News Item: Fed to Buy $600 Billion of Treasurys
The Federal Reserve Wednesday unveiled a controversial new plan to buy U.S. Treasurys, hoping to spur growth in a disappointingly slow U.S. economy.
After two days of discussions, Fed officials decided to go ahead with a much anticipated program, saying they will buy $600 billion of U.S. government debt over the next eight months.
The Fed's policy-setting body said it stands ready to purchase more bonds if the economy's persistent weakness leads inflation to remain too low and unemployment too high.
The Fed's first $1.75 trillion bond-buying program, which ran from Dec. 2008 to March 2010, is credited with helping the economy when the U.S. was hit by a financial crisis and a deep recession. The latest move is more controversial because the economy is now growing -- albeit slowly -- and financial markets are no longer under severe stress.
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Feb '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
This is as much or more responsible for the current jump in the stock market as the results of the elections.
Investors know that all this extra money is really aimed at propping up the stock market. But it's all fake, for appearances only-- the increase in the value of stocks is merely reflecting the decrease in the value of the dollar.
However, it did make people like me want to jump in from the sidelines, mainly to ride the wave and protect the value of my retirement fund. My (very small) IRA is mostly in cash. Though I don't have much faith in the stock market, if cash is doing even worse, it may have made sense to jump back in and ride the Fed wave. Still, I'm not sure I want back into the stock market at this point.
Plus, it's already too late. If I were going to ride the wave I should have jumped in the moment the Fed announcement came out.
Edited on Nov 4, 2010 at 9:09amJul '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
This is the biggest story of the day, but folks are talking about Michele Bachmann.
MSM, mission accomplished.
Busy System Admin, gold jumped. Commodities will go up.
"Investing" $600B (PLUS!) in the stock market while inflating the currency while trying to suppress that very inflation? What could go wrong with that?
Prediction: When the market collapses from the sell-offs, Barney Frank will chair the committee on Wall Street Stock Market Oversight.
Jul '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
Michael Tee: This is the biggest story of the day, but folks are talking about Michele Bachmann.
MSM, mission accomplished.
Busy System Admin, gold jumped. Commodities will go up.
. · Nov 4 at 5:09pm
As a precious-metals investor, this was the day I've been waiting for. Gold up $55 an ounce, silver up nearly 5%.
I told my friends, buy silver and gold: it's a bet on the Fed being criminally-stupid.
Some of them listened, some hesitated. Those who listened are up over 50% in just a few months and the party has only started.
Aug '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
Rather than printing this stuff wouldn't it be cheaper to cut the tax revenue and let us spend and invest it ? Our combined brainpower ,connections surpasses those nonprofit slugs that dont understand money . So don't demand the six hundred billion and the added cost of collecting . And then don't spend the money to print and decide how best to freak out world markets. And grow the economy.
Jul '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
Oh, I don't think Obama has read Hayek. He's read Niebuhr though.
@Kenneth Buy wheat, rice and light sweet crude.
May '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
The problem is a political one. Cutting taxes would take an act of Congress which would in turn take an act of God. The Fed has god-like powers and so if acting here. It's not criminal per se since the risk of inflation at the moment is so low. The trouble of course is trusting the Fed to have the discipline to raise rates when things start to turn the other way.
For Kenneth and his ilk I actually worry more about a bubble in precious metals.When I see Glenn Beck touting Gold on his show for an hour I become concerned. At least oil futures relate to a precious commodity with intrinsic value.
Jul '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
Trace Urdan
For Kenneth and his ilk I actually worry more about a bubble in precious metals.When I see Glenn Beck touting Gold on his show for an hour I become concerned. At least oil futures relate to a precious commodity with intrinsic value. · Nov 4 at 8:02pm
Trace, he's pitching to the rubes. Anyone who does business with Goldline is going to take a major haircut. As for me, I can liquidate my positions with a couple of clicks of a mouse.
And I am invested in oil stocks, with very nice dividends.
But my point on precious metals is that governments, in extremis, will always try to inflate their way out of trouble. It's not so much that gold and silver are going up, it's that the value of the dollar is going down. But for a certain period of time - until the prices of consumer goods start to spiral upwards - the increasing dollar value of my precious metals buys more of the consumer products most important to my family's survival: BMW's.
