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To: Les H who wrote (278213)	9/23/2010 5:31:25 PM
From: DebtBomb	Read Replies (2) \| Respond to of 306849

Volcker: Fed must not sow seeds of inflation .Topics:Economy, Government & Policy.On Thursday September 23, 2010, 4:26 pm By Ann Saphir CHICAGO (Reuters) - Paul Volcker, special adviser to President Barack Obama, said on Thursday that while the Federal Reserve's purchases of long-term Treasuries are "understandable," the central bank must be careful not to set the stage for future inflation. The former Federal Reserve chairman, known for slaying inflation in the 1980s by hiking interest rates well into the double digits, said he is not worried about deflation, and that he believes the country is on the road to price stability. "We are in a situation now where we've got a sluggish economy, a lot of excess resources, a lot of unemployment -- this is not an atmosphere that's inclined to produce inflation," he told reporters on the sidelines of a banking conference at the Chicago Fed. "I think we ought to be sure that we don't take actions that down the road might lead to an inflationary situation." Volcker's super-high interest rate policy earned him vociferous criticism from some quarters, a token of which Chicago Fed President Charles Evans held aloft as he introduced Volcker -- a two-by-four wood block famously sent to the Fed chairman by angry homebuilders who viewed high rates as bad for business. Today, Fed Chairman Ben Bernanke is taking an exact opposite approach against a vastly different backdrop, using super low rates and asset purchases in what some view as an attempt to push up uncomfortably low inflation. The Fed lowered its target rate for overnight lending between banks to near zero in December 2008 to help pull the nation from its deepest recession since the 1930s, and has since bought about $1.7 trillion in long-term Treasuries and mortgage-backed securities to further spur the economy. But with unemployment at a lofty 9.6 percent and amid signs that the economic recovery may be faltering, Fed officials are now debating whether to embark on a new round of monetary easing through the purchases of more Treasuries. Indeed, some market participants believe the Fed's decision last month to reinvest the proceeds of maturing mortgage-backed bonds on its books in long-term Treasuries, keeping its nearly $2 trillion balance sheet steady instead, signaled outright purchases ahead. Earlier this week, Fed policymakers left their current policies intact, but said they were ready to act if needed. Despite his concerns about potential future inflation, Volcker said he was not concerned by the Fed's decision to buy long-term Treasuries to bolster the economy. When he joined the U.S. central bank in the 1950s, the Fed routinely bought and sold bonds to influence the market, Volcker told attendees at the banking conference. While later the Fed came to the view that it should only intervene in the short-term money markets, he said, buying longer-term securities does not violate any rules. "Given present conditions, I don't feel this violates some Fed doctrine or ethics or whatever," Volcker said. finance.yahoo.com

To: Les H who wrote (278213)	9/23/2010 5:56:55 PM
From: LTK007	Read Replies (4) \| Respond to of 306849

Trader Mark wrote <<I did think QE2 was coming but I thought Bernanke was somewhat a man of his word and would actually wait for data to come in to backstop his words - instead he already had his mind made up, and it appears whatever the data he will move.>> In my view he is being quite consistent as he is a QE Lunatic.I don't think people realize we have a "MadMan" at the controls the Helicopter, o my when it suddenly goes into a dead spin fall i can see Bernanke laughing hysterically, and shouting drop more drop more drop more money, i am Mister Magic, i was Times Man of of the Year--iam NOT crazy, i am BRILLIANT! People that are surprised at Bernanke behavior keep thinking this is a rational economist---Big Mistake.Max

To: Les H who wrote (278213)	10/5/2010 9:25:22 AM
From: Les H	Read Replies (1) \| Respond to of 306849

Zero Interest Rates Back In Japan Japan Looking To Set Up $60B Fund To Buy Gov't Bonds, Assets wmur.com The rate cut is the first step of a three-pronged approach outlined by the central bank to answer critics who had disparaged previous efforts as inadequate. It did nothing at its last meeting in early September, which followed an emergency meeting in late August when it expanded a low-interest credit program. Part two of what the BOJ describes as a "comprehensive monetary easing policy" is a pledge to maintain the zero rate policy until prices start rising again. That will probably take three or four years, which means rock-bottom rates are here to stay for a while, Morita said. Japan last period of zero rates lasted for five years starting March 2001. Through its "quantitative easing" policy to boost the economy, the central bank flooded markets with excess liquidity to hold short-term interest rates near zero. The final piece of the central bank's strategy is the creation of a temporary 5-trillion-yen ($60 billion) fund to purchase financial assets such as government securities, commercial paper and corporate bonds in an attempt to stimulate the economy by lowering longer-term interest rates and risk premiums. About 70 percent of the fund will be used to buy long-term government bonds and treasury discount bills. The central bank will offer another 30 trillion yen ($359 billion) through its loan program.