http://www.iht.com/articles/2007/12/12/business/fed.php
On page 2:
"The auctions held by the Fed will set interest rates on borrowings by banks from the Fed. The banks will be able to post any collateral they wish, including illiquid securities such as collateralized debt obligations, as they now can do at the discount window. But while it often becomes known which banks borrow at the discount window, the auction procedures are designed to keep the identities of the borrowers secret."
OK. I'm putting up the lint in my navel as collateral next time I go to buy a snack cake.
So let me get this straight-- the Fed will take as collateral the bad debt that they know the banks already have. Now when this debt goes bad, who is covering it? The issuer of the bonds, actually. And these are who? That's right, the people of America! And China! And Japan! And....
But no, it doesn't stop there. By failing to be able to recover the money the Fed loans out, the value of the denomination (ie, the dollar) drops. On top of that, the extra lent money continues to bulge up an already inflated money supply, which is getting less valuable every day that he risk that its precious underlying commodity, oil, will be traded on a large scale in something other than it.
Notwithstanding that I flunked Macro in college (and I did, too), I did though manage to get a B in Micro from a real jerk of a prof (and that was considered a good grade coming from him). But still, I am not the dunce I was back then when it comes to economics, and so, please explain to me how actions that increase the quantity of a devalued asset will somehow increase the value of the goods and services it is designed to act as a medium of exchange for?
On page 2:
"The auctions held by the Fed will set interest rates on borrowings by banks from the Fed. The banks will be able to post any collateral they wish, including illiquid securities such as collateralized debt obligations, as they now can do at the discount window. But while it often becomes known which banks borrow at the discount window, the auction procedures are designed to keep the identities of the borrowers secret."
OK. I'm putting up the lint in my navel as collateral next time I go to buy a snack cake.
So let me get this straight-- the Fed will take as collateral the bad debt that they know the banks already have. Now when this debt goes bad, who is covering it? The issuer of the bonds, actually. And these are who? That's right, the people of America! And China! And Japan! And....
But no, it doesn't stop there. By failing to be able to recover the money the Fed loans out, the value of the denomination (ie, the dollar) drops. On top of that, the extra lent money continues to bulge up an already inflated money supply, which is getting less valuable every day that he risk that its precious underlying commodity, oil, will be traded on a large scale in something other than it.
Notwithstanding that I flunked Macro in college (and I did, too), I did though manage to get a B in Micro from a real jerk of a prof (and that was considered a good grade coming from him). But still, I am not the dunce I was back then when it comes to economics, and so, please explain to me how actions that increase the quantity of a devalued asset will somehow increase the value of the goods and services it is designed to act as a medium of exchange for?
posted by Matt Campbell at 8:48 PM
0 Comments:
Post a Comment
<< Home