Dollar Bear: The road to hyper-inflation
Posted by Peter Schiff on March 15, 2008

"Backing paper money with mortgages is nothing new. The French tried it in the late 18th Century, and it lead to hyperinflation." — Peter Schiff

by Peter Schiff

Baltimore — (TFN): This week, as the financial sector began to give way under the unbearable weight of bad mortgage debt, the Federal Reserve stepped in to save the day. At least that’s what it says in the script.

In a surprise move, the Federal Reserve announced its intention to swap $200 billion of treasury debt for $200 billion of potentially worthless mortgage-backed securities. The Fed may have been partially spurred to take the step as a result of the rapid collapse of Carlyle Capital Corp., a publicly traded private equity firm that is a subsidiary of the Carlyle GroupOil-Producers-Buying-Spree .

The Dutch firm could not meet margin calls on its depreciating collateral of AAA-rated mortgaged-backed securities guaranteed by Fannie Mae and Freddie Mac. On Friday, the Fed then took the unusual step of providing emergency “non-recourseâ€