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Is this printing money?



September 15, 2008 – Comments (3)

According to Naked Capitalism the feds added $70 billion to the federal reserves.

So far what I've seen I put into reduced money supply through credit contraction.  

Now, what I don't understand is where this $70 billion comes from.  Do they print it? 

3 Comments – Post Your Own

#1) On September 15, 2008 at 8:36 PM, IBleedConcrete (29.93) wrote:

Woah, that's a big fed funds rate spike.  I think it's actually a deflationary sympton, since it's being countered by an inflationary measure.

From Wikipedia:

How do open market operations actually work? Currently, the FOMC establishes a target for the federal funds rate (the rate banks charge each other for overnight loans). Open market purchases of government securities increase the amount of reserve funds that banks have available to lend, which puts downward pressure on the federal funds rate. Sales of government securities do just the opposite—they shrink the reserve funds available to lend and tend to raise the funds rate. By targeting the federal funds rate, the FOMC seeks to provide the monetary stimulus required to foster a healthy economy. After each FOMC meeting, the funds rate target is announced to the public.

So if that's what happened, the Fed moved interest rates down by ordering the Treasury to print dollars and gave them to banks in exchange for outstanding government bonds.

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#2) On September 15, 2008 at 10:36 PM, abitare (29.66) wrote:

The Federal Reserve Is in Panic Mode. Gary North

Sept. 15, 2008

Today, the FED injected $70 billion of credit into the system.

Before this, the FedFunds rate hit 6%, 4 percentage points above 2%. Banks refused to lend to each other overnight.

This reaction indicates that bankers panicked. The FED panicked because bankers had panicked.

This story is here.

If the FED lowers the FedFunds rate tomorrow, Bernanke is in panic mode. It will send a bad signal if the FED lowers the rate. It will say, "It's close to getting out of control."

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#3) On September 16, 2008 at 8:05 PM, camistocks (69.22) wrote:

The Fed didn't panic. It is their job to look for orderly markets during difficult conditions. That's what they were created for. 

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