Wednesday, March 18, 2009

$1.1 Trillion in Fed Spending Just Announced at FOMC…

R.I.P. U.S. Dollar, nice knowing you.

Total new money "printed?" $1.15 TRILLION or $3,770 for every man, woman, and child in America. Family of four? That's a $15,000 future hit to taxes and spending power, without interest.

Bernanke has now made himself the only buyer of Fed bonds and Treasuries. Why would anyone from overseas do so?

Now that he’s buying out in the open, he will have to do it again and again, just like he's doing with mortgages.

This will certainly light a fire under gold and temporarily in bonds. This is SYSTEM ENDING type of decision making. It may take a while, but watch out. The only thing that saves the dollar is if all the other countries in the index are likewise hell bent on destroying their money. We know the U.K. is, but we’re going to find out who else… (that's a daily chart of /DX [dollar] on left and /ZB [long bonds] on right)

Gold looks very sensible on this headline, just look at this reaction in GLD, up the equivalent of $50 an ounce on the news so far. This puts those crazy sounding figures sqarely on the table:

To summarize, the Fed is going to buy up to $300 billion in long-term Treasuries over the next six months. They are also buying up to an additional $750 billion in agency mortgage backed securities, adding to an existing program to buy $500 billion of agency MBS. It will also double the size of its purchase program for FNM and FRE debt to $200 billion from $100 billion.

Here is the entire Fed Statement:
Release Date: March 18, 2009

For immediate release

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. U.S. exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of evolving financial and economic developments.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.