The only way to make money, is to spend money. Now apply that to money already spent. This is what the Federal Treasury is attempting to do right now. The FED is buying $600 Billion Dollars in U. S. Government Bonds. What’s misleading is that the FED isn’t buying anything but our own debt.
The Wall Street Journal writes:
In essence, the Fed now will print money to buy as much as $900 billion in U.S. government bonds through June—an amount roughly equal to the government’s total projected borrowing needs over that period.
In normal times, a Fed spending spree on government bonds would be highly inflationary, because it would flood the economy with money and raise worries about too much government spending. The mere worry of too much inflation in financial markets could drive long-term interest rates higher and cause the Fed’s program to backfire.
Prices in commodities markets have marched higher since late August. Crude-oil futures prices, for instance, have risen 15% since then, to $85 per barrel.
Michael Pence, a top Republican in the House of Representatives, said the Fed was taking an “incalculable risk.”
The government is printing money. It’s printing money we don’t have. The gamble is by taking the bonds off the street, it will lower interest rates and encourage more investment and spending. The FED is hoping that a orderly drop of the dollars value will spark growth in the economy. However, if that doesn’t work then inflation looms in the near future. That inflation could be crushing if the FED’s plans backfire. Not just for the United States Markets, but World Wide Markets also.
China owns a significant amount of U.S. debt. You cannot walk into any Wal-Mart and find products without a “Made in China” sticker on it. Pumping more money into the economy will bring down interest rate. It will also encourage riskier investment. It will effect the Stock Market into seeing gains that are artificially there. China has already expressed concern as well as other emerging markets about the risks the U. S. is placing on the world economies. It is a bubble that will effect other world markets into a possible currency war.
If this calculated risk fails, and inflation begins, it will effect prices of goods and services. It will devalue the dollar further and investments and savings will decline in value. People could see the value of their life savings evaporate.