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We should abolish the words trillion and million from the English language.

Instead, we should always use numbers. Seeing all the zeros would help people understand what those numbers really mean.

The U.S. government debt, for example, is over $16 trillion. Without the zeros, that doesn’t sound like a whole lot because we tend to focus just on the numeric portion of the sentence – so, most people think it’s not a big deal. Saying that the government debt is over $16,000,000,000,000  is a much better way to represent the dimension of the problem.

Here’s another example: the Fed has just announced it will print $85 billion a month. That doesn’t sound like a lot, right? But that’s $85,000,000,000 every single month.

And the Fed is just getting started. I believe they will print billions of dollars every month as long as unemployment remains above 6%-7%. This could take years, and the result will be a massive expansion in its balance sheet.

The Fed prints money by buying securities from banks. The more securities it buys, the larger its balance sheet becomes. This lets you measure its money-printing activities by looking at the balance sheet expansion.

Starting this month, the Fed will purchase $40,000,000,000 a month in mortgage-backed securities, in addition to $45,000,000,000 worth of Treasuries. If it keeps that pace, it will add over $2,000,000,000,000 to its balance sheet in the next two years.

And if the economy doesn’t improve, the Fed will increase the size of those purchases. Its balance sheet could explode even faster.

Analysts at have projected what the balance sheet will look like by the end of 2013 if the Fed keeps its current pace. The chart below shows the Fed will print $1,170,000,000,000 by December 2013.

The Fed’s Balance Sheet is Set to Explode

See larger image

In fact, last week, Bank of America published a report saying the Fed will increase the size of its balance sheet from $2,800,000,000,000 to $5,000,000,000,000 when all is said and done. That’s a lot of zeros. And that means lots of new dollars.

Maybe me saying the Fed will print trillions of dollars has not convinced you to buy gold and silver. But I hope that if I say the Fed will print more than $1,000,000,000,000, it will.


Evaldo Albuquerque
Senior Analyst

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