$40 Billion A Month In Mortgage Bonds

The Federal Reserve has chosen inflation of the US dollar through the creation of more valueless dollars. To top it off they have promised to buy $40 billion a month of mortgage bonds and $85 billion a month of US treasury securities. From WaPo:

The Federal Reserve under Chairman Ben Bernanke is trying to help the economy by doing something President Barack Obama and Congress can’t and which Mitt Romney opposes: electronically creating money, mostly out of thin air.

The Fed says it will “buy” $40 billion a month in mortgage bonds until stubbornly high unemployment eases substantially. The Fed’s new move is on top of its $85 billion-a-month purchases of Treasury securities under an existing program.

It hopes to hold down long-term interest rates long enough to stimulate more private-sector borrowing and hiring.

Democrats generally welcomed the step, although Obama’s camp won’t comment on Fed actions. Republicans called it further confirmation that Obama’s policies are failing.

“The president’s saying the economy’s making progress, coming back. Bernanke’s saying, ‘No, it’s not. I’ve got to print more money,’” Romney told ABC.”

Today, with all of everyone’s attention on the mobs in the middle east, it seems that few are paying attention to the recent announcement by Fed chairman Bernanke. He is blatantly playing politics by trying to give the economy a boost just before the election. It’s an effort to make the Obama economy look better than it is.

In the process he’s playing with fire. Printing billions more dollars, buying T-bills, and mortgage securities with invented money is a sure way to make the inflation rate become a major problem. But, it won’t happen until after the election.

We haven’t heard anything about the mortgage bonds he’s talking about buying. I’m wondering if they are the sub-prime securities that popped the housing bubble.

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10 Responses to $40 Billion A Month In Mortgage Bonds

  1. Locke n Load says:

    “I’m wondering if they are the sub-prime securities that popped the housing bubble. ”

    yes

  2. Locke n Load says:

    like operation twist, the supply of tese MBS is limited. someone who’s not driving should look up the total $$ amount of “sub prime” in the privaste mkt. that is the upper limit of this form of QE.

    slowly but surely the Fed is swallowing the private debt mkts and laundering the bad debt. only the Fed could accomplish something as audacious as this because they refuse to be audited

  3. notamobster says:

    $1.2T as an estimated 12% of the $10T MBS market.

    Source: Global Securitization.

  4. Uke says:

    I’m already investing in silver. Inflation will hit, and hit fast.

  5. notamobster says:

    I invested in gold and silver way back. I spent the better part of 2 years trying to convince a core group of friends (serious money investors) to buy gold and silver. I was out ahead of the financial collapse by 14 months.

    I convinced a couple of them. I sent a long email (like some of my longer posts) detailing why I saw what I saw. I told them that gold was bottoming out. If it moved more downward, it wasn’t gonna be more than a couple bucks. It went down $5 more (720 ish) and we’ve all witnessed it’s rise since then.

    One friend, Pat, took 40% of his retirement (35+/- years in the oil business) and put it in gold & silver. He bought bullion and ETF shares. He still thanks me.

  6. Locke n Load says:

    The biggest challenge i have as an owner operator is fuel costs. Its a bitch to pass them along in rising or falling markets so in actuality i am a rolling inflation buffer. Unless a trend is sustained most consumers feel only moderate pain whereas I lose an arm or a leg. Trust me. Painful.

    This new form of QE however should put an ever rising floor under oil. I WILL be passing it along, count on it.

    Yesterday I linked to Zerohedge to point out Tyler had similar asssumptions about oil inflation…
    Now its BofA backing both of us up. Oil is increasingly tracking Gold and Silver which are directly tied to dollar debasement.
    BofA sees it even worse than me…

    again, HT zerohedge
    http://www.zerohedge.com/news/bofa-sees-fed-assets-surpassing-5-trillion-2015-leading-3350-gold-and-190-crude

  7. James says:

    The problem is because the US has so much debt, rates can’t be allowed to rise. It could never be serviced.

  8. Locke n Load says:

    James, thats certainly a big part of the problem. Bigger Q: as the fed rapidly accumulates 65% of ALL mortgage debt and HALF of the treasury debt, how pray tell, can they EVER sell it or unwind it? To do so would take monstrous chunks out of the recovering economy’s GDP.

    This game is up, the Fed has just slit the throat of the Dollar. And don’t go expecting relative value against the Euro to save us. Fiat currency is decoupling from reality and commodity vlaues are realigning with precious metals. This is the endgame. From here on out it’s either war or SDR’s,lol.
    Well I guess the moon could turn bright blue and we could have a global Debt Jubilee but I’m guessing those odds are low.

  9. notamobster says:

    Well I guess the moon could turn bright blue and we could have a global Debt Jubilee but I’m guessing those odds are low.

    Now, that’s funny shit.

  10. messup says:

    President Barack Obama was a pioneering contributor to the national subprime real estate bubble, and roughly half of the 186 African-American clients in his landmark 1995 mortgage discrimination lawsuit against Citibank have since gone bankrupt or received foreclosure notices.

    As few as 19 of those 186 clients still own homes with clean credit ratings, following a decade in which Obama and other progressives pushed banks to provide mortgages to poor African Americans.

    Each client’s wealth losses have been shared with other Americans through declining neighborhood-wide property values.

    In Marcella Wilson’s neighborhood, nearby home values have dropped, she said, because “crooks [in banks] were giving people money they couldn’t afford.” NINJA(NoIncome, NoJob, Approved). Downpayment of only 3.5%. Later, raised in 2008 to 20%, reversed by Mr. Obama back to 3.5%.

    “My neighborhood is so-so.” she said. “Fifty years ago, when we moved in, it was a very lovely place.”

    Seventeen of Obama’s clients lived in her 60619 ZIP code.

    Each foreclosure cost neighbors, most of whom are African-Americans, up to $220,000 in lost property value, according to a study of Chicago foreclosures in 2003 and 2004 by the left-of-center Homeownership Preservation Foundation.

    This report is contained in Neil Munro’s DC article of 09/03/12.

    Conclusion: Yes, subprime loans are continuing apace…and the same debacle of 2007 will prevail in USA’s housing market, again.

    Vote massively for massive fraud is all around us, especially with all this crony-capitalism now underway. Amen.

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