FED Determined to Trash the Dollar
I read a story today saying the Federal Reserve announced a radical plan to buy massive amounts of short-term debt in a dramatic effort to break through a credit clog that is imperiling the economy. The Federal Reserve will buy commercial paper, a short-term financing mechanism that many companies rely on to finance their day-to-day operations, such as purchasing supplies or making payrolls. This comes a day after a huge selloff that put the Dow below 10,000 for the first time in four years.
The Fed said it is creating a new entity to buy three-month unsecured and asset-backed commercial paper directly from eligible companies. Fed officials said they'll buy as much of the debt as necessary to get the market functioning again. They refused to say how much that might be, but they noted that around $1.3 trillion worth of commercial paper would qualify. The money to purchase this commercial paper is in addition to the $700 billion financial bailout President Bush signed into law on Friday.
What?! It's bad enough that the $700 billion (actually $850 billion) bailout is going to skyrocket inflation, now the Fed is promising another $1.3 trillion on top of that. Unbelievable!
Folks… hang on, because we're headed into the worst economic period since the Great Depression, if not worse than the Great Depression.
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China's central bank has reiterated its call for the creation of a new international currency that could replace currencies such as the dollar in countries' official reserves. Senior Chinese officials, including Premier Wen Jiabao, have repeatedly expressed concern about the dollar, which comprises most of China's roughly $2 trillion in foreign-exchange reserves. China is concerned that the dollar's dominance exacerbates global financial imbalances. It also worries that massive U.S. government borrowing to support stimulus spending could eventually lead to inflation, hurting the value of China's holdings.