Election 2010: Teabaggin' the Ds & Rs

[Tyrone Slothrop]

Originally Posted by sebastian_dangerfield

It's too blunt an instrument for the reasons I noted. Businesses won't expand until they see sustained demand. Hence, unemployment will remain high. We know what that does in terms of foreclosures and consumer spending. Banks will naturally lend where they can get the best return on risk. That's emerging markets.

I'm confused on your second point. The Fed buys $50bil in bonds from BOA. How is that $50bil not BOA's money?

ETA: I hope your final point is wrong. If the Fed is doing this just to do give the appearance of engagement and control, Bernanke has lost his mind.

The Fed gives $50 billion to BofA for the bonds, but it doesn't sell anything to raise the funds. It just creates them. Presto: the money supply is increased by $50 billion.