Fed bets big in new push to rescue economy

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By Pedro da Costa and Alister Bull – The Federal Reserve launched another aggressive stimulus program on Thursday (Sep 13), saying it would pump $40 billion into the U.S. economy each month until it saw a sustained upturn in the weak jobs market.

Unlike in its two previous bond-buying sprees, the Fed said it would only purchase mortgage-backed securities, hoping in part to unstick a housing sector that Fed Chairman Ben Bernanke called “a missing piston” in the U.S. recovery.

Economists said the Fed could eventually buy more than $1 trillion in debt given the open-ended nature of its new policy. Capital Economics estimated purchases could top $1.4 trillion. more> http://tinyurl.com/8c8cqym

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Ben Bernanke’s Paper Dollar Embodies Systemic Risk

Description: Newspaper clipping USA, Woodrow Wilson signs creation of the Federal Reserve. Source: Date: 24 December 1913 (Photo credit: Wikipedia)

By Charles Kadlec – The paper dollar is now the single most important source of systemic risk to the financial system, the world economy, and the security of the American people.

That is the lesson of the past 100 years that Federal Reserve Chairman Ben Bernanke did not teach during his four lectures at George Washington University’s Graduate School of Business. Instead, he celebrated the importance of the extraordinary powers he and his fellow governors have to manipulate interest rates and the value of the dollar in the name of economic growth and stability.

In so doing, he ignored completely that the ever growing need for heroic interventions by the Fed is itself being created by the paper dollar system he celebrates. more> http://is.gd/VZkWUy

related>

• Origins and Mission of the Federal Reserve
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Watch Bernanke’s ‘Little’ Inflation Capsize U.S.

By Amity Shlaes – A little is all right. That’s the message Federal Reserve Chairman Ben S. Bernanke has been giving out recently when asked about the evidence of inflation in the U.S. recovery.

Sometimes Bernanke doesn’t even go that far. He simply says he doesn’t see inflation. The Fed chairman recently described the prospects for price increases across the board as “subdued.”

“Sudden” is more like it. The thing about inflation is that it comes out of nowhere and hits you. Monetary policy is like sailing. You’re gliding along, passing the peninsula, and you come about. Nothing. Then the wind fills the sail so fast it knocks you into the sea. Right now, the U.S. is a sailboat that has just made open water, and has already come about. That wind is coming. The sailor just doesn’t know it. more> http://tinyurl.com/78kqtvp

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Central banks may need to burst bubbles: Bernanke

By Kristina Cooke – Federal Reserve Chairman Ben Bernanke said on Tuesday that central banks may need to resort to monetary policy to combat asset bubbles, although regulation should be a first line of defense.

Despite an aggressive easing of monetary policy by the Fed, the U.S. economy continues to suffer from the effects of a burst real estate bubble.

Economists have long debated whether central banks should prick perceived asset bubbles when they are forming. Before the financial crisis, most central bankers, Bernanke included, argued against using interest rates to lean against bubbles. more> http://tinyurl.com/6jk9ftd

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