The World According to Michael

 Today's question comes from Reality Girl:

 "Dear Michael,  Xtranormal cartoons creep me out. Could you explain POMO without talking bears?"

Dear Reality Girl,

POMO is a convoluted mess.  However, the most straight forward explanation goes as follows:  POMO ("Permanent" Open Market Operation) is the act of the Federal Reserve Bank printing money out of thin air to purchase government bonds (treasuries) from their favorite primary dealers (i.e. Goldman Sachs, JP Morgan etc...) at a premium price.  This is a sneaky way of monetizing the governments debt.  Instead of purchasing treasury bonds directly from the government, the Federal Reserve purchases them from their buddies on Wall Street such as Goldman Sachs & JP Morgan.  What this does is deflect the notion that the FED is monetizing debt by using a 3rd party to purchase the treasury bonds from.

It should also be noted that when the FED purchases these treasury bonds from the big banks they do it at a premium cost.  In simplistic terms the bonds are purchased by the primary dealers at price A and sold to the FED at price B.  On top of the "Typical" premium price, the big banks receive commission based profits on any treasury sold above or below the original price.  So as you can see the big banks will profit regardless of price.  

The FED has enacted the Open Market Operation to "Boost" the economy.  The reality is that it has not boosted the economy, but has boosted inflation and started another bubble.  This time the bubble is the stock market itself.  The money that is printed by the FED and given to the big banks has to go somewhere and it's going directly into the stock market and the commodities market.  And we wonder why the big banks get richer during the worst financial crisis in 80 years.  This is all sponsored by the US Government and the Federal Reserve.  

Hope that answers your question.

Michael

P.S.  Did I mention that all of the money that is printed out of thin air by the FED is inherently owed by the US Taxpayer.  The taxpayers should at least request a snuggle after being sodomized.