Bernanke On Inflation: We Have Ways Of Sucking It Back In (Video)

More from today's Congressional hearings.  Here Bernanke is being questioned by Bill Posey of Texas and when discussing the excess reserves in the system and the potential for inflation, B-52 says we have ways of "sucking it back in."  Comes sometime near the 45-second mark.

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Comments

[DailyBail]

Any one else amused by this clip? The idea of vacuuming up reserves is the reason the Fed floated the concept a few months back about issuing their own debt. This debt issuance would then be used to partially offset the massive excess reserves in the system, as the economy began to gain strength.

[James H]

I keep wondering about this power to pay interest on excess reserves. What's to stop the Fed from using this power to recapitalize the banks - secretly and slowly? I know they're paying squat right now, but what if they take advantage of all this "hyperinflation" talk and start saying they "must" pay, say, 4% on excess reserves? At that rate, they could have a real impact. And yet, what would that do but kick the can further down the road -- temporarily immobilizing the reserves isn't hte same thing as getting rid of them.

Am I being paranoid, here?

[DailyBail]

I'm not totally up to date on this one, but the Fed might already be paying interest on reserves...if not I know I've heard B-52 express a desire to do so...and for exactly the reason you stated...as a means of recapitalization...

It wouldn't be much now but it would help their books in a marginally positive way...

I'll find teh Bloomberg article on Fed debt and see if you can find the Kashkari quote...thanks.

[DailyBail]

Here ya go...on issuing its own debt...

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a8R8g_qvgis8

and here on paying interest on reserves (at the bottom of page 1 and some of page 2):

http://www.reuters.com/article/ousiv/idUSTRE5685XE20090709

And another from the WSJ:

http://blogs.wsj.com/economics/2008/04/29/fed-paying-interest-on-reserves-an-old-idea-with-a-new-urgency/

[James H]

More green shoots from Dylan Ratigan's awesome new show. Dylan puts on his Banker hat and swaps a (literal) bag of trash, on-air, for $13.9 Trillion worth of Monopoly money from a guy wearing a "Fed" hat. Dylan then explains why we should support Ron Paul's Audit of the Fed (HR 1207) and explains in plain and simple terms how we have been screwed by the Fed's bailout of the banks. This is really good stuff. I can't help but admire Ratigan for what he's doing with the new show. From our perspective, it just gets better and better.

Her are just two of several choice morsels from this clip:

"The Federal Reserve just extended $14 Trillion of our money, our children's money, America's future...and now they don't want to talk about what's in the bag. And they did it because the banks created a garbage bag full of bad debts." (4:45)

"I feel as if America has suffered the greatest theft and cover-up -- ever, ... where banks created a pile of garbage, that they paid themselves billions of dollars in personal compensation, and then stuck the trillions of dollars worth of garbage with the American taxpayer. That, to me, is stealing." (7:05)

If you were to email just one story to friends and family, this might be the one. It explains the Fed's actions better than anything I've seen. And the anti-bailout perspective is put front and center.

http://www.msnbc.msn.com/id/21134540/vp/32124060#32124060