US to inject a further $800 billion into financial system!!

[Totally_Baffled]

http://news.bbc.co.uk/1/hi/business/7748362.stm

The US Federal Reserve is to inject another $800bn (£526.8bn) into its economy in a further effort to stabilise the financial system.

This is in addition to the 700 billion bail out.

So I guess we need to revisit the question of, how much money does the US federal reserve have? Or is it infinite?

If the fed is only replacing money which has disappeared in defaults and foreclosures, is it inflationary?

[Aurora]

They can inject a few mil into my bank account to stabilise my financial system whenever they like.

[waermund]

Yeah, and what confuses me is there was a whole hoohaa about getting the initial $700B past congress - remember the vote - but there's been not a word about all the subsequent huge amounts that have been pumped into their system?

How come?

[emordnilap]

Yeah, and what confuses me is there was a whole hoohaa about getting the initial $700B past congress - remember the vote - but there's been not a word about all the subsequent huge amounts that have been pumped into their system?

How come?

It's hardly news any more, is it?

Yawn.

[Joules]

So I guess we need to revisit the question of, how much money does the US federal reserve have? Or is it infinite?

I've followed a recommendation on this forum to this guy http://www.chrismartenson.com/crashcour ... y-creation and chapter 8 (about 2 minutes in) definitely says that the Fed just prints off whatever it needs, whenever it needs it. However, this must definitely be inflationary.

[waermund]

I was actually looking for someone - in the know - to explain how one lot of money needed approval to be used but the following amounts have not...

emordnilap - did you forget the emoticon or were you just being sarcastic for a cheap laugh at my expense?

[kenneal - lagger]

I was actually looking for someone - in the know - to explain how one lot of money needed approval to be used but the following amounts have not...

emordnilap - did you forget the emoticon or were you just being sarcastic for a cheap laugh at my expense?

The election is over so they don't have to account for anything for another four years.

[SunnyJim]

The Fed don't need a vote to create or spend money. The fed is a a quasi-public (government entity with private components) componant of the banking system.

The last vote was for treasury money, i.e. a $700m bail out of treasury held tax payers money.

The FED however, as you say, just create money (as can all banks), and lend it to the banks in exchange for what ever they want. The board of the fed is made up of the boards of the major wall st banks. It has to raise money by selling bonds too. The fed bail out will be a swap for toxic assets as collateral for a loan, and the loan will have to be paid back by the banks that take it. if they can't pay it back the fed get saddled with the bad assets.

The equivalent is the BoE lending to banks (no vote in the UK) and the government 'nationalisation' of banks in the UK, which strangely wasn't put to a vote either. At least the US package did get discussed. The UK one didn't.

[Andy Hunt]

Apparently more US government money has now been spent on this financial crisis than on World War II, in real terms when adjusted.

Kind of puts things in perspective a bit dunnit.

[Totally_Baffled]

Apparently more US government money has now been spent on this financial crisis than on World War II, in real terms when adjusted.

Kind of puts things in perspective a bit dunnit.

[SunnyJim]

Apparently more US government money has now been spent on this financial crisis than on World War II, in real terms when adjusted.

Kind of puts things in perspective a bit dunnit.

Were the US in WWII? I thought we were fighting the Germans!!!

[Erik]

Apparently more US government money has now been spent on this financial crisis than on World War II, in real terms when adjusted.

Kind of puts things in perspective a bit dunnit.

It does. But money as such seems to mean less now, or seems to be less of a reference to actual real work and resources. I mean think of all the sheer effort that went into WWII, as compared to the sheer effortlessness of printing money. I can visualize and get a general feel for the human work and sacrifice required in WWII, but when it comes to "battling" against the current financial crisis, it doesn't really seem to matter which bailout figures are being mentioned - 100 billion, 700 billion, 800 billion, whatever - Feels like these numbers are just dragged out into the press once a month as doom-defying market confidence boosters.

[Andy Hunt]

It seems that the $1.5 trillion mentioned so far in the greatest bail-out on Earth is actually only the tip of the iceberg:-

http://www.bloomberg.com/apps/news?pid= ... EE1iClqDrk

Nov. 24 (Bloomberg) -- The U.S. government is prepared to provide more than $7.76 trillion on behalf of American taxpayers after guaranteeing $306 billion of Citigroup Inc. debt yesterday. The pledges, amounting to half the value of everything produced in the nation last year, are intended to rescue the financial system after the credit markets seized up 15 months ago.

The unprecedented pledge of funds includes $3.18 trillion already tapped by financial institutions in the biggest response to an economic emergency since the New Deal of the 1930s, according to data compiled by Bloomberg. The commitment dwarfs the plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program. Federal Reserve lending last week was 1,900 times the weekly average for the three years before the crisis.

[emordnilap]

All this points to what Taleb said in October: that what we're seeing in this so-called financial 'crisis' is merely the beginning.

Scared or excited? Hands up.

[Andy Hunt]

We live in interesting times.