Tornado Alley (PROG)

[SilverSurfer]

Yesterday the Fed said it would do more the "help" the economy. What else can they do? Interest rates are almost at zero to borrow from the Fed for the big banks. Even though citizens have to pay 4.5% or less, that is still low. You may not believe it but The Fed can just create money for itself and use that money to buy Treasuries, Mortgages, Resources, Companies, or anything with the click of a computer. In 2002 before he became chairman of the Fed "Helicopter Ben" said that as a student of the Great Depression he would be determined to prevent the destructive deflation we saw in the 1930s from happening again.

Quote

"The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost… Under a paper-money system, a determined government can always generate higher spending and hence positive inflation…

…Prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation."

http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm

Notice how the President and Democrats don't utter the word stimulus, knowing they will be thrashed and fearing they may lose the Senate and Congress in November, and possibly the White House in 2 years. So we know more money in the pockets of special interests and friends = Stimulus is out. So, if stagnation or worse deflation is reality, and significant tax cuts are out there is no choice except for the Fed to monitize the debt.
There are still a lot of scared investors, banks, and countries out there who will buy the long bond to fund Federal Deficit Spending, so the Fed may not just be able to buy Treasuries to get the job done. Ben will have to Shop till he Drops and buy anything that slithers by his door. That inevitable dilution of the dollar to solve the massive debt overhang is why I invested in Gold/Silver and related stocks long ago. Monitizing does not solve the problem of the Over Promised Entitlement Society we are all counting on because SS and Medicare are not relieved by inflation, like fixed debt. But Ben does not see that as his problem. He knows some day politicians will have to face that music. imho hge