Fed Buying Treasuries: A Real Terrifying Move

In today's Financial Times they report:

"...Goldman Sachs said the Fed was throwing the “kitchen sink” at the problem. The plan to buy Treasuries caught investors off guard. “It appears that they wanted to give the market a jolt,” said Peter Hooper, an economist at Deutsche Bank. The last time the central bank attempted to bring down yields on long-term securities through direct intervention came during the ill-fated Operation Twist in the 1960s. Recent comments by Ben Bernanke, Federal Reserve chairman, and William Dudley, New York Fed president, did not suggest that Treasury purchases were imminent. But the deterioration in the US outlook, problems rolling out the US financial rescue plan and the Bank of England’s success in buying UK government gilts seem to have persuaded the Fed to act..."

This should be truly terrifying since it is the true beginning of printing of money. The concern is that they just print money to buy bonds because no one else believes in them. Gresham's law then takes over, bad money drives out good, and then the US dollar suffers massive inflation. Add to that the Administration plan for cap and trade and they yet to be mandated plan for health care and one gets a mess.