Federal Reserve $1.2 trillion spending plan

[myp]

As another "stimulus" the Federal Reserve has now unveiled its TALF plan, in which is will print $1.2 trillion in order to buy U.S. treasuries and mortgage-related debt. This of course means inflation of the dollar and there are serious concerns of a possible stagflation period coming out of this move, especially because of the mortgage-related debt.

How do you all feel about this? Personally, I am again opposed to this because the inflation is going to be horrible and we are only trying to create more artificial growth to get out of this. I don't see it working and I think it could possibly end up in disaster if we do see a lot of stagflation.

 

[The Parakeet]

My main concern would be the effect on T-Bills. I've heard that there is a terrible bubble in that market. If the government is buying them up, that will cause it to bubble even further and could really screw up our borrowing ability.

This will probably free up some more capital for the banks though. There are a lot of regulation on who the Fed can deal with directly, so I guess the plan would life those restrictions. It's also pretty standard practice.

It also might be nice to just get the assets off the books once and for all. We've been delaying this for awhile, but it was pretty inevitable that we were going to have to buy up some of the mortgage debt.

I'm not too worried about inflation, since it hasn't hit us too hard yet from previous increases. The big fear is deflation from the market slide, so this will likely just have a bit of a cancellation effect.

 

[deanhills]

This of course means inflation of the dollar

Thanks for this insight and explaining how it is to happen as for a while I was wondering how I should have my overseas funds, in US dollars/Pound Sterling/Euro. All of these are obviously suffering, but get a feeling the biggest debt has to be in the US. On the other hand, this is the more innovative country and more capitalist, possibly they will bale themselves out first? This is thinking out loud and a little off topic but thanks for the insight, obviously the 1.2 trillion has to come from somewhere and doing it all at the same time is definitely going to devalue the dollar, which is probably going to make the 1.2 trillion in much more than what the nation signed for?

 

[myp]

Thanks for this insight and explaining how it is to happen as for a while I was wondering how I should have my overseas funds, in US dollars/Pound Sterling/Euro.

Personally, I am not a fan of any of these right now and would much rather be in commodities because as soon as Asia (almost certainly the first to get out the of slump) comes out of the recession demand will soar and so will prices for commodities, many of which are very cheap right now.

All of these are obviously suffering, but get a feeling the biggest debt has to be in the US. On the other hand, this is the more innovative country and more capitalist, possibly they will bale themselves out first? This is thinking out loud and a little off topic but thanks for the insight, obviously the 1.2 trillion has to come from somewhere and doing it all at the same time is definitely going to devalue the dollar, which is probably going to make the 1.2 trillion in much more than what the nation signed for?

The biggest debt is here and I don't really know what you mean when we will bail ourselves out first because what will we do that with (other than taxpayer money?) As for the 1.2 trillion, the sadest part is no elected official even signed off on it since the Federal Reserve can print money at will and that is exactly what they are doing.

 

[deanhills]

The biggest debt is here and I don't really know what you mean when we will bail ourselves out first because what will we do that with (other than taxpayer money?)

The US has a very large population which is living in a capitalist country, and I would think that in that framework it would take some time, but that chances would be great that it would revive itself before the UK for example would, the UK having a smaller population, and more of a socialist culture.

Thanks for the tip about commodities. Which ones are you thinking about? Oil?

 

[myp]

The US has a very large population which is living in a capitalist country, and I would think that in that framework it would take some time, but that chances would be great that it would revive itself before the UK for example would, the UK having a smaller population, and more of a socialist culture.

Thanks for the tip about commodities. Which ones are you thinking about? Oil?

Sadly, we are moving further and further away with capitalism with these bailouts and government intervention. Population doesn't really have much to do with bouncing back though and the case can be made that smaller populations are easier to revive due to less opposing views and simply less to worry about. I am still happier to be here than in England or Europe though because they have a lost of social troubles starting to arise as well with their more socialist programs.

For commodities, I am really bullish on most of them in the long term because as Asia comes out of recession demand and with it prices will go up. Oil is certainly a good one- in fact, one organization (don't remember exactly which one, but I remember seeing it on CNBC last night) said they wouldn't be surprised if oil hit $150/barrel soon. Gold is another one that I am especially bullish on due to all of the inflation that governments, namely Europe and the States, are creating.

 

[deanhills]

Sadly, we are moving further and further away with capitalism with these bailouts and government intervention. Population doesn't really have much to do with bouncing back though and the case can be made that smaller populations are easier to revive due to less opposing views and simply less to worry about. I am still happier to be here than in England or Europe though because they have a lost of social troubles starting to arise as well with their more socialist programs.

For commodities, I am really bullish on most of them in the long term because as Asia comes out of recession demand and with it prices will go up. Oil is certainly a good one- in fact, one organization (don't remember exactly which one, but I remember seeing it on CNBC last night) said they wouldn't be surprised if oil hit $150/barrel soon. Gold is another one that I am especially bullish on due to all of the inflation that governments, namely Europe and the States, are creating.

I probably need to buckle down and work on my finances. Think I have been sitting with my head in the sand for the last three months. Thanks for the insights ... probably should get stuck in soon ...