Todays $200 Billion infusion
The FED acted in what appears to be pure desperation. $200 Billion will spent by the Federal Reserve to buy up bad mortgage debt and mortgage backed securities. The move was scene to be putting more money in the banks that are suffering from a collapse in the housing market.
The bad part is that this $200 Billion is pure inflation. The $200 Billion will buy the debt that the Fed plans will be defaulted on, giving them a chance to put more credit in the system while bailing out the corporate bankers. For the investor, this is both good and bad news. For the everyday citizen, this is terrible news.
Buying up $200 Billion in mortgage backed securities will hopefully drive more investment into the market. The loans will be made to investment bankers with the mortgage securities as collateral. The banks will be able to borrow at the federal funds rate for more than the actual reserves of the bank. For example, a bank could put up $1Billion in bad loans to receive a $1B loan for 28 days. At that point the loan would have to be renewed or covered.
This system is meant as a way for corporations to take the debt off their books and exchange it for new capital. A win-win for them. After the crunch is over, the Federal Reserve will give the debt back to the banks but only after they are financially stable.
For the everyday person, the value of your bank account has essentially gone down 2% overnight due to inflation of the money supply. This is a fresh $200 Billion on top of the already $10Trillion in M3 statistics. No wonder why gold hovers at $1000 per ounce.