The new purchases come with risks. They will balloon the value of the assets the Fed holds by about 50 percent, to more than $3 trillion. That could make it tricky for the central bank to draw that money out of the system once the economy starts to recover. The Fed would probably find it difficult to sell such massive volumes of assets, and if it doesn't handle the task adeptly, the nation could face high inflation because too much money would be in circulation.Fed to Pump $1.2 Trillion Into Markets - washingtonpost.com
"This will help the economy," said John Silvia, chief economist at Wachovia. "The challenge comes nine months from now, when the economy starts to recover and the Fed finds itself in a very delicate position. The challenge is the exit strategy."
Thursday, March 19, 2009
Fed to Pump $1.2 Trillion Into Markets - washingtonpost.com
Posted by Anthony J. Pennings, PhD at 12:35 PM