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FED to Monetize Another $1.75 Trillion in 2009

.... debasing the dollar to prop up the housing boom that the FED created.
by Jake Towne, the Champion of the Constitution

Monday, June 29, 2009

"A government that robs Peter to pay Paul can always depend on the support of Paul."

- George Bernard Shaw (photo)

In the June 24, 2009, the Federal Open Market Committee (FOMC) led by FED Chairman Ben Bernanke announced that the FED will monetize another $1.75 Trillion in 2009.  The announcement reads "the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn."

This is a last-ditch attempt to continue to prop the housing market from a further collapse due to option, Alt-A, ARM mortgages.  As with most of the current interventions, instead of "softening the blow" this action will merely drag out this depression, and likely will make the end resolution that much more catastrophic. Monetization of debt increase the money supply of dollars, which inevitably causes debasement of the dollar by inflation.

Perhaps the real shame in the FED's actions is they merely continue to spur malinvestments and prolong the false economy we now live in.  Retired Soviet apparatchiks in their rocking chairs are probably watching their old foes, and reminiscing,"Da, Igor, wasn't that the way we used to do it?" 

The FOMC also reported that it "expects that inflation will remain subdued for some time."  However, they themselves must realize that the true inflation rate is close to 6%, right?  In the mid-1970s, Nixon flipped out and ordered price and wage controls while the inflation rate was a mere 4%.

They themselves must realize that 45 banks have failed so far this year, and it's only the tip of the iceberg in terms of the banking system's insolvency.  Right?

That, as I wrote in "Unlocking the Money Matrix - The Real Interest Rate (PART 12/15)", the "real rate of interest" is still roughly -7%. Right?

As Mark Thornton of the Mises Institute wrote in "Keynes's Upside-Down World," if we had instead just allowed the free market process to work, inside of endless, unprecedented, and unresearched governmental interventions, the downturn would have finished by now.  The unemployment rate would be dropping, and companies like GM and AIG would be exiting or finishing the bankruptcy process, and stronger companies might be moving in.  Instead of having more electric or electric-hybrid cars starting to roll off the line in the coming year, we will be stuck with government-controlled production rates and subsidizing inefficient autos. 

As I've written and said countless times, those who do not believe the government are protecting themselves not just with physical paper dollars,  but more importantly with physical food, physical gold, and physical silver. 

Those that believe the government?  They may be wiped out. In the meantime, Paul will obtain a refinancing deal and continue to enjoy making mortgage payments to the banks on overvalued housing (or more likely, commercial) property until the interventions run out, or the scourge of inflation catches up with him. 

Jake Towne is running for U.S. Congress in Pennsylvania's 15th District in the 2010 election as a citizen unaffiliated with any political parties.  Jake also writes at www.LibertyMaven.com and www.CampaignForLiberty.comA master campaign presentation for internet viewing is available.  [Reach the Author Here!] 

P.S. You can listen to my most recent interview with "Patriot Pastor" Kinley from last week on BlogTalk Radio here.   On July 1, 4 PM EST, I will be on live with Ken Van Doren of the Voice of Liberty on www.RevolutionBroadcasting.com

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We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.

As always, unlike the NFL, the author grants full permission to allow any accounts of, rebroadcasts, retransmissions, repostings of this article to your blog or anywhere else in order to promote the Restoration of our Republic.

Veritas numquam perit. Veritas odit moras. Veritas vincit. Truth never perishes. Truth hates delay. Truth conquers.

Tu ne cede malis sed contra audentior ito. Do not give in to evil but proceed ever more boldly against it.

Summary of Articles and Bibliography for Jake Towne, the Champion of the Constitution (6/8/2009)

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