FED wants to issue its own bonds

The Federal Reserve is considering issuing its own debt for the first time, a move that would give the central bank additional flexibility as it tries to stabilize rocky financial markets.

Government debt issuance is largely the province of the Treasury Department, and the Fed already can print as much money as it wants. But as the credit crisis drags on and the economy suffers from recession, Fed officials are looking broadly for new financial tools.

Some economists worry about the consequences of this approach. Fed officials could find it challenging to remove the cash from the system once markets stabilize and the economy improves. It’s not a problem now, but if they’re too slow to act later it can cause inflation.

Moreover, the flood of additional cash makes it harder for Fed officials to maintain interest rates at their desired level. The fed-funds rate, an overnight borrowing rate between banks, has fallen consistently below the Fed’s 1% target. It is expected to reduce that target next week.

My comment: People wonder why there is a shortage of gold and silver small bars and coins. It is bad enough the Treasury issues bonds backed by "the federal governments taxing authority" or as I like to say there ability to use their monopoly on violence in order to coerce you into paying taxes. The FED by contrast only has a printing press what will back their bond issuance? More paper currency? Even average unsophisticated people know that this cannot stand. How anybody that is not insane can think we are somehow going to worm our way out of a day of reckoning for all this financial chicanery by jumping through these hoops I would sure like know. Instead I will continue to buy gold on dips along with good quality gold stocks.

John Polomny
The Real Deal