Sep '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
First: Anyone who can actually watch Glenn Beck for an hour has a higher pain threshold than I do. Kenneth said investing, but what he described at least to me, sounds more like trading, which is a question of timing. He certainly timed it right. Wish I had!
It is generally admitted that Greenspan’s cheap dollar/low interest policy helped get us into this mess; I doubt that a similar policy on setroids will get us out. This move by the Fed serves as a disincentive for non-dollar denominated investors/traders to buy treasuries. It looks like they are parking cash in commodities. All this is good for WS and once again leaves main street picking up the tab. Will either party establishment say anything about it? No-they’re invited to the party. I hope Kenneth lets us know when its time to go short!
Jul '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
Trace Urdan
The Fed has god-like powers and so if acting here. It's not criminal per se since the risk of inflation at the moment is so low. The trouble of course is trusting the Fed to have the discipline to raise rates when things start to turn the other way.
My problem is twofold. The pressure for inflation right now is low, but the quantitative easing may produce inflationary pressure. Other markets are raising rates now. (Flownover has a point about cutting spending.) There is plenty of money out there right now; estimates put it about $1T, but businesses are sitting on it. An additional $600B+ is doing nothing except monetarising the debt. Which brings me to my second point: the reason for QE2 is not to stimulate in my view, but to "expand" the Fed's balance sheet. What Bernake is doing now is creating a bubble in soft commodity markets and to a lesser extent, the stock market and wherever the banks and businesses are putting their money. The last $2T (QE1) has done very little in terms of stimulus as the jobs numbers are still in the tank.
Jul '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
No, Jim, I've been holding those positions for several years. But it's just within the past 6 months that I felt confident enough to recommend them to friends, who aren't as patient or comfortable with volatility.
In any event the two metals - gold and silver - have outpaced the S&P over the past 3 years. If you bought $1,000 of the S&P in Oct 2007, you'd have abut $860 now. Silver? You'd have $2,000.
As for when to go short, you'll have to ask someone a lot smarter than I.
Feb '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
Michael Tee: This is the biggest story of the day, but folks are talking about Michele Bachmann.
MSM, mission accomplished.
Busy System Admin, gold jumped. Commodities will go up.
"Investing" $600B (PLUS!) in the stock market while inflating the currency while trying to suppress that very inflation? What could go wrong with that?
Prediction: When the market collapses from the sell-offs, Barney Frank will chair the committee on Wall Street Stock Market Oversight. · Nov 4 at 5:09pm
Yes, I've got some in gold too. I pulled out of the stock market almost completely in the spring of 2008-- a great move. I did leave some in a few stocks that got killed. I had also moved a portion into precious metals at that time and have kept it there.
Cash was definitely better than the market on the way down, but with the Fed inflating everything, cash is no longer necessarily better than stocks. I still think stocks are overvalued based on P/I ratios, but I saw the current wave coming after the Fed announcement and was a bit too slow to break out the surfboard....
Feb '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
I also worry about a bubble in precious metals. I'm not convinced we will have runaway inflation, though the Fed's current actions are certainly inflationary. I'm concerned we could easily end up like Japan, in a decades-long deflationary period, but the reality is nobody knows whether we'll have inflation or deflation.
So, I do have precious metals as a hedge. It's probably less than 30% of my IRA, but it's done better so far than the cash sitting on the sidelines. No guarantees it will continue, though.
May '10
Re: News Item: Fed to Buy $600 Billion of Treasurys
Busy System Admin
also worry about a bubble in precious metals. I'm not convinced we will have runaway inflation, though the Fed's current actions are certainly inflationary. I'm concerned we could easily end up like Japan, in a decades-long deflationary period, but the reality is nobody knows whether we'll have inflation or deflation.
So, I do have precious metals as a hedge. It's probably less than 30% of my IRA, but it's done better so far than the cash sitting on the sidelines. No guarantees it will continue, though. · Nov 5 at 8:14am
But the difference between the US and Japan is that the Japanese government invested into business ventures, instead of propping up consumer spending, right? Please correct me if I am wrong here...