Things keep getting curiouser and curiouser over at the Federal Reserve. According to the Wall Street Journal, the Fed is now considering issuing its OWN debt for the first time ever. As you probably know, the Treasury is the primary institution that issues U.S. government debt. More below on this very odd development …
“The Federal Reserve is considering issuing its own debt for the first time, a move that would give the central bank additional flexibility as it tries to stabilize rocky financial markets.
“Government debt issuance is largely the province of the Treasury Department, and the Fed already can print as much money as it wants. But as the credit crisis drags on and the economy suffers from recession, Fed officials are looking broadly for new financial tools.
“Fed officials have approached Congress about the concept, which could include issuing bills or some other form of debt, according to people familiar with the matter.
“It isn’t known whether these preliminary discussions will result in a formal proposal or Fed action. One hurdle: The Federal Reserve Act doesn’t explicitly permit the Fed to issue notes beyond currency.”
Related posts:
- Reports: Insurers, emerging markets next in l… The credit virus just keeps spreading, and with each new outbreak of disease,various government agencies are forced to respond. The...
- Another day of market chaos What more can I say? The chaos continues. AIG is the area of biggest focus in the credit market, given...
- Two “Generals” in serious debt trouble Another driver of today’s carnage is the debt problems at two Generals — General Motors and General Growth Properties. These...
{ 1 comment… read it below or add one }
Thanks Mike for your insight. It seems to me that all the fiat currency being created to fill the holes in our virtual economy is behaving like a giant coil spring. As the money is created it compresses the spring ever tighter with
each new round of bail-outs. Eventually when that spring is fully loaded and beginning to overflow with fiat currency the hardware that holds the spring down (the final remains of American productivity) will give way. When the productive remains of our
economy give into the hidden tax of inflation BOOM! Inflation, dollars will explode and fly everywhere. Those holding them will try to sell them for something real. Those holding bonds will sell, but who will buy? Those who sold their equities,
commodities and foreign currencies at a loss in round one, seeking safety in US treasuries in round two, will be wipe-sawed and lose as everyone heads for the exit in round three. Wonder what round four will bring?