Money, Money, Money

The Wall Street Journal reported late today today:

The Federal Reserve Wednesday unveiled a controversial new plan to buy U.S. Treasurys, hoping to spur growth in a disappointingly slow U.S. economy.

After two days of discussions, Fed officials decided to go ahead with a much anticipated program, saying they will buy $600 billion of U.S. government debt over the next eight months.

The Fed's policy-setting body said it stands ready to purchase more bonds if the economy's persistent weakness leads inflation to remain too low and unemployment too high.

The Fed's first $1.75 trillion bond-buying program, which ran from Dec. 2008 to March 2010, is credited with helping the economy when the U.S. was hit by a financial crisis and a deep recession. The latest move is more controversial because the economy is now growing -- albeit slowly -- and financial markets are no longer under severe stress.

By buying government bonds, the Fed aims to keep long-term interest rates low, hoping it will lead consumers to spend and companies to invest more, thus helping to propel the economy forward. Short-term interest rates were slashed close to zero in Dec. 2008, so the Fed no longer has its traditional weapon to boost the economy.

The Fed said it expects to buy between $850 billion to $900 billion Treasurys through the end of the second quarter of 2011. That's because in addition to the $600 billion, the Fed expects to buy about $35 billion a month to replace mortgage bonds in its portfolio that are being retired, a decision that was taken back in August.

Glib & Superficial has exclusively obtained a copy of a video presentation made by staffers intended to illustrate for the Fed's Board of Governors how the new program was expected to work.