No No, We Should Pay Banks MORE To Store Their "Money" In the Fed Vault, Duh!
So says St Louis Fed President James Bullard, who is deathly afraid of deflation, so afraid, in fact, that if it were up to him, the presses would be cranked up as far as they can go and Bernanke would have been in the helicopter months ago doing donuts in the sky while dropping sacks of cash to the peasants below. If that isn't a central banker's wet dream I'm not sure what is... maybe Jr Deputy Accountant bound and gagged and tossed in some empty gold vault so she can't stir up any more shit?
Anyway. Read on. WSJ:
St. Louis Federal Reserve Bank President James Bullard said Thursday that lowering the interest rate on excess reserves kept at the central bank is "a dead-end policy" that wouldn't be effective.
Federal Reserve Chairman Ben Bernanke has said lowering the rate on excess reserves was one option for boosting the economy. Reducing the rate would encourage member banks to withdraw the reserves from the central bank, and instead loan the money to businesses and households.
Bullard has been a leading proponent of another option--reviving quantitative easing, which includes the purchasing of U.S. Treasurys. The Fed took a modest step in that direction Aug. 10, announcing it would reinvest proceeds from maturing mortgage-backed securities into Treasury bonds.
Bullard said on Thursday that no further purchases were needed at this time, but reiterated that the Fed should signal its willingness to do so if necessary.
AHA but see Bernanke isn't thinking because if they did that, the fake made-up money that has blown up the Fed's balance sheet over the last two years would go from fake made-up account at the Fed to ACTUAL money. And we know what comes next if that happens, don't we? OK, some of us do. Bernanke obviously doesn't.
Also I'm a little confused on Bullard's statement that the Fed should be clear that it will do whatever it takes should it become necessary (necessary to them, not necessary to us, those are two completely different items and don't you forget it). When was the last time the Fed did not signal its willingness to buy crap assets no one else wants to "save the economy"? Hello, extended period? Hello we're investing some of this MBS money in Treasurys because we're afraid the economy is going down the toilet again?! Oh sorry, that's not actually what they said. What they should have said was we were wrong, the economy is fucked and we're just going to buy Treasurys because we think we can pull this off for just a tad longer but you'll never get that kind of signal from those fuckers.
Gas up the helicopter, Bernanke!