By Alan Fein

(AXcess News) New York - The Federal Reserve stepped up to support the US economy, buying $300 billion in Treasuries.  The bold move signaled the Fed's belief that the recession would end which in turn pushed the dollar down 1.6 cents, making commodities a cheap bet against inflation.

The Federal Reserve in effect printed money which diluted the value of the dollar by the highest one-day amount since 1971.  The US Central Bank also purchased mortgage bonds, bringing its total asset purchase to near $1.15 trillion.

Critics argue that if the Obama administration moves to spend more taxpayer dollars to prop up the US economy that the dollar will lose even more of its value as China, our biggest trade partner and largest buyer of Treasuries has essentially backed off purchasing anymore US debt.

But with the dollar rally over, investors were looking to commodities as a cheap bet against inflation that in turn pushed crude oil up more than 6% early Thursday morning in New York.  The metals markets were also very active with gold trading up nearly 7% and silver showing one of its highest intraday gains in years, up more than 12.5%.   Copper prices also rallied, climbing nearly 5.19% and aluminum moved up 0.8%.

In Chicago, grain markets were also active in anticipation of demand growing against the drop in the dollar index.  Corn futures rose 2.5%, Wheat rose 2.6% and Soybeans were up more than 3.1%.

While the value of the dollar plunged, it was Federal Reserve Chairman Ben Bernanke who decided the best way to hedge off a Depression of the US economy was to push as much cash as was needed into the financial system to get the economy moving again.

The move by the Federal Reserve is intended on stimulate the economy where it will have the biggest impact in lowering the cost of borrowing.  In a Bloomberg Television interview, Chief Economist with the Bank of New York Richard Hoey said Bernanke has created a "Rambo Fed" in defense of the US economy, citing Bernanke's knowledge of the economic affect of the Great Depression and how the Federal Reserve was moving to stem the economic slowdown.

"One of the reasons I've been arguing we won't have a depression is we've got a Fed chairman who understands the problem and is going to come with the right diagnosis and the right medicine," Huey stated.

Hero to some, Bernanke has stood alone in repeatedly telling the Democratic-led Congress that in order to stem the tide of economic downturn, the government needed to support the financial sector first.   While Democrats have been preoccupied with AIG's $165 million in bonuses paid out of the latest round of government bailout funds, the Federal Reserve took it upon itself to buy assets.  When Bernanke did that, he cut the value of the world's cornerstone currency but his choices were few as the market for US treasuries has nearly dried up after China backed off purchasing.  Printing money was Bernanke's only hope and in so doing, he set a global stage for inflation.  But inflation is better than deflation and the global economy was on the brink of spiraling into a Depression.

The intent of the Federal Open Market Committee (FOMC) in declaring a $1 trillion Term Asset-Backed Securities Loan Facility which is opening this week is to "jumpstart consumer and business lending," the FOMC said in its Minutes from yesterday's meeting.

The Fed program, known as TALF, is intended to fuel economic growth but the danger in the Central Bank's move to buy stalled financial assets could cause inflation to spike without an ability to sell those assets fast enough to raise interest rates.

Few paid attention to Bernanke's prior statement in that the Fed would be prepared to buy Treasuries if needed.

Borrowing from a Bloomberg story this morning, Bernanke said at a Feb. 24 Senate hearing: "Our objective is to improve the functioning of private credit markets so that people can borrow for all kinds of purposes.  We are prepared, and we want to keep the option open to buy Treasury securities if we think that is the best way to improve the functioning or reduce interest rates in private markets."

But on the opposite side of the equation, the Fed's move crushed the return on the benchmark 10-year US Treasury, hurting foreign banks and institutions that bought into the Treasury market last month.  Still, doing nothing could have caused a global economic collapse.