Fed Money Printing: What It Means for Investors
“The dollar is the best example that trust can be printed.”
Mark Twain
One year, the United States entered a war that was not fully funded. Taxes were not raised promptly, and people were not asked to sacrifice publicly.Rather, the easiest and quietest solution was chosen: printing.
The citizen did not feel anything on that frist day. The dollar in his pocket seemed the same, and the number in his bank account did not change. But after a few years, he began to notice that his house had become more expensive, his food was heavier on his budget, and his savings were weaker than they were.
no one had stolen it, and no fine had been imposed on it. It was just that new dollars entered the scene, and the old ones lost part of their value.
This is not the story of one person, but rather a recurring story of printing the dollar: a decision taken at a political moment, and paid for gradually from the purchasing power of the people. Printing does not declare itself as a tax, but it performs the same role, more calmly, and without confrontation. And from here begins the story of the modern dollar, not only as a currency, but as a tool that redistributes losses before distributing profits, a story that has been repeated since the beginning of the last century and to this day.
The latest news and its impact on the price
“It protects you from decisions you did not make.”
day
The Federal reserve announced, in Jerome Powell’s speech last Wednesday evening, that it will begin purchases of Treasury bonds within the management of reserves starting on December 12, in a step aimed at enhancing the stability of the financial system and supporting liquidity in the financial markets, so that this decision will accompany the decision to reduce interest rates in the markets by a quarter point and this is what justifies the recovery and decline of the dollar and bond yields.
Powell also pointed out that if there were no concerns about the labor market, the interest rate would be higher now, stressing that decisions are taken taking into account the balance of inflation and the stability of the economy.
the President of the Federal Reserve Bank of New York, John Williams, said that the Federal Reserve may have to expand its balance sheet during the coming period, if market conditions require this to meet liquidity needs,
Williams indicated that this trend may include increasing liquidity injections or returning to asset purchases if pressures on the financial system and markets continue.
Economic analysis
Looking at the economic indicators, we note that the growth index continues to rise for the sixth week in a row, reaching 3.35%, with inflation stabilizing at 2.4%, and bond yields declining, and this indicates a response from the market to the expansion undertaken by the Federal Reserve and justifies the rise in the price of silver to reach a new historical peak.
Conclusion:
When the Fed says that it will buy bonds from the market with the aim of pumping liquidity into the market, it is indeed actually bringing this liquidity from printing the dollar in the hope that as soon as the market improves and the economy is moving (accommodative policy), it will resell these bonds (accommodative policy).this,in my opinion,is one of the stupidest,if not the stupidest,ways to treat recession and weak markets,because this is true. It treats recession,
key improvements and explanations:
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