Just in from the Wall Street Journal: > The Federal Reserve said Wednesday it will buy up to $300 billion in > longer-term Treasurys
When the Fed buys treasuries they do it with "new money", "high powered money", "magic dollars". Whatever you care to call it, it means that they create the money out of thin air. In fact, as far as I know, this is the only way the U.S. government currently has for creating new money; everything else is just transfer payments. Obama's mega plan, and Bush's not-quite-so mega plan before it, involved nothing more than transferring a couple trillion dollars from taxpayers and bondholders to banks and related businesses. No new money was created. But this is different. In plain English, they're *printing* a third of a trillion dollars. Printing money is the last and largest "canon" available to the government in combating the recession. Apply the current high-powered money multiplier to that, which is something between 10 and 20, and you get an effective injection of between 3 and 6 *trillion* dollars. So, they have clearly decided to barrel ahead with inflating their way out of the crisis. I'd have to guess that, for Bernanke to agree to this, the current numbers they're looking at, which haven't been published yet, must be *awful*.
