to buy in any significant quantities, and silver is getting difficult to acquire...
What forms of assets should the common man put his cash into?
Raw rural land in a low tax state bought with cash (no mortgage) is an excellent idea. You can buy great land for 4k per acre. Quoting: Anonymous Coward 519619
In parts of my state land can be had for 1500 or 2000 an acre. |
| Anonymous Coward
User ID: 519619
10/7/2008 11:51 AM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
I still don't understand...
how does the Fed purchasing commercial paper risk a Wiemar situation?
They are buying the unsecured liabilities of bankrupt corporations, and the taxpayers are on the hook to pay.
This is illegal, so they structured what they call an SIV, to get around it....effectively now making up new laws as they go.
This is but one element of a massive money printing campaign and the bottom line is that the people cannot repay the debt, so the debt is no good. If the debt is no good then the currency is no good and there is a hyperinflationary spiral.
Look at Zimbabwe. They pursued this same monetary path.
Thank you for the excellent explanation. I think I understand now.
You're welcome. I'll add this link to show what the ultra rich are doing right now.
Wealthy investors hoard bullion
By Javier Blas in Kyoto
The Financial Times, London
September 30 2008
Investors in gold are demanding "unprecedented" amounts of bullion bars and coins and moving them into their own vaults as fears about the health of the global financial system deepen. Industry executives and bankers at the London Bullion Market Association annual meeting said the extent of the move into physical gold was unseen and driven by the very rich.
Address : < [ link to www.ft.com]
It will be quite interesting to see the reaction on their face when they realize gold bullion doesn't taste very good. It's been quite entertaining watching and I'm sure the show will get much more entertaining with time.
That "gold doesn't taste good" is the pervasive uneducated viewpoint of someone who is doesn't have any wealth to protect. If you have money, and you are worried about financial system instability, you want to protect your wealth. If you are trying to protect ten million dollars, gold is the most convenient and efficient way to do that.
Even if you are trying to protect only a couple hundred thousand dollars, that still may hold true.
If you have no wealth to protect and are in debt like the vast majority of Americans, then you are already screwed and it doesn't matter.
Lets raise the bar on discussion here to above an elementary school level. |
| Anonymous Coward
User ID: 481210
10/7/2008 12:03 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
That "gold doesn't taste good" is the pervasive uneducated viewpoint of someone who is doesn't have any wealth to protect. If you have money, and you are worried about financial system instability, you want to protect your wealth. If you are trying to protect ten million dollars, gold is the most convenient and efficient way to do that.
Even if you are trying to protect only a couple hundred thousand dollars, that still may hold true.
If you have no wealth to protect and are in debt like the vast majority of Americans, then you are already screwed and it doesn't matter.
Lets raise the bar on discussion here to above an elementary school level. Quoting: Anonymous Coward 519619
I think it was a very valid issue. Gold is also an artificially inflated, man-determined, value product. We have determined that it has value because of its scarcity. Not because of its need. Food is a human need. Gold isn't. With market instability, you can expect food production instability as well. Transportation instability. Hell...instability in general.
If the rich haven't stocked food in a place they alone can excess, defend, and control, then food could become more valued than gold. |
| Enigma
User ID: 70637
10/7/2008 12:22 PM
 | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
holy freakin' crap. the Fed pretty much now has absolute control over Congress, the Treasury, the economy, currency, inflation tax, homes and mortgages, banks, insurance companies, and private business.
And there ya go. IN IM's with SHR last night he believes Obama is gonna win and provided some pretty convincing evidence I was not aware of.
That happens your statement becomes absolutely true and this country flat out becomes a totally socialist oligarchy mixed in with some good ole police state .gov has the absolute power to kill no questions asked thrown in. Won't be pretty.
I think this may happen even if McCain wins, no champions left in our Government.
Please don't get me wrong, I hate McCain. I just believe it will be worse under Obama-and if he tries to go for the guns and outlaw citizen ownership of firearms its fucking on. We revolt...... Quoting: Omega
I had this conversation with my dad a few weeks ago...
while I think Obama may be smarter and has more energy and drive that Son of Cain, the old folks are not voting for Obamania...
and as both of us are Lifetime NRA members, we don't trust his stance on firearm regulations...
and for THAT REASON ALONE, we would NOT vote for him...
