Increasing the money supply could induce inflation and it could get out of control. The analogy is that the fed has the gas and brakes of the economy and the economy is a huge ship that is hard to get going and hard to stop. The gas is lowering interest rates and increasing the money supply and the breaks are the opposite. Right now the Fed sees us moving too slow and therefore is putting the pedal to the metal. But the ship could build a full head of steam, economy overheat, in a short amount of time once it gets moving. Then they would have to hit the brakes before we run into an iceberg!

No icebergs in sight so few worries just yet. Hopefully, the fed won’t leave the bridge in the middle of the night when things get going.

The testimony to the Senate is a wonderful insight into what is going on, and, the Fed and Greenspans’ thoughts on many issues. I highly encourage you to read the transcript. Both sides of the Senate spin the Chairman’s comments toward their own point of view.

So, go to the source, don’t use others’ interpretations, review all sides, etc.  For example, read what Greenspan actually said, not what CNN thinks you should hear about what he said. Read the actual economic reports, not an interpretation of them by a pundit on a Sunday morning talk show. TV and Radio make money by being entertaining. This is the point of “my take” on current events. Read between the lines, think for yourself.

Why aren’t they bringing back the 30 year yet, even though interest rates are down. Interesting that the Fed didn’t address it further, and don’t count on them not bringing it back at some time in the future.

Crowding out will not be a problem for the foreseeable future as the stock market is not “hot” and there are many that are looking for a “solid” return. Also, the amounts are still small compared to the overall market. This theory is not fact and may not occur at all.

Regarding politics and the Treasury, the debt ceiling will have to be lifted soon. As this is done by congress, there democrats will probably have something to say before they approve the increase. (They have to eventually approve it as otherwise the US Government would default on their debt)