In the latest round of government “stimulus” the Fed has announced that it will be buying $40 billion in mortgage-backed securities each month for an indefinite period of time. The logic here: Buy more mortgage-backed securities (MBSs). This will in turn increase liquidity available for lending to people to buy houses or possibly other real estate. All those people buying houses will then have houses to spend money on and they will spend money at Home Depot and other places, and then the economy will miraculously recover. The effect of this will be: Even less saving going on than is … Continue reading Here Comes QE3