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PUMP DELUXE: Federal Reserve to spend $45B month to buy bonds...


Federal Reserve to spend $45B a month to buy bonds, links rate hike to 6.5 pct. unemployment
By Associated Press, Published: December 11 | Updated: Wednesday, December 12, 4:31 PM
WASHINGTON — The Federal Reserve said Wednesday that it plans to keep interest rates ultra-low even after unemployment falls close to a normal level — which it thinks could take three more years.

As long as expected inflation remains tame, the Fed said it could keep its key short-term rate near zero even after unemployment falls below 6.5 percent. Unemployment is now 7.7 percent.

For the first time, the Fed is making clear to investors and consumers that it will link its actions to specific economic markers. Previously the Fed had said only that it expects to keep the rate low until at least mid-2015.

Analysts said the Fed’s new guidance will make it easier for companies, investors and consumers to make financial decisions because they will have a clearer grasp of when borrowing costs will begin to rise.

“This approach is superior” to setting a timetable for a possible rate increase, Chairman Ben Bernanke said at a news conference after the Fed held a two-day policy meeting and issued a statement. “It is more transparent and will allow the markets to respond quickly and promptly to changes” in the Fed’s economic outlook.

Though the Fed’s low interest-rate policies are intended to

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As desertdave points out...

...[The Fed will be] spending $45 billion per month buying Treasuries on the long-end of the yield curve until employment falls to 6.5%.
So between this and QE 3 which was announced just two and a half months ago, the Fed will be printing $85 billion per month.

First and foremost there is no evidence that QE creates jobs. Consider the case of the UK.
Since the crisis began, the Bank of England (BoE) has announced QE efforts equal to $598 billion in the UK. The UK’s GDP is $2.43 trillion. So the BoE has engaged in QE equal to over 20% of the UK’s GDP.
Despite this massive amount of QE, 2.53 million people are out of work today in the UK, up from 2 million at the start of the Great Crisis in 2007. Similarly, the UK’s GDP remains well below its peak.

In simple terms, QE fails to generate economic growth or jobs. End of story. The BoE spent 20% of the UK’s GDP on QE (a truly staggering amount) and more people are unemployed now than when it started. And GDP has yet to get even close to its pre-Crisis highs.

The same can be said of Japan which has implemented QE over 20% of its GDP. There, as has been the case in the UK, there is no evidence that QE has created jobs or even economic growth.

So the Fed is flat out lying in its claim that QE will create jobs. There is no evidence that this QE does this...

If the Fed is not doing this to create jobs, then they must be doing it for some other reason... Perhaps to help banks at the cost of American citizens!

What a surprise.

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>> Federal Reserve to spend $45B a month to buy bonds, links rate hike to 6.5 pct. unemployment

full employment used to be considered 5% - so Fed policy is only aiming to get us halfway there? I guess they think they smart enough to know just when to let off the gas.

Of course, their power and knowledge weren't enough to keep us out of this mess, but come on... give 'em another chance

The Fed reminds me of the hucksters near Time Square who con people into playing three card monte
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Scheesch guys, get the full story for the guys own mouth will yah!!!

Oh in the later question and answer period he says he is not looking for a new job... to bad we are going to be looking for someone to replace Carney.

Comment the one of the objects is to force investors into higher risk products... wouldn't that be good for the stock market?

Any <speaking of slinky> mouse

Fed makes new rate pledge, ups stimulus

In an unprecedented step, the Federal Reserve said on Wednesday it would hold interest rates near zero until the U.S. unemployment rate falls to 6.5 percent as it launched a new round of bond purchases to stimulate the economy.

The central bank said its commitment to hold rates steady until its new threshold was reached would hold as long as inflation was projected to be no more than 2.5 percent one or two years ahead and inflation expectations were contained.
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