What the Fed Is Trying

It has become obvious, even to the Fed, that interest rate cuts alone are not going to right the ship. So they have come up with a plan for an "auction facility". They are going to auction off $20 billion, twice in the next couple of weeks, and more in January. The total amount is reported to be $64 billion (domestically). But that number can change determining on market conditions.

I will hand it to them...they are getting a good portion of the world to go along and offer money and using different collateral than normally allowed (specifically the Bank of England). It has come a time in our history where these moves will need to be a global effort. As we have seen in the last few months, an issue here can have a huge impact overseas.

These auctions are meant to help open up liquidity, where interest rates have failed in that attempt. If this works, and it might. The rate cuts may be at an end. I think the amount of money involved in these auctions will ultimately be significantly higher. But an alternative had to be determined. An inflation report today didn't have good news. It's on the way up. You cannot continue to cut rates in the face of inflation.