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Discussion Re. Fed Plan to Buy Commercial Paper

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  • Tue, Oct 07, 2008 - 04:01pm



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    Discussion Re. Fed Plan to Buy Commercial Paper

Today the Fed announced a "radical" plan to buy commerical paper directly.

Let me see if I understand (correct me if I’m wrong!):  There is no market right now for commercial paper.  Businesses need financing.  So, the Fed, with its infinite supply of money, is going to step in and directly buy commercial paper.  Isn’t this basically its way of cutting out the middle man and injecting tons of new money directly into the economy without having to try to force the money through the banking system?  Isn’t it highly inflationary?

Please discuss.  Thanks!

  • Wed, Oct 08, 2008 - 08:01am



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    commercial paper

I’d say unless the credit issued by the Fed is retired upon maturity of the commercial paper, then it is most definitely inflationary, even highly inflationary.

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