Wednesday, November 3, 2010

The Fed Just Swaps More Junk

The NY Times has just reported on the Feds latest move which we detailed over six months ago; namely they are buying Treasuries from Banks for cash. The cycle just keeps the money in the FED, Treasury, Big Bank domain and none leaks out for any growth. This is good for the Treasury because it gets the FED to print more money, this is good for the Banks because they have a willing buyer at the FED and they then go back and buy Treasuries.

The problem is the money will not leak out of the Treasury. The current administration looked to this scam as a way to pump up another Stimulus, as if the last one did any good, we explained why almost two years ago when we started this blog.

This is a bad policy, it is a bandage on a cancer, the money will just metastasize in the back room as they collusion continues. Perhaps the new House can look into this mess.

The FED Balance sheet is shown below.

Perhaps one should also contrast this with what the NY Times presented. But whatever, as they say, the explosion continues and will almost increase another 50% from where it is now and well near 4 times where it was in early 2008! The question is to the FED; what is the plan to get this to the economy? The economy is grown organically by small business and fundamentally be the most creative portion of that business. R&D is good, but too much R&D without conversion into product makes us look like Russia.