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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: el_gaviero who wrote (33203)5/25/2005 11:03:47 PM
From: mishedlo  Read Replies (1) of 110194
 
But I don't understand why the FED can't just buy up bad debt, or at least enough of it to prevent serious loss of purchasing media within the system.

They could but they won't.
In this latest "reflation" effort the FED bailed out corporations that were about ready to go under. In doing so the FED bailed out something near and dear to their hearts: banks.

Now we have a different story, it is consumers more at risk than corporations. Corporate balance shhets are in far far better shaoe than they were 2-3 years ago. Consumer balance sheets far worse off. To bail out consumers via inflation would be at the expense of the wealthy. Who needs that?
No, in fact we are going the other route passing bankruptcy "reform" bills to keep people in debt for something like forever.

Eventually it will spill over into corporations again but by that time the FED will be powerless to stop it. Just like Japan.

Mish
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