March 18 (Bloomberg) -- The Federal Reserve opened a new front in its battle to bring down borrowing costs across the economy, pledging to buy as much as $300 billion of Treasuries and stepping up purchases of mortgage bonds.
Hmm…and there is the additional $600 billion that the Fed has already committed to buying of mortgage-backed securities and bonds sold by government-sponsored housing agencies. Through emergency loans and liquidity backstops, U.S. central bankers have expanded Fed credit to the economy by an unprecedented $1 trillion over the past year.
Ok…so what is this?
Basically, the US government wants to rescue this economy with a lot of US dollars. However, they can only borrow so much from the private sectors and foreign governments. After all, Chinese Premier Wen Jiabao already voiced concern and said that he is “worried” .
No problem. The Federal Reserve is now out on the front, and they are willing to lend as much money as needed to the US government. After all, the Federal reserve has “UNLIMITED” amount of money. That is the beauty of it! The world’s currency is US dollar, and we own the printing machine.
Of course, the Federal Reserve , basically the central bank of the world, must maintain its position as fair and neutral. So they do not just “give” the trillion dollars to US government, they simply “lend” the money, and they “expect” the money to be returned.
Now, how does US government plan to return that money to the central bank ( of the world )? Obama said that he would tax the wealthy “AFTER” this crisis is over. So, at least, the US government is still maintaining its responsible principle.
In the mean time, though, Wen Jiabao is still worried.
That is the primary trend that is going under this financial turmoil now.
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