Dave P

Wednesday Market Outlook: What Is the Fed Hoping to Achieve?

The Fed needs to stop buying t-bills and start buying illiquid assets like real estate and automobiles. T-bills are liquid, so trading them for money does little to increase the liquidity of the economy. Buy apartment complexes, office towers, and other income producing real estate. That would put money directly into the economy, bypassing the banks, who are too scared to lend, and they can sell them back to the private sector at a profit when the economy rebounds. Buy a few thousand cars from Detroit, with newly minted money. That would put money directly into the economy, get the inventory off the Big 3's books, and you can be certain that the cash starved automakers would spend the money as soon as they got it, which would boost the economy. Sure, it would be better if consumers bought those cars, but that won't happen for a long time. Have the Fed buy them and turn the cars over to the US government. If the US government can't use them all, they can divide them up among the state governments.