[Snowrunner]

Looks like some people are getting a bit concerned about the "liquidity".

It will be interesting see how the sale goes, may be indicative of things to come.

WASHINGTON — The U.S. Treasury Department will begin selling bonds for the Federal Reserve in an effort to help the central bank deal with unprecedented borrowing needs resulting from the current credit crisis.

Treasury officials said Wednesday that the new program would be part of the normal auctions it conducts to finance the government's budget deficits, which have been soaring because of the current economic slump.

Treasury officials said that the first auction would be for a total of $40-billion (U.S.) and would occur later Wednesday. The auction would be for cash management bills that will mature in 35 days.

Do you want to know more?

[seahorse2]

Yes, I smell hyperinflation. Maybe others do too, and that's why gold just shot up $40 an ounce.

[gnm]

Yes, I smell hyperinflation. Maybe others do too, and that's why gold just shot up $40 an ounce.

Urp. You mean $54 an ounce.

Ah yes, hyperinflation, the non-tax way to impose a tax.....

-G

edit - up $67 now....

[nero]

The Fed just asked the governement to sell 40billion worth of treasuries and deposit the money in their bank account at the Fed. This is exactly how money gets printed. That's an increase in the money (M0) supply of about 5% I believe.


Washington post link

[Cynus]

82.70
I bought GLD again when they announced the F&F bailout and promptly got fleeced. I wonder if this is a permanent climb or just another head fake.

[Snowrunner]

82.70
I bought GLD again when they announced the F&F bailout and promptly got fleeced. I wonder if this is a permanent climb or just another head fake.

I think it is a panic move. People who have money to move are trying to figure out where to put it and so it's piling back into commodities right now.

My guess is this will "relax" a bit next week and stay stable unless something else happens (FDIC bailout?).

Damn. I planned on "piling" into metals early next year when my financial situation had stabilized enough, but with any luck this may still be lucrative assuming the CAN$ goes up again together with oil and gold.

[Eli]

Well it is either print, or the US is BK.

Being in Gold may not be a bad place to be.

One thing for sure, Senator Dodd is a full fledged horse's ass. He just said the Treasury could set up a fund to buy up all the bad debt out there. He is an idiot.

The Treasury just had to bailout the Fed, there is no money to bail anybody out. The Treasury has to have actions to sell the debt to create money, and if there are no buyers the US is done.


It is becoming painfully apparent there is no money.

[ReverseEngineer]

No big deal, only 40 of these.



They'l be a bugger to change if you get hold of one, though !!!!!!!!

Gasmon

At least we don't have to push them around in wheelbarrows. At least until there are too many Zeros to fit on the paper.

Who the heck is going to buy this paper? With WHAT?

Reverse Engineer

[smallpoxgirl]

Yes, I smell hyperinflation.

Yeah. No kidding. Sorta smells like somebody left a dead possum in the living room.

[Snowrunner]

Yes, I smell hyperinflation.

Yeah. No kidding. Sorta smells like somebody left a dead possum in the living room.

Keep it, could be worth something soon!

[sittinguy]

Hot Damb, now I know why my gold is worth more today.

[EnergyUnlimited]

Hot Damb, now I know why my gold is worth more today.

You talk too much.

Someone from .gov is reading that.

After few weeks (following some Executive Order) that gold will no longer be yours.

PS. DJ dived nicely (>4%) towards end of sesion and gold was $84 up about the same time.

[burtonridr]

Hot Damb, now I know why my gold is worth more today.

You talk too much.

Someone from .gov is reading that.

After few weeks (following some Executive Order) that gold will no longer be yours.

Haha they'll never get me gold

[Dreamtwister]

Assuming they can find buyers for all of that toilet paper, isn't that the equivalent of dumping $400 billion into the economy via the fractional reserve mechanism?

[mmasters]

Yes, I smell hyperinflation.

Yeah. No kidding. Sorta smells like somebody left a dead possum in the living room.

Perhaps you forget your deodorant?

[CrudeAwakening]

Assuming they can find buyers for all of that toilet paper, isn't that the equivalent of dumping $400 billion into the economy via the fractional reserve mechanism?

I might be wrong about this but I don't think this action increases total bank reserves, since increasing treasury deposits at the Fed draws reserves from the system, offsetting the increase in reserves that occurs when the Fed buys the debt.

Somebody correct me if I'm wrong...

[gollum]

My guns and toilet paper are worth more, my money may end up supplamenting the toilet paper supply.

[mmasters]

Assuming they can find buyers for all of that toilet paper, isn't that the equivalent of dumping $400 billion into the economy via the fractional reserve mechanism?

I might be wrong about this but I don't think this action increases total bank reserves, since increasing treasury deposits at the Fed draws reserves from the system, offsetting the increase in reserves that occurs when the Fed buys the debt.

Somebody correct me if I'm wrong...

Yeah this is just high level money. It would have to trickle down through the fractional system of lending over many months to blossom and loan activity in general is quite restrictive so no this wont blossom into a ton of money...not in this economy. Now if people start dumping gov bonds from overseas there will be nobody to buy them but the fed (and it's their job to if nobody else does) and that in return will create ridiculous amounts of high level money, enough to cause hyper inflation.

[DantesPeak]

Ok, this is not easy to explain.

The Fed & Treasury developed a plan after the credit crisis started in July 2007. Basically in the event that the demand for highly liquid securities like Treasury bills greatly exceeded demand, the Treasury was to launch an emergency issue of new Treasury bills.

When interest rates on one month Treasury bills fell to 0% (zero) this morning, the plan was activated. The Treasury rather quickly sold $40 billion in new one month Treasury bills.

If the Treasury has excess funds, it usually deposits them with the Fed, as was the case today with eth $40 billion it received from the bill sale.

To lend money for its various schemes, the Fed could choose to sell its existing assets or just basically print up new money. Mostly over the last year, it has sold Treasury bills it owns and lent money to banks/brokers/mortgagers/insurers – but also printed up new money. The Fed statement Thursday night will tell us whether the new Treasury money was lent out somewhere.

Anyway, the Treasury & Fed at this point are just trying to prevent interest rates on US treasuries going negative. Perhaps needless to say, negative interest rates for the dollar would not be attractive to foreigners. Gold would seem more appealing. Gold could even go up $80 in one day as money leaves dollars.

So the answer as to whether this is inflationary or deflationary depends on what the Fed does with the money and whether it affects the value of the dollar.

Most likely, this is just one more step in the debasement of the dollar - that is replacing the backing for the dollar with private debts and assets instead of US treasury bills.