I’m a complete novice and I’ve been trying to wrap my around what the Fed did today. I’ve got a great deal of money (relatively I’m sure ;)) tied into CDs while I wait to jump back into the housing market, and I don’t want my dollars to become worthless (which I fear is happening).
If I understand correctly, the Fed is just acting as the bank of last resort. No one in the upper echelons of finance knows how much risk is involved with bonds and hedge funds; how much toxic junk is embedded in which particular funds and who will be the bag holder on these funds. There is fear and as a result, the banks don’t trust each other’s credit, so everything is locking up. The Fed is stepping in to take on some of the risk by purchasing some debt, taking on risk, to get things moving. IF I understand correctly.
But the main question I have is this: Where is the Fed getting its money? Is it money in reserve or are they just cranking up the presses? If they’re cranking up the presses then the dollar just lost some value. But Bernake said his main concern is inflation (if you can believe anything the power brokers say).
Does anyone know if this will kick up inflation?
