Clarification on the Posting About the Central Banks Action Today

The U.S. Federal Reserve Board is not really giving  free money to Europe but making  more dollars available to lend at a lower interest so the other central banks borrow from the Feds and then in turn they can lend to their banks at a lower interest so the banks can also lend at a lower interest so the borrowers pay less interest and that is supposed to benefit businesses and consumers.

By the way, The Federal Reserve does not borrow money. The step taken today do not increase the deficit. The only one allowed to issue federal bonds – that is borrowing – is the U.S. Treasury Department. The Feds on the other hand, are independent from the federal government and they print money so when they do the money supply increases.

That could lead to inflation if the economy takes off but I think you’ll all agree with me that there no danger of a takeoff  for now – we are kind of stagnant. And the current crisis overrides any fear of inflation.

What the central banks are trying to prevent is a panic if the euro fails because then everybody puts their money under the mattress and in that case we have a Depression – with a D.

Thus I do support the move although, believe me, I am part of the 99% and closer to 99 than to the single digits.