Helicopter Ben

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Ben Bernanke has long said that even with interest rates near zero, the Fed still has plenty of monetary ammunition left to stimulate the economy.  Today he put his money where his mouth is and announced that the Fed would be buying up a trillion bucks worth of treasury bills and mortgage securities.  This is known as quantitative easing, aka printing money.  The Wall Street Journal rounds up some reaction:

Guy LeBas of Janney Montgomery Scott provides the basics: “Even today’s announcement that the Federal Reserve plans on purchasing everything in America that isn’t nailed down raised relatively few eyebrows on our end….Effectively, the Fed is monetizing the Treasury’s debt, a strategy that appears in the encyclopedia under the heading ‘how to trigger inflation.’ “

David Greenlaw of Morgan Stanley says the purchase of mortgage securities is designed to drive down interest rates: “In 2008, the average mortgage rate on the outstanding stock of loans was about 6.50%. So, if the Fed brings 30-yr fixed rate mortgages down to 4.50% and all homeowners are able refi, the aggregate permanent cash flow savings would be on the order of $200 billion per year.”

Paul Dales of Capital Economics isn’t sure that $300 billion of Treasury purchases is enough: “This could just be the opening salvo….Overall, no one knows whether these measures will work. Much depends on whether banks loan out the cash they raise from selling Treasuries and whether households and businesses spend, rather than save, any extra borrowing….At the least, no one can say that the Fed isn’t trying.”

So there you have it.  $300 billion in new money, another $200 billion over time from lower mortgage rates, and a clear message that the threat of deflation is being taken seriously.

That’s what the adults were up to, anyway.  Back in make believe land, meanwhile, it was AIG bonus time 24/7.  Gotta keep Congress busy with something, I guess.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

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