The Fed's New Tool
- Housing in California is back to its pre-crisis peak;
- Stocks are at record levels;
- Food prices jumped 0.7% in May alone; and
- Anyone who drives knows that a tank of gas is far more expensive than it was a year ago.
- The Fed creates cash from thin air;
- The Fed buys Treasuries and mortgage-backed securities (MBS) from banks with that freshly minted cash;
- The Fed pays banks 0.25% interest as an incentive to keep the new cash on deposit at the Fed.