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What is the government to do? Great question. I suggest not leting the same people that created the problem propose solutions because they are guarenteed to be wrong.
I have been thinking about this but have not solidified any ideas the have a hope of doing more than preventing starvation.
Why do you think Bernake said yesterday that the Fed would start buying Treasuries ?
China announced a few weeks ago that it would be spending it's money in it's own country to help its own economy.
When the Fed has to start buying Treasuries that indicates that no one else will.
The writing was on the wall..just not printed by the MSM.
HappyTexan,
The Fed buys securities when it want to increase the money supply. Please see open market operations of the FED. Its standard operating procedure.
The most effective tool the Fed has, and the one it uses most often, is the buying and selling of government securities in its open market operations. Government securities include treasury bonds, notes, and bills. The Fed buys securities when it wants to increase the flow of money and credit, and sells securities when it wants to reduce the flow.
This will in effect put cash in the hands of China who will buy things. Good for them. Since plenty of capacity is available here, its just as well.
Yes, they are getting that desperate. Interest rates are so low already they are approaching zero.
Sounds like countries are not bellying up to the table to buy our Treasuries either.
What's a government to do ???
Hi HappyTexan,
I don't think I understand the point of view. If China pulls out of treasury purchases, that will mean there will be fewer buyers at auction. This would generally mean interest rates would go up as they are auctioned off. That is not what we are seeing at all.
Since inflation in the near term is the least of our problems, this will have little effect. The Fed should rightly be in bond buying mode. This would be a big problem during an inflationary environment since the Fed should be selling bonds in that case but without China buying, long term rates would surge higher.
Please do not confuse explanation with appeasement. This system is by design a tool for volatility . As the lower classes accumulate wealth they are sheered like sheep with it.
I don't think I understand the point of view. If China pulls out of treasury purchases, that will mean there will be fewer buyers at auction. This would generally mean interest rates would go up as they are auctioned off. That is not what we are seeing at all.
So maybe the Fed is getting more involved so rates DO NOT go up.
Bernake did say "unconventional" when he talked about this.
reportonbusiness.com: globeinvestor.com - Even Bernanke can't say what's next (http://www.globeinvestor.com/servlet/story/RTGAM.20081201.wibuseconomy02/GIStory/ - broken link)
snippet:
"But Mr. Bernanke said the bank will continue to use unconventional means to keep money coursing through the banking system, including buying up longer-term Treasury bills as well as the debts of mortgage lenders Fannie Mae and Freddie Mac."
Question: Ben Bernanke has access to all economic indicators and he kept on saying the economy was strong when in fact it wasn't.
I am no expert but I do feel with unemployment continuing to spiral upward, inflation, high consumer debt, high foreclosure rates, lack of consumer confidance resulting in less spending, major businesses going through bankruptcy, and a 12 trillion national debt, I do not foresee this country coming out of this recession or near depression anytime soon. Lack of manufacturing jobs, is not being addressed by our government. If the Big 3 collapses, I believe it will spur on a major Depression.
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