Wednesday, April 1, 2009
ZimBen's Printing Press
"Wouldn't it be nice if you could just print money? The US Federal Reserve can. It has pumped roughly $800 billion of new money into the financial system over the past seven months, and last week said another trillion or more could be created in months ahead. ... The cash credits--known as bank reserves--have grown from $3 billion last August to $776 billion by mid-March. .... Some economists find the Fed's actions alarming, especially its purchases of government bonds. The Fed is essentially creating money and lending it to the Treasury. ... Officials hope the new money gets more credit into the economy and helps to revive the financial system. If all goes according to plan, Fed officials will pull the extra money during a recovery, pushing interest rates higher before inflation gets out of hand", my emphasis, Jon Hilsenrath (JH) at the WSJ, 21 March 2009.
Is JH serious? If the Fed contracts the monetary base the banking system will collapse. What plan is JH talking about? The one he dreamed about after consuming too many pints of Jack Daniels topped off with too many magic mushrooms?