The Federal Reserve has followed through with its plan for an auction of money with an 84 day term. This action by the Fed was once considered impossible but finding new and better ways to print and pump money into the economy, no matter the negative effect on the value of the dollar is now commonplace. And, no one notices or objects. Likewise, the federal government’s bailout of the private companies, Fannie Mae and Freddie Mac, has caused no noticeable furor. This is in direct contradistinction to the uproar which accompanies the loan guarantees made by the federal government to Chrysler back in the 1970’s. In that case, there was a huge public reaction and yet all that was offered was a guarantee of loans which were paid back by Chrysler, with interest, to its lenders. Here the risk to the federal government as a result of this bail out is enormous by comparison and yet no one objects or even notices. This idea is not original to me, but came from an article several weeks ago by my favorite car/economics writer, Ed Wallace, whose columns appear in the local paper, the Star Telegram. [As an aside, here is a link to his latest article: http://www.star-telegram.com/ed_wallace/story/819483.html .]

“The credit squeeze hit with force a year ago and the central bank has shoveled out billions of dollars in loans. From September through April it also was aggressively cutting interest rates to keep the financial turmoil from pushing the country into a deep recession.

The Fed’s interest-rate setting panel met again last week and for the second meeting held interest rates unchanged amid concerns that lowering rates further could stoke inflation pressures.”

Here is a link to the whole article from Yahoo Finance online: http://biz.yahoo.com/ap/080812/fed_credit_crisis.html?.v=2

Michael