BUT unlike the joos in the last wiemar meltdown, us texans won't sit by idly and let them round us up and take our shootin' irons...
nope... aint gonna happen...
enigma |
| Anonymous Coward
User ID: 25
10/7/2008 12:34 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
holy freakin' crap. the Fed pretty much now has absolute control over Congress, the Treasury, the economy, currency, inflation tax, homes and mortgages, banks, insurance companies, and private business.
And there ya go. IN IM's with SHR last night he believes Obama is gonna win and provided some pretty convincing evidence I was not aware of.
That happens your statement becomes absolutely true and this country flat out becomes a totally socialist oligarchy mixed in with some good ole police state .gov has the absolute power to kill no questions asked thrown in. Won't be pretty.
I think this may happen even if McCain wins, no champions left in our Government.
Please don't get me wrong, I hate McCain. I just believe it will be worse under Obama-and if he tries to go for the guns and outlaw citizen ownership of firearms its fucking on. We revolt...... Quoting: Omega
Obama would be no more than a meat puppet, his strings being pulled by the highest bidder. I heard this quoted elsewhere on another thread but it applies here:
"GOLD IS THE CURRENCY OF KINGS,
SILVER THE CURRENCY OF NOBLEMEN,
BARTERING THE CURRENCY OF PEASANTS,
AND DEBT THE CURRENCY OF SLAVES" |
| Anonymous Coward
User ID: 519619
10/7/2008 12:39 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
"GOLD IS THE CURRENCY OF KINGS,
SILVER THE CURRENCY OF NOBLEMEN,
BARTERING THE CURRENCY OF PEASANTS,
AND DEBT THE CURRENCY OF SLAVES" Quoting: Anonymous Coward 25
That has been true since the beginning of recorded history.
I would also add that in many societies, regimes, empires, etc that land ownership is what separates the elite from the serfs.
However you slice it, if you are in debt you are a slave. Credit is the modern version of slavery. It looks a lot cleaner and is politically acceptable. |
| Anonymous Coward
User ID: 321019
10/7/2008 12:42 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
to those who say that rural land is a good investment now, and I see why it would be, what's to prevent the government from just claiming it as eminent domain and just taking that, too, in the future? |
| Anonymous Coward
User ID: 69144
10/7/2008 12:45 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
Doesn't look like the FED's plan is working very well. It just stalled the inveitable. |
| Anonymous Coward
User ID: 519619
10/7/2008 12:47 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
to those who say that rural land is a good investment now, and I see why it would be, what's to prevent the government from just claiming it as eminent domain and just taking that, too, in the future? Quoting: Anonymous Coward 321019
My answer to that would be that if you are concerned about the US government revoking property ownership rights, then you should be moving to a different country. Even in China and North Korea you are allowed to own property. I don't mean that as a knock against what you believe, just if you truly believe that is a possibility, there are far better countries to live in. |
| Anonymous Coward
User ID: 515785
10/7/2008 12:49 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
The last bullet of the FED will be to buy all the unsold pretzels and popcorn at the end of the day. |
| Anonymous Coward
User ID: 489235
10/7/2008 12:50 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
They are gonna bail EVERYONE!!!! Next up, A US Fed American Express Card-don't leave home without it-and if you miss a payment we'll send a team and burn you out ala WACO.
Wait for it,lol....
omega gets it.
I have a bit of first hand experience. The federal government first got in the business of buying bad paper when they agreed to purchase defaulted student loans, "guarantee" them as it were. So that the lenders could lend to anyone and everyone, knowing that if the student didn't pay, the government would bail them not just for the principle they were out, but for the interest too.
So when I was too broke to pay my student loan, the Department of Education bought it and as I said, bailed the lender for the whole thing, no discount, it's not like they paid them x cents on the dollar, they paid them the whole figure, as far as I know anyway!
So once the government is holding your debt, whatever kind it is, they can change the rules in any way at any time. It's their game and they aren't accountable. They changed it so there was no statute of limitations, when there had been such a thing when I took out the loans. They added ten thousand dollars in "collection fees" for a loan that had only been eleven thousand dollars in principle in the first place. They don't have to go to court to garnish your wages, it's "administrative wage garnishment" and they just send a note to your employer, end of story, you are garnished.
