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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: ahhaha who wrote (404324)5/7/2010 5:26:09 PM
From: Real Man  Read Replies (1) of 436258
 
I really think you are confused, regarding MBS and Agency
purchases done by the Fed. That was part of Quantitative
Easing monetary policy, and I characterize correctly that
they printed it. Whether or not they sterilize the printing
in the future is another question, for another time. For
the time being, the Fed printed exactly 1.725 Trillion from
December 2008 until March, 31, 2010, the stated size of
their Quantitative Easing. Whether or not this
leads to inflation, it's effect on various broad money measures
that include banking system credit, is also a different issue.

en.wikipedia.org

"The process of purchasing financial assets with ex nihilo money
is referred to as open market operations. The creation of this
new money is supposed to seed the increase in the overall money
supply[1] through deposit multiplication by encouraging lending
by these institutions and reducing the cost of borrowing, thereby
stimulating the economy. However, there is a risk that banks will
still refuse to lend despite the increase in their deposits, or
that the policy will be too effective, leading in a worst case
scenario to hyperinflation.[1]

Quantitative easing is sometimes described as 'printing money',
although the central bank actually creates it electronically
'out of nothing' by increasing the credit in its own bank
account."
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