How many of you noticed what the Fed is up to?
Even before the House stunned the world on Monday by rejecting the Bush administration’s bailout bill, the Fed was already resorting to the oldest action in its book: printing money.
With money markets around the world seizing in fear, the Fed on Monday announced that it would provide an extra $150 billion through an emergency lending program for banks, and an additional $330 billion through so-called swap lines with foreign central banks to help money markets from Europe to Asia.
That was on top of the $230 billion the Fed borrowed last week so it could finance its previous efforts to prop up the American International Group and other institutions.
Add that up. $150 billion + $330 billion + $230 billion = $710 billion. And that's just since last week. Apparently, they ain't done yet. Keep those printing presses filled with paper and ink!
Even if Congress refuses to pass the bailout measure, there is more money where that came from. The Treasury Department has already created a series of “supplemental” Treasury securities to finance the Fed’s activities, and there is no limit to how many more it can issue and sell.
I won't pretend to grasp what all the means in the short-term or the long-term. I am no economist, but I'm going to keep reading trusted sources of information with the hope that I'll grasp just a pinch of the overall complexities of our financial system.
“We have a lot of money to play with,” said Kenneth Rogoff, an international economist at Harvard. “As long as foreigners have a lot of confidence in our ability to solve our problems, we can borrow the $1 trillion to $2 trillion we need to solve it.”
I love that. Playing with money is fun! Even if it's just Monopoly™ money.