Everything will be like the rules for child support collection, you wait, this is what they've been practicing for, everyone is so rabidly in favor of the "deadbeat dad" laws that are so Orwellian and Kafkaesque, but I could see right away that there's really nothing to stop them from doing that to everyone, for everything, why shouldn't they? What's to stop them? It doesn't stop them in the case of child support collection, why should anything else be legally any different? People are so trusting and naive. Quoting: mercury2
Remember debtors' prisons? Perhaps debtors' prisons will be brought back. However, there are way more debtors than prisons. Think about that. |
| Anonymous Coward
User ID: 517755
10/7/2008 12:50 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
a little off topic, but i think someone here should know the answer.
whats the mechanism used to generate the interest paid on t-bills, t-bonds, etc? where is the treasury investing the money lent to them to create more money?
my first instinct is to say its generated by taxpayers, namely income tax. from what i know, the federal reserve prints money for the government to use, and they are guaranteed repayment through the income tax of taxpayers. im figuring this how they generate interest for treasuries as well. or else what market is there for the treasury to be investing in.
somebody help! |
| Anonymous Coward
User ID: 321019
10/7/2008 12:53 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
In China and North Korea, (as well as the USA) you are allowed to own property for now. If you believe the NWO exists, as I do, that may very well not be the case in the future. Greedy bastards want it all and could care less about property rights. |
| Anonymous Coward
User ID: 515785
10/7/2008 12:53 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
a little off topic, but i think someone here should know the answer.
whats the mechanism used to generate the interest paid on t-bills, t-bonds, etc? where is the treasury investing the money lent to them to create more money?
my first instinct is to say its generated by taxpayers, namely income tax. from what i know, the federal reserve prints money for the government to use, and they are guaranteed repayment through the income tax of taxpayers. im figuring this how they generate interest for treasuries as well. or else what market is there for the treasury to be investing in.
somebody help! Quoting: Anonymous Coward 517755
They invest in papaya and mango. |
| Anonymouse
User ID: 514938
10/7/2008 12:56 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
By Craig Torres
Oct. 7 (Bloomberg) -- The Federal Reserve will create a special fund to purchase U.S. commercial paper after the credit crunch threatened to cut off a key source of funding for corporations.
The Treasury will make a deposit with the Fed's New York district bank to help set up the special purpose vehicle. The central bank will also lend to the program at policy makers' target rate for overnight loans between banks. The Fed Board invoked emergency powers to set up the unit, the central bank said in a statement released in Washington.
... Quoting: Omega
That's where the money's coming from, right? In other words, the Federal Reserve normally BUYS treasury notes like anyone else, but in this case the Treasury is just DEPOSITING treasury notes, which is essentially the same thing as printing money.
Normally: Federal reserve buys treasury bill for $90 that will return $100 in 28 days. This is essentially a loan from the federal reserve to the government, in 28 days the government pays it back with interest, this is where the bulk of US debt lies.
Now: Treasury "deposits" money into the fed's "special vehicle" under "emergency powers". So in other words, Fed buys nothing, Treasury gives the fed their Treasury bills for free and in 28 days the Treasury can redeem those bills for cash. In other words, money out of thin air.
That is what it SOUNDS LIKE, due to the ambiguous information it is hard to know exactly what "The Treasury will make a deposit with the Fed's New York district bank to help set up the special purpose vehicle." means. |
| Anonymous Coward
User ID: 519619
10/7/2008 12:58 PM | | Re: Fed to Purchase U.S. Commercial Paper to Ease Crunch | Quote |
a little off topic, but i think someone here should know the answer.
whats the mechanism used to generate the interest paid on t-bills, t-bonds, etc? where is the treasury investing the money lent to them to create more money?
my first instinct is to say its generated by taxpayers, namely income tax. from what i know, the federal reserve prints money for the government to use, and they are guaranteed repayment through the income tax of taxpayers. im figuring this how they generate interest for treasuries as well. or else what market is there for the treasury to be investing in.
somebody help! Quoting: Anonymous Coward 517755
There is a video floating around called "Money as Debt".
Find it and watch it, it's easy to understand and critical to understand. |
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