Everyone has known this was coming for months now. They weren't sure of the amount but the consensus was $500 billion to $1 trillion.
Essentially, inflation is very very low right now and the government wants to avoid a deflationary spiral where prices start to decrease. A little bit of inflation is actually good for the economy in a lot of ways.
What happens in this situation is that the Fed actually creates money out of thin air and buys these securities. The net effect is that they increase the money supply and this should make it easier for banks to lend and in turn, it will spur the growth of businesses that need credit. It also devalues the dollar relative to other currencies and makes imports cost more here and American produced goods cost less in foreign markets.
Now I'll open the floor to wild emotional outbursts, Dave Ramsey style pissings about debts and conspiracy theories about how the world is going to end. 3....2.....1 GO!
"I find that the harder I work, the more luck I seem to have." - Thomas Jefferson (1743-1826)
"There are four boxes to be used in defense of liberty: soap, ballot, jury, and ammo. Please use in that order." - Ed Howdershelt
Last edited by AL P; 11-03-2010 at 04:46 PM.