by Mario Rizzo
In an effort to prevent deflation, the Fed has now decided to do more quantitative easing, that is, to buy with newly created high-powered money various assets aside from short-term Treasury securities. Over the next six months it will buy up to $300 billion in long-term Treasury bonds.
It will also purchase additional mortgage-backed securities (MBS) in the amount of $750 billion as well as up to $100 billion in additional securities of Fannie and Freddie (to a total of $200 billion). These are the parts of the new policy that concern me most. They are bad ideas. Continue reading