SW Richmond

Is the Fed Taking a Step Toward Explicit Quantitative Easing?

The Fed prints money and uses it to buy Treasuries. The Fed will print enough to buy whatever Treasury issues, so there is never a need for rates to rise in the face of a skeptical market. In other words, using circular monetary reasoning that only a central banker could love, we will create brand new money and use it to buy investments from ourselves, printing our way to prosperity. All that is required for this to work is a massive global suspension of disbelief, and lots of people educated in public schools who no longer understand what capital is.

In this manner Treasury rates can be kept low; since Treasury will be issuing at least $2 Trillion to cover next year's deficit, all one has to do is watch the Fed's balance sheet balloon.


On Dec 02 06:29 AM ItsAMegaFlopper wrote:

> Wish I better understood exactly HOW the mechanism of the Fed "buying
> longer term treasuries" works. What does it accomplish? What motivations
> (among buyers/sellers) does it change, i.e. what value is supposedly
> added? What are it's risks?


Note to the article's author: quantitative easing started a few weeks ago.
blogs.reuters.com/grea.../