FED pump $70 BILLION into system

[HL]

WASHINGTON - Urgently trying to keep cash flowing amid a Wall Street meltdown, the Federal Reserve on Tuesday pumped another $70 billion into the U.S. financial system to help ease credit stresses.

The Federal Reserve Bank of New York's action came in two operations in which $50 billion and then another regularly scheduled $20 billion were injected in temporary reserves.

The maneuver takes place as Federal Reserve Chairman Ben Bernanke and his central bank colleagues prepare to meet to decide their next move on interest rates and conduct a fresh assessment of the country's financial and economic troubles.

[HL]

This financial crisis is not looking good. The worldmarkets are affected...

I hope that the FED did not print new money for this bail-out!!!

SIDEBAR:

Mosiah: is it true your Escalade isup for sale? If so, i have a buyer

[Bricktop]

When the Fed injects money into the economy they aren't printing new money it's by buying bonds in the open market. The money they pay for the bonds flows through the economy. That being said the Fed itself is a fraud.

[Assasin]

Where is the excess money coming from? It is either printed or borrowed hence it affects the economy.

[Bricktop]

Where is the excess money coming from? It is either printed or borrowed hence it affects the economy.

Well it's just a short term thing. The fed buys bonds from traders. The money they paid for it travels through the system theoretically boosting the economy. But they have a deal with the traders that after say 6 months they have to buy back the bonds at the same price. It's all a wash. This only pertains to what they are doing now though. This is a drastic measure.

[Mosiah]

These big financial institutions, like Lehman Brothers, were no better than a Cash Plus!

[HL]

The cash infusion Tuesday was designed to help ease a spike in the overnight lending rate between banks. A sharp rise in such borrowing costs makes banks reluctant to lend to each other and to hoard cash, worsening already tight credit conditions. Harder-to-get credit has crimped spending by consumers and business, a factor in the slowing economy.

To help grease the financial plumbing Monday, the Fed pumped a total of $70 billion into the system through open market operations.

[Bricktop]

To help grease the financial plumbing Monday, the Fed pumped a total of $70 billion into the system through open market operations.

The open market operations is what I referenced before and is done as a quick fix. Like I said before it's all a wash as the Fed get's back the money paid out , the brokers get back the bonds the sold and theoretically the economy was stimulated by all that cash flowing through it.

[Islandman]

Well it's just a short term thing.
.....
But they have a deal with the traders that after say 6 months they have to buy back the bonds at the same price.

Hmmm. So in six months when they still have a not-so-short term liquidity problem, as they did 6 months ago when Bear Stearns collapsed, then what?

One of these days when the Asians and Middle Easterners decide its not as safe to buy US govt securities as they thought, who are they going to run to to fund the upcoming wars against Iran, Russia and whoever else?

[Bricktop]

Hmmm. So in six months when they still have a not-so-short term liquidity problem, as they did 6 months ago when Bear Stearns collapsed, then what?

I guess the same thing they did before that they thought would avoid where we are right now: Slashing interest rates and showering Wall St with cash.

[Islandman]

And pray you do not get to the point where interest rates are at or about zero, as happened in Japan in the 90s. Then deflation sets in and unlike Japan where people actually save money, in the US all people have is debt and more debt.

Printing money like crazy and basically dropping it from a plane on Wall St seems like the most likely end game here. The US dollar will be screwed but at least those debts can be paid back with worthless dollars and the nominal value of assets will not collapse.

Not a pretty picture but maybe they will find a way to escape the worst.

[Willi]

And pray you do not get to the point where interest rates are at or about zero, as happened in Japan in the 90s. Then deflation sets in and unlike Japan where people actually save money, in the US all people have is debt and more debt.

Printing money like crazy and basically dropping it from a plane on Wall St seems like the most likely end game here. The US dollar will be screwed but at least those debts can be paid back with worthless dollars and the nominal value of assets will not collapse.

Not a pretty picture but maybe they will find a way to escape the worst.

Yup,

Danger of HYPER-stagflation and eventually DEFLATION...not sure which is worse!

[Willi]

When the Fed injects money into the economy they aren't printing new money it's by buying bonds in the open market. The money they pay for the bonds flows through the economy. That being said the Fed itself is a fraud.

Completely agree.

The plunge protection team (PPT) is running out of viable options.

[Assasin]

"not sure which is worse"

John McCain economics