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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (76997)	3/28/2008 12:58:55 PM
From: valueminded	Read Replies (1) \| Respond to of 116555

Mish: Although money supply may not be expanding, don't you think the recent moves by the FED - (Taking mortgage securities in exchange for treasury bills and cash from investment banks not just commercial banks) is essentially slowing down the credit contraction. For example, if the investment bank has 200 billion in mortgage securities (Grade A - and Marked to Fantasy - ie face value). It exchanges them to the FED for 200 billion in cash or Tbills, now the Fed has the implicit risk. Certainly the FED is not going to mark them to market, they are just going to hold them ad infinitum and stick it to the US government. The US government will then just issue more bonds to cover the losses since it operates in a deficit anyway. This is part of the great reckoning in which the standard of living in the US will be adjusted downwards as the purchasing power of the dollar declines. (just my opinion)