Thursday, November 4, 2010


This is why Main Street is pissed off ...

The Federal Reserve is going to spend about $600 billion to purchase Treasury notes (our debt), which will help keep our unfunded obligations (war, corporate bailouts, tax cuts for the rich, etc.) going. Then, for good measure, the Fed will use it's financial muscle to boost the stock market's performance. They're doing this because, you know, we didn't use enough taxpayer money for Wall Street's Bailout in Perpetuity Program, which we made official in 2008.

These two posts from zero hedge help explain what's happening ...

First up, let's take a look at the Federal Reserve's balance sheet through 2012. It appears that the Federal Reserve, in an effort to pump more money into the economy (called Quantitative Easing, II), will purchase about $75 billion in Treasury notes every month for the next 8 months. This will help the U.S. taxpayer government surpass China as the top holder of U.S. Treasury notes (China holds about $868b in Treasury notes) by the end of THIS month (click graph to enlarge).

In real life this is what were doing ...

I know, the picture's ugly. But it's about as good as any to drive home the point that we're taking on debt to continue policies that maintain: (1) unfunded bailouts for Wall Street, (2) unfunded tax cuts for the rich, (3) unfunded wars, and (4) a hyped up war culture that doesn't want to touch national security budgets (even though we spend more than all of our enemies, combined!).

The next Zero Hedge post makes it clear that the Federal Reserve isn't even trying to fake it any longer.

Specifically, as opposed to guarding the integrity of the dollar - a job every real central bank is supposed to take seriously - the key goal of the Federal Reserve's easy money policies, according to both Alan Greenspan and Ben Berananke, is to boost stock prices. No magic market pixie dust here. U.S. taxpayer government money is necessary to make sure Wall Street prospers.

That's right. We're using debt and easy money to maintain unfunded policies, and to inflate stock prices so Wall Street feels better about itself.

To hell with debt that lead to inflation threats ... To hell with debt that undermines global confidence in the dollar ... To hell with debt that brings on the threat of currency wars ... To hell with debt funded policies that undermines the integrity of the market ... To hell with debt that shackles the American consumer and taxpayer to an uncertain future. Job One for the Federal Reserve is to help an already bailed out Wall Street, by using Fed money to boost stock prices.

This, my friends, is the magic of the market at work in modern America. And Wall Street just loves it.  

- Mark

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