The US faces a one trillion dollar debt. How will the US get the money to pay off this frightening deficit? The Fed will buy mortgage-backed securities from the banks at the rate of $40 billion a month, thus re-liquifying the banks. The banks will then spend the money on Treasury bonds.
Thus, the Fed will accomplish a few things -- the banks will be rendered more liquid, and the Dow and mortgage-backed securities will probably be lifted. But what happens when the banks are cleared of all their mortgage-backed securities? Maybe the Fed will buy straight mortgages, I don't know, and I'm not sure that the Fed knows. Maybe the Fed just wants to sneak by the election, and later they'll address the problems.
Meanwhile, the Fed will continue to talk up the economy. But I believe it's the Transports that are telling us the real story regarding the US economy ... Log in or subscribe to continue reading.
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