It's a new week!
It's a new trillion dollars!
Little Timmy Geithner, Obama's Eunuch of the Treasury, is busy announcing that - having spent a trillion bux last week, while most everyone was busy watching the Great "Screw 'em with the tax code" abomination:
The Federal Reserve sharply stepped up its efforts to bolster the economy on [March 18], announcing that it would pump an extra $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities.
Having already reduced the key interest rate it controls nearly to zero, the central bank has increasingly turned to alternatives like buying securities as a way of getting more dollars into the economy, a tactic that amounts to creating vast new sums of money out of thin air. But the moves on Wednesday were its biggest yet, almost doubling all of the Fed’s measures in the last year.
The action makes the Fed a buyer of long-term government bonds rather than the short-term debt that it typically buys and sells to help control the money supply.
Here is another observation on last week's spending extravaganza:
Note the losing battle Benanke is fighting: attitudes. The Fed has become the lender of only resort as opposed to the lender of last resort. Bernanke cannot force banks to lend nor can he force companies to hire or if they do hire the wages that will be paid.
Wage destruction continues unabated, and if Bernanke does succeed in driving prices higher, he just might ask himself, how anyone is going to pay the bills.
Deflation is a benefit, not a curse. It only appears to be a curse through the myopic eyes of Bernanke who is worried about the destruction of debt on the balance sheets of financial institutions. However the time to worry about balance sheets is not now. The time to worry about balance sheets was in 2002 when something could have been done about it.
Now the best thing to do is let things play out. The economy will bottom on its own once prices fall far enough.
Now, Obama and Geithner are going to use another freshly-printed trillion bux (starting to sound like Zimbabwe, aren't we?) to buy up failed banks.
Mike Shedlock on that:
This is similar in nature to fraudulent schemes that promise “what’s inside the bag is worth $1 million, unless you open the bag”.
In this case there may be a few “good bags” similar in nature to salting the mine schemes, but for the most part everyone knows what’s in the bag is toxic garbage. What really makes no sense whatsoever is why the government would risk 97% with shared “upside” instead of just buying it all.
Somehow, Geithner (and Obama by implication) believes that igniting a bidding war between hedge funds and private equity over a bag of cow manure will inspire confidence that there’s gold in the bag. Such insanity cannot possibly work, which means it won’t.
Meanwhile, we find that Geithner's little elves were busy at work with AIG on the bonuses for months:
Geithner Aides Worked With AIG for Months on Bonuses
Meanwhile, China holds a $1,000,000,000,000 (that's One Trillion dollars) in US debt.
Would you like noodles with your breakfast McFooYung?