Fed Needs To Print Roughly $1.5 Trillion to Satisfy Extended Language

August 19, 2011

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Bernanke Capital announced it will continue to roll over it’s portfolio of subprime and Treasury investments indefinitely, while purchasing all securities needed to maintain interest rates low for at least 2 more years.  To use a conservative baseline Bud Conrad, chief economist with Casey Research, extrapolates how much money printing it took to satisfy the Fed’s purchase of subprime mortgage backed securities (MBS) from banks in QE1, and Treasury securities in QE2. He came up with $1.5 trillion. But it actually could take much more to roll over this debt in the future. The Fed just keeps buying bonds until rates reach their level. If there is a loss of confidence in the dollar and Treasuries, it could take many multiples of $1.5 trillion in money printing to keep rates low.

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For it’s own calculations, the Fed does not release figures about the amount needed to print, and “probably doesn’t know.”

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