FEDERAL RESERVE TO BUY SECURITIES

The Sec of Treas and the Federal Reserve came up with the same plan some time ago with a 600B stimulus that many felt was too little, but it may have been too much too quick for foreign currency to handle.  However the  "gradual" stimulus may more acceptable.  The View from 2217 of this plan was expressed last month in a Blog on 8/15 and the view remains the same today.

An excerpt from the 8/15 Blog is presented below:

If deams could come true the Federal Reserve could gradualy issue dollars to pay off debtors,  devaluating   the dollar  and causing inflation that would increase prices which would also increase wages and taxes, all born fairly by consumers and businesses alike in the purchase of goods and services..

Real Estate and Capital Wealth would retain their value through appreciation.  The only losses would come from large amounts of uninvested dollars in corporations and banks. (and also of course, cash horded under mattresses)

Higher prices would be offset by corresponding higher wages and business would not be effected.  The possibility of low income consumers unable to save for down payment on a first home could be offset by government backed, low interest, capped mortgages that could also help small business entrepreneurs in need of capital for start-up and/or expansion.

Any change would be opposed by those satisfied with the statis quo.  Even if the tax break for the top 1% was ended, it wouldn't be much of a hardship for them.  However, massive cuts in entitlements and health care would tragically reduce the standard of living level for millions of  middle class with millions of the poor living at a third world level.  Continued cuts in  education would greatly jeopardize our future leadership role in the world.  Neglect in maintaining the infrastructure and public service will impede progress and result in choas.  The budget challenges today are astronomical!

The effect on foreign trade would vary according to the financial adjustments made by the countries involved, but basically prices on imported goods would be higher with lower prices on exported goods.  This would be good for our economy as this would promote more demand for domestic goods.  Admittedly, this may reduce profits for outsourced domestic corporations.

 If you think that the doubling of prices and wages would never happen, consider the prices and wages from 1960 to 2000 and we still surived.