NY Times: Fed to Buy $1 Trillion in Securities to Aid Economy

With its key interest rate already at zero, the Fed has turned to a tactic that amounts to creating money out of thin air. The Federal Reserve will pump an extra $1 trillion into the financial system by purchasing Treasury bonds and mortgage securities. The move is its biggest yet, almost doubling all of the Fed’s measures in the last year. Investors responded with surprise and enthusiasm, and the DOW jumped 91 points. But there were also clear indications that the Fed was taking risks that could dilute the value of the dollar and set the stage for future inflation. Gold prices rose $26.60 an ounce, hitting $942, a sign of declining confidence in the dollar. The dollar dropped sharply against the Euro and the yen.