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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Re: Fed goes ballistic

Posted by WARREN MOSLER on September 29th, 2008


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(email exchange)

>   
>   This morning the Fed announced a massive expansion of its dollar liquidity
>   facilities. Three measures were announced: (1) an increase in total TAF
>   auctions from $150 billion to $300 billion, all coming in 84-day funds (2)
>   forward TAF auctions of an additional $150 billion, with the auctions to be
>   conducted in November for funds available for one or two weeks surrounding
>   the year-end and
>   

The TAF would be unlimited, unsecured, and the Fed would set the rate in advance if they had a clear understanding of reserve accounting and monetary operations. It’s about price, not quantity.

>   (3) an increase in the currency swaps with foreign central banks (ECB, BoE,
>   BoC, BoJ, SNB, RBA, and the Scandis) taking the total outstanding from $290
>   billion to $620 billion. In addition, these swap lines were extended through
>   April 30, 2009; previously they were authorized through January 30, 2009.
>   

This is a different matter, and more serious and disturbing- foreign central banks borrowing $ from the Fed to support the $ needs of their local banking systems.

Should those banking systems go down and this program gets large enough it could take down their currencies like any other external debt.


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10 Responses to “Re: Fed goes ballistic”

  1. Rich Says:

    Warren, what is the worst case scenario if congress does nothing? What other tools does the fed have?

    Reply

  2. jcmccutcheon Says:

    I guess he would say, see the Mosler plan.

    Reply

  3. Rich Says:

    Do you have a link?

    Reply

  4. Winslow R. Says:

    “The TAF would be unlimited, unsecured, and the Fed would set the rate in advance if they had a clear understanding of reserve accounting and monetary operations. It’s about price, not quantity.”

    It also should be unrestricted. The financial sector doesn’t deserve monopoly access. Any citizen has superior qualifications.

    Reply

  5. Jim Baird Says:

    So, we could see a paradoxical spike in the value of the dollar?

    Reply

  6. jcmccutcheon Says:

    The Mosler Plan.
    http://www.moslereconomics.com/2008/09/20/the-mosler-plan/

    Reply

  7. warren mosler Says:

    1. THE FED CAN FOLLOW MY PLAN AND LEND UNSECURED TO MEMBER BANKS VIA THE DISCOUNT WINDOW AND TAF, TO NORMALIZE LIQUIDITY. BUT THAT DOESNT ADDRESS THE DEMAND ISSUE.

    2. YES!

    3. ON THIS SITE, SADA WILL PUT UP A SEPARATE LINK SHORTLY
    http://www.moslereconomics.com/2008/09/20/the-mosler-plan/

    4. ONLY FOR MEMBER BANKS WHO ARE HIGHLY REGULATED. THEY ARE THEIR OWN COMPETITION WITH THOUSANDS OF THEM ALL OVER THE PLACE

    5. YES, IF THE EURO GOES DOWN.

    NEXT POST COMING- TIME FOR A PAYROLL TAX HOLIDAY? WITHIN A FEW DAYS IT WOULD BE AS IF THE CRISIS NEVER HAPPENED.

    Reply

  8. warren mosler Says:

    1. just what’s in my plan

    4. just banks, the others aren’t sufficiently regulated
    and supervised, yet.

    5. yes, if it all goes bad in the eurozone this week

    Reply

  9. Mike Magoo Says:

    4. Warren you say regulation and superivision. However I have already heard volcker claim we have possibly breached what is already legal for them to do several months ago. Today it seems they took more action that is not LEGAL and they don’t currently have the authority to take. However they took the action based on the hope that a bill was going to pass today that did not. This is no way to run a government. We fire attorneys who do not meet the current ideaology wether that action is legal or not! Huh? Even the mosler plan will fail if the government agents can pick and choose what rules and regulation they pick and choose to follow. Perhaps today they don’t want to do what is legal, and tomorrow they will.

    You said before the markets can only function within the “box” of government. A government that is doing things that it has no authority to do is broken. Therefore markets cannot properly function when the foundation beneath it is disorganized and in chaos.

    I am glad the bill did not pass today, they did not have you or roubini coming in and talking to them about what needs to be done before they rushed into actions based on fear. Are you on that plane to washington yet Warren?

    Reply

  10. warren mosler Says:

    thanks!

    haven’t gotten invited yet

    Reply

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