Econ 101 TeachingNovember 3, 2010
I’m not an economic prophet, but everyone is saying the same thing: Later today, the Federal Reserve is going to buy up Treasury Bonds. “Big Deal” the guy on the couch watching basketball says. “Let them buy all they want” says the teen texting her friend on the other end of the couch. Just in case you don’t remember Economics classes in college, or were smart enough to stay away from them, here is the big deal in four easy points.
1. The Treasury Bonds are what the Government issues to pay their debt. People buy them up, so the government owes them money. They are pretty good investments…safe at least.
2. The Federal Reserve prints money. Our money – American money.
3. When the Federal Reserve buys Treasury Bonds, they are buying up debt, with money they are printing.
4. Other countries see this and conclude “America is buying its own debt with money it is printing. Let’s invest somewhere else”.