Friday, June 22, 2012

Fed Fumbles

The Federal Reserve just announced its latest solution to the slow economy.  It is called the "twist."  They will sell short term bonds and buy long term bonds.  This will hopefully lower long term interest rates.  Whopee!  Interest rates are  already at historic lows, but the private sector does not want to borrow because consumer demand is inadequate.  Instead of trading in the financial markets, the Fed should be buying something that everyone has so as to put new money in the hands of consumers.  You can hear the no-nothings scream socialism.  Why buying bank assets is OK say them, giving money to real people is some how bad.  Go figure!
   The same problem pervades Europe.  The European Central Bank buys assets of failing banks, but does not buy bonds of failing nations. 

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