In exchange for $85 billion of bridge financing, the Federal Reserve takes over insurer AIG.
Now, the question is, where did that $85 billion come from? Well, ah, err, uhm... ah, the Federal Reserve just printed it. Next question?
Now I hear you asking, isn't this inflationary, just printing money like that? Err... ah... well yes. But then, remember, we just had Lehman Brothers evaporate billions of dollars out of the economy, causing deflation, plus the continuing housing crash evaporating billions of dollars out of the economy, so that's not a bad thing. If you want a bad thing, a deflationary spiral like the one from 1930-1932, now that is a bad thing, bad in so many ways that it depresses me just to think about it. Thus the term "The Great Depression." Sigh.
And oh yeah, let's not forget John McInsane's commentary about all this: "The fundamentals of our economy are strong."
Alrighty, then!
-- Badtux the Monetary Penguin
Well, I'm getting a lot of firewood stocked, let it all go to hell, I don't care.
ReplyDeleteIt has to go to hell before it can be rebuilt again in wiser ways. Meanwhile, I'm going to get all the camping in that I can.
On the upside, we (the taxpayers) now own Stowe Mountain Ski Resort.
ReplyDeleteWell, ah, err, uhm... ah, the Federal Reserve just printed it
ReplyDeleteOh, jeez.
cookie- Too bad we won't be able to afford to ski there.
ReplyDeletePrint it? They don't even bother to do that anymore. They just add some zeros to the computer.
Indeed. I was using the term "print" metaphorically. Indeed they may have even loaned the money out of the reserves on deposit from national banks, which would be equivalent to reducing the reserve requirement (and thus via the magic of fractional reserve banking, is equivalent to printing money). But whatever they did, it all ends up with the same result -- an increase in the money supply.
ReplyDelete- Badtux the Monetarist Penguin