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Chart – Credit Easing Policy Tools – As of 6.13.11

Courtesy of Phil’s Stock World:
The weak Dollar was pretty much the only reason we have had the pretense of a global recovery. It made it look like there was a demand for commodities (there was not), it made it look like there was a demand for American goods (there was not) and it made it look like we were paying our debts, which we were – but with discounted Dollars that were being created by the Federal reserve at a rate of over $50Bn per month.

In fact, the Fed has expanded its balance sheet (ie. printed money) by $2Tn since October of 2008. As you can see from the chart below (from the Cleveland Fed), there have been huge increases this year in “Long-Term Security Purchase” (T-Bills) as QE2’s primary purpose was to keep our lending rate artificially low by faking a demand for the $140Bn a month of debt paper that is being issued by the Treasury.

This chart just covers the first four months of the year and you can see Long-Term Security Purchases (in Red) grow from $700Bn to $1.3Tn in 5 months of QE2 (beginning in December). This has not been an issue of the Fed putting training wheels on the bike for us – this is the Fed drugging us, sitting us on the floor, playing a video of a bike ride and pretending we are ready to go on our own.

~Z props


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About V

V has been observing markets with a suspicious eye for decades. Years ago he said so-long to finance in pursuit of something far greater and more valuable than capital gains.

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