[henkster]

Everyone is blasting the Fed over this, and they are missing the point, or target, of the criticism. The Fed has no choice but to conjure up $600 Billion, and will have to conjure up a lot more in the next year.

Our government is spending money like there’s no tomorrow (in fact, by spending so much money they are guaranteeing it). There isn’t enough credit on foreign markets to buy up $1.4 Trillion every year in bonds. So, in order to cover the deficit, the Fed is printing money.

It’s not their fault; the fault lies in the teleprompter puppet president and the socialists in Congress. They’re the ones writing the checks and the Fed has to cover them somehow.

Right now, printing money is the only way to do it, and as stated, they just don’t have any choice.

[Jack Black]

Excellent point, great post. So, lets think this trough. If the Fed doesn't print enough money to buy $600 billion in Treasury notes then who is going to buy those T-bills to keep the government afloat? If we have to go to market we're not going to get away with the very low interest rates we're paying today, to make that much debt attractive the rates will have to go way up, which means we'll need even more borrowing in the future.

We can have austerity, or inflation via monetization (what Bernanke is doing) or outright debt repudiation (ala Argentina), or some combination of all three. But we can't have "nothing". Austerity is being tried with a vengence in Ireland, and not working so well. The problem with austerity is that it shrinks the economy and lowers tax revenue, so it's a vicoius cycle too. I say we get right to the main act and start repudiating this debt.

[DHerion]

I think you are right about why the Fed is printing money. Banks are already sitting on a trillion in reserves. What’s another 600 billion. The fed is doing this to buy the debt. On the other hand there is a dark cloud for Republicans if Ben were to cancel this move. It could very likely push the country into a deflationary spiral, run up unemployment much higher in the short term - Obama could fire back as the economy tumbles that we were thisclose to getting out of this until the ‘crazy tea party/republicans’ forced us to change course. Obama could possibly get reelected and who knows, the Democrats could storm back into Congress in 2012. Very tricky situation.

[FromLori]

The Fed has a choice just say NO they are supposed to be independent and are proving they are not. They are scratching the liberals backs and allowing the spending while at the same time giving gifts to the banks with our tax dollars and as a result causing a huge back door tax increase in the form of inflation to American citizens.

The way it works is the banks sit on the money and earn interest and we foot the bill so it’s a win win for leftists and the crooks we already bailed out. The crooks that supported obama in the first place like Jamie Dimon, Lloyd Blenfein, Warren Buffet, etc. they win and the leftists win.