Not likely, of course, but what they are doing now is exactly what we argued for some time…

From Yahoo

• Meanwhile, the Federal Reserve announced that it will start buying long-term government bonds, its latest step to try to lift the country out of recession. The Fed said it will buy up to $300 billion in long-term Treasury securities over the next six months. The Fed also will buy an additional $750 worth of mortgage-backed securities and debt guaranteed by Fannie Mae and Freddie Mac in a move to help that market…

Soo, they are:

1. Buying up public debt, monetary financing the increased government spending
2. Buying up toxic assets, relieving banks balance sheets, and increasing the money supply some more..

Which is exactly what we argued they should do..

With bank profitability returning because of the steep yield curve (very low short-term rates, much higher long-term rates), there appears to be a ray of sunshine in the distance..