Egodeus

Stunning Reversals: Is This a Market or a Casino?

Oh, the Central Banks play the roll of Bondwriter for the respective countries, to avoid missunderstanding.

Stunning Reversals: Is This a Market or a Casino?

NO! Fredie and Fanny are Commercial Banks. Only the Federal Reserves is allowed to write out Government Bonds Taxpayers are paying the governmnet to reduce its loss in Government Bonds, held by the Federal Reserves and Central Banks of countries. Those government institutions can lend their money at the IMF if everything gets out of hand too much...

Stunning Reversals: Is This a Market or a Casino?

No surprise the dollar rises, with Fanny and Freddy off of the Federal Reserves balance sheet on the liabillities side and an increase in government bonds (assets) to pay it off the difference, there is a major decline in M(oney) while demand is still high. Hence I think the dollar will appreciate even further vis-à-vis the rest of the valuta of major economies. One upside, since the capital destruction will (theoretically) cause deflation (PV=(M(t=0)-M(t=govt.b... out))*Y), assuming the drop in confidence will not drop below the point that consumer spending will stop entirely and the decelleration of the velocity of money will completely negate the capital destruction, then again retailers will have to drop their prices to get any revenue at all for consumption and thus the velocity of money to resume.