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Fed Shifts to Bond-Buying Mode to Boost Economy

Posted on Aug 10, 2010
Flickr / jmlawlor

George Washington strikes a pose in statue form outside the Federal Reserve building in Washington.

The Federal Reserve is taking action to try to give the flagging U.S. economy a much-needed jolt by committing to buy up some of the government’s debt in the form of long-term Treasury securities.

The Fed’s announcement came in tandem with the gloomy news on Tuesday that America’s economic recovery is likely to be “more modest in the near term than had been anticipated.” Nice with the “more modest,” there, but to translate this message from governmentese, we can deduce that the situation is going to stink for a good while to come.  —KA


In a statement, the Fed said the pace of recovery had slowed in recent months and is likely to be “more modest in the near term than had been anticipated”.

“Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit,” the central bank said.

Some analysts say the move could mean that money can be borrowed cheaply for a longer period of time.

“The Fed’s investments in longer-dated Treasury debt should ... lower mortgage and other borrowing rates,” Stephen Gallagher and Aneta Markowska from Societe Generale commented.

Others believe the Fed will have to take further steps in the coming months.

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By Ray Duray, August 12, 2010 at 7:05 am Link to this comment

William K. Black was today’s guest on the Keiser
Report. The topic was the failure to police Wall St.
Very germane to this article, IMHO:

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PatrickHenry's avatar

By PatrickHenry, August 11, 2010 at 6:04 pm Link to this comment

Paper begets paper.

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By JIn lee, August 11, 2010 at 4:07 pm Link to this comment
(Unregistered commenter)

No skulz I don’t smell bullshit.  That smell is long gone its more like a rotten corpse being fed on by maggot’s smell.

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By Beltwaylaid, August 11, 2010 at 9:11 am Link to this comment
(Unregistered commenter)

Can’t we start printing money in colorful, geometric
and intriguing patterns?  A little paste and my
bathroom will look like a million bucks.

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By diman, August 11, 2010 at 8:46 am Link to this comment

The economy is collapsing and all these “measures” are just twitches of the dying body.

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By Shift, August 11, 2010 at 7:07 am Link to this comment

The non-recovery is a result of wages falling faster than prices.  Now that deflation is just now beginning to bring prices down to find a balance and recovery can begin, the nutty elite are talking about deflating wages too.  HUH?  That will just continue the downward spiral. Rx:  maintain wages at their current level and allow prices to fall until a balance is reached.

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By bogi666, August 11, 2010 at 5:33 am Link to this comment
(Unregistered commenter)

I’m going to venture a guess what all this mumble bullshit means. It means that the decision to bailout Wall St. and to make the banks that are to big to fail are now too bigger to fail. The President ObambyaBush gangs along with congress simply choose the wrong strategy and the to big to fail they should have been allowed to fail rather than getting $trillions to be bailout out of a failed business model.Of course, the Wall St., Wash.,D.C.[District of Criminals}axis of evil are easily bribed to do the bidding of Wall St.The Fed, Wall St., D.C.will never admit failure of course. Meanwhile, with interest rates being kept artificially low it will force the stock markets to go up because their is simply no where else for investment money to go. Incidentally, this strategy is just a repeat of the business model that created the crisis in the first place, doing the same thing expecting a different result, a definition of insanity. The President has picked which side he favors and it ain’t main st., folks.

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By bogi666, August 11, 2010 at 5:09 am Link to this comment
(Unregistered commenter)

Smoke and mirrors? The President ObambyaBush administration was geared to bailout Wall St., it was never intended to solve the economic problems, just to bail out the financial criminals that engineered the crisis.FOLLOW THE MONEY

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By Ray Duray, August 10, 2010 at 11:36 pm Link to this comment

Hi Tim,

I’m not your hoped for economist, but I do have a
suggestion on follow-up reading for this topic.

Yves Smith of the Naked Capitalism blog has a pretty
good bead on what’s up with our monetary decline in the

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By Tim, August 10, 2010 at 8:35 pm Link to this comment
(Unregistered commenter)

Apparent desperation indeed. Any economist care to comment on this and explain to me how this is in any way a reinforcing venture.

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skulz fontaine's avatar

By skulz fontaine, August 10, 2010 at 7:36 pm Link to this comment

The Federal Reserve is going to buy Treasury Securities? How does that work? The
Fed prints the money to buy T-bonds and does anyone smell a bullshit?
Desperation on the cusp of madness.

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