Monday, September 29, 2008


In a point that I cannot emphasize enough, the federal reserve has the ability to print money and effectively raise funds ad infinitum (until the whole system falls apart, but thats not going to be now). That means that this vote today was simply a formality; the great and powerful bernanke chose to let the treasury and the congress look like they could handle the bailout (with his blessing, of course). But when our politicians dropped the ball, the US central bank let everyone know who was really in charge.

The fed wields blunt instruments, but they are hugely powerful. As the dollar is the world reserve currency, the fed can create money out of thin air in a way people only dreamed of under the gold standard (GS). They can pump prime the lending markets until the rapture because nervous investors have driven treasury bill yields to historic lows.

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