CASH COW

[Abondanceinvest]

Great article:The US Federal Reserve this evening announced it would inject $600 billion into the economy by the middle of next year to help safeguard the recovery.
The decision, which takes the Fed into largely uncharted waters, is aimed at further lowering borrowing costs for consumers and businesses still suffering in the aftermath of the worst recession since the Great Depression.

The US Fed said it would buy about $75 billion in longer-term Treasury bonds per month. It said it would regularly review the pace and size of the programme and adjust it as needed depending on the path of the recovery

The Federal Reserve will essentially be printing money in hopes that low interest rates will convince Americans that it’s time to start making large purchases again. The action, known as “quantitative easing,” is designed to "promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate," the FOMC said.

The FOMC framed the move as necessary to help the struggling economy, which is emerging from recession at a sluggish pace.

"Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the committee judges to be consistent, over the longer run, with its dual mandate," the FOMC said in a statement. "Although the committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

Stocks dropped in response to the announcement, which had been expected, but rose by the end of Wednesday.

Republicans pounced on the move, arguing it would weaken the dollar and promote inflation.

"The Fed’s actions will lead to inflation and undermine the purchasing power of an already vulnerable middle class," said Rep. Cathy McMorris Rodgers (R-Wash.). "Instead of facilitating President Obama’s spend-and-borrow addiction, the Federal Reserve needs to protect the integrity of the dollar.

Fed officials voted to maintain an interest rate near zero and again said that economic conditions are "likely to warrant exceptionally low levels for the federal funds rate for an extended period."

Kansas City Federal Reserve Bank President Thomas Hoenig voted against the policies, saying he "believed the risks of additional securities purchases outweighed the benefits." He also expressed concern that "that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy."

Hoenig has been a vocal opponent of holding interest rates low, saying they need to gradually increase to spur economic growth.




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