“For gold investors,” Ed Bugos writes us this morning, “this Fed action is icing on the cake. I can’t help but think that in less than a year, Bernanke has turned the Federal Reserve into a hedge fund… watch them issue their own negotiable paper next -- Federal Reserve Savings Bonds!
“The assets of the ‘fund’ currently include Treasuries, some of which are short positions (swapped out), some gold and defunct currency items, agency debt, repurchase agreements from various financial companies, term loans, a piece of Bear Stearns and AIG debt and foreign currency paper. Before long, the fund will add mortgages and consumer debt… ha, give me a piece of that!”
“Before this crisis, the Fed it could only buy Treasuries. Its liquidity injections were effectively limited to reserve bank credit. Today, it can shovel money out of many other doors too, including its direct line to many primary nonbank dealers (broker-dealers and other financials), mortgage lenders and guarantors, money market funds, car and consumer finance companies, the government and so on. It is widely backstopping risk taking, and multiplied the ‘Greenspan put.’ “The only window it hasn’t opened is a direct line to consumers. I’m sure it’ll think of something. “In light of all this, and the explosion in the Fed’s balance sheet in recent weeks, who can take the deflation case seriously? All the indications of a massive reinflation effort are under way, and the results are coming in clear as day.”
“The assets of the ‘fund’ currently include Treasuries, some of which are short positions (swapped out), some gold and defunct currency items, agency debt, repurchase agreements from various financial companies, term loans, a piece of Bear Stearns and AIG debt and foreign currency paper. Before long, the fund will add mortgages and consumer debt… ha, give me a piece of that!”
“Before this crisis, the Fed it could only buy Treasuries. Its liquidity injections were effectively limited to reserve bank credit. Today, it can shovel money out of many other doors too, including its direct line to many primary nonbank dealers (broker-dealers and other financials), mortgage lenders and guarantors, money market funds, car and consumer finance companies, the government and so on. It is widely backstopping risk taking, and multiplied the ‘Greenspan put.’ “The only window it hasn’t opened is a direct line to consumers. I’m sure it’ll think of something. “In light of all this, and the explosion in the Fed’s balance sheet in recent weeks, who can take the deflation case seriously? All the indications of a massive reinflation effort are under way, and the results are coming in clear as day.”
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