Fed prints $1.3 trillion
I dunno who's been watching the news but Friday around 3pm east the Fed basically printed $1.3T worth of money to buy bad assets with. This money never came from anywhere which means that without public consent we instantly inflated the US dollar. This has been tried before and never in the history of the civilized world has it been successful. No idea why it hasn't hit the news, all I keep hearing about is the AIG business, this is possibly the largest undertaking of the American economy ever. Even during a depression the currency still maintains a value which would have been better than this. As far as america is concerned it's never been done before so there's no model to follow. However it has been tried in several other countries without success.
Think of it like this. Economies need inflation to be healthy so long as it's under control. Deflation is a bad thing when exposed to over a lengthy period of time. By dumping this much cash on the open market we are rapidly inflating the dollar which in turn is driving its value down meanwhile the economy around us is deflating. They've recently tried this in Zimbabwe where people walked around with wheelbarrows of cash to purchase a small amount of food. Recently made million dollar bills to try and control it. While Zimbabwe is not on our economic playing field the fundamentals of the govt and economics are the same. This has been tried a few other times. All of which has been met with 100% failure.
The idea is that you use the money to free up the economy but have to do so extremely fast. Once the money hits the streets in full force you just drove the value of the dollar down essentially lowering the value of everything once again. Now a $10 meal is $100. Contracted labor is shafted from the get go being held to their contracts. Other sectors can fluctuate with the needs but this takes a significant amount of time which may be to slow, in past cases it always has been. Where it hurts the most is in your bank and savings account. If the dollar falls 50-100% because of this then all your savings is worth half of what it was. Those on fixed income won't be able to buy the $50 loafs of bread etc.
The only saving grace I can think of in this situation is that the US economy is tied into the global economy. When we sink they sink. Modern day economics could be what makes this a success story. However given the possible consequences I'd rather see us in a depression with an intact economy than a collapsed one which is a very real possibility.
I can't for the life of me figure out why this isn't being screamed all over the media yet but look for it to hit by Friday. This was a last ditch effort by our Fed. There are no more tools in the shed for this one. They are printing money with no backing hoping that it hits the markets fast enough to jolt things. When they see it hit the market they then have to quit printing and start pulling it back in. If this isn't done then a collapse is very possible.
I'm actually a little scared when I think about it. Hope to God this is just me looking at the worst side of things but make no mistake in thinking. The United States is in a position it has never been in before and ALLothers that have tried this have collapsed their economies.