On Aug 14, 2007, at 11:28 PM, Mike Ballard wrote:
> I'm ignorant of where these cash injections go. I mean, do they go
> directly
> into various private bank accounts as a kind of temporary deposit
> or? And
> where does this cash come from? Previousl tax collections or hot
> off the
> printing presses.
Essentially the Fed - or any central bank - goes into the markets and buys bonds using money created out of thin air. The sellers are the big commercial and investment banks. The central bank may sell its purchases back into the markets days or weeks later, or they may just keep them and earn interest.
Doug ***************** Honestly, I've never seen an explanation before. So, the private banks issue these bonds and the a central bank buys them with freshly printed paper? And billions of this paper (or electronic forms of same) has been pumped into the market to buy these bonds in order to solve the cash flow problems associated with failures in the sub-prime mortgage market? And this builds confidence?
I think, I understand now.
Mike B)
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