The Federal Reserve announced yesterday that it would immediately begin a program of increasing its holdings of "agency mortgage-backed securities" by $40 billion a month; continue its program of swapping shorter-term securities for longer-term ones ("Operation Twist"); and use the payments it receives on the agency mortgage-backed securities it holds to buy more of the same. All told, the Fed said, these actions would increase the Fed's holdings of longer-term securities by about $85 billion a month through the end of the year.
The Fed further added that it expects to continue its "highly accommodative stance ... for a considerable time after the economic recovery strengthens," and expects to keep the federal funds rate — currently at zero to one-quarter percent — at "exceptionally low levels" through at least mid-2015. The vote was 11-1, with only Richmond Fed president Jeffrey Lacker dissenting.
With Thursday's move — widely touted as QE3 — the Fed drops the pretense of a time-limited bailout, in favor of an open-ended program, a hyperinflationary end-game. Since the crisis publicly surfaced in Sept. 2008, the Fed's balance sheet has soared from under $1 trillion to $2.8 trillion. Some $1.65 trillion of that is U.S. Treasury debt, putting the Fed far ahead of China ($1.16 trillion as of June) as a holder of U.S. Federal debt, and it is now the largest buyer of such debt.
The Fed's move comes one day after Germany's capitulation to the fascist European bailout scheme, both actions reflecting a hopelessly bankrupt global system careening out of control. And the Fed, as we have seen, stands behind all the big derivatives banks, be they domiciled in the U.S. or elsewhere. It is protecting the Brutish Empire, not the United States.