The U.S. Dollar: Headed Down the Rabbit Hole

Buyers? We don't need no stinking buyers!

Saying that the recession continues to deepen, the U.S. Federal Reserve announced Wednesday that it would pump an extra $1 trillion into the economy by buying mortgage-backed securities and long-term Treasury issues. [SNIP]

As expected, the Fed kept its benchmark interest rate virtually at zero. But in a surprise, it drastically increased the amount of money it will create out of thin air to thaw out the still-frozen credit markets that have cramped lending to consumers and businesses alike.

The Fed said it would purchase an additional $750 billion worth of government-guaranteed mortgage-backed securities, on top of the $500 billion that it is currently in the process of buying. In addition, the Fed said it would buy up to $300 billion worth of longer-term Treasury securities over the next six months. That would tend to push down longer-term interest rates on loans of all types. (Emphasis: Oklahomily)

I'm trying real hard not to use profanity.

Do you understand this report? The Fed is going to purchase certain troubled securities and U.S. treasury bills to help finance various government spending with "money that it will create out of thin air."

No longer is it necessary, apparently, to actually find people or governments that will buy U.S. debt. Hell no! We'll just print the money we need or punch in better numbers into the supercomputer that it will take to keep track of this financial madness!

(Dave calling Alice and the Mad Hatter: Please set one more place serving for tea! I'm late to the party but I'm hurrying ...)

You cannot have a stable monetary system if the value of your money isn't tied to something, anything. Once upon a time it was precious metals like gold and silver. Then it was decoupled and the yardstick became real productivity and the perceived value of denominated goods in international trade. Apparently the new standard for an Obama World is that dollars will be generated by angels dancing on the heads of pins.

Incredibly, the Dow Jones went up 90 points today as investors latched onto this new happy talk!

As the Mogambo Guru would say, "We are doomed! Freakin' doomed!"