Wednesday, December 03, 2008

The Fed rolls out its new printing presses. (Helicopters on order next.)


One chore high on Ben Bernanke's to-do list was ordering the rebuilding of Uncle Sam's money presses a week ago to make sure they won't break down trying to keep up with the government's new $800 billion relief plan...

As part of the ambitious moves, the government's two huge printing facilities -- in Washington, DC, and Fort Worth, Tex. -- will have to expand their already strained, 24-hour output.

To upgrade and rebuild money presses, the government said with little notice on Nov. 14 that it began negotiating an exclusive contract with Swiss printing giant KBA-Giori, SA to provide labor, parts, repairs, upgrades, improvements, service, software and equipment in a long-term contract....

"This new $800 billion initiative (by the Fed) will cause an increase in currency requirements ..." said Mark Gertler, a professor of economics at New York University.

Essentially, the $800 billion in the new moves will come through a series of yard-sale swaps back and forth - starting with hard cash that's swapped for a holder's risky assets.

The holder, in turn, then swaps his newly gained cash back to Uncle Sam for government IOU's, such as one-year Treasury bills, and the cash goes back into the hands of the Fed to be traded out again in other rounds of similar horse-trading - leveraging the cash many times over.

"It's called sanitizing the cash," said Gertler, noting that theoretically there's no limit on how much cash Uncle Sam can print....

In a related development, the Fed entered negotiations with Sikorsky Aircraft... [ NY Post ]