Darrell

Why Is the Fed Buying Treasuries?

Jeff, you are rather late to the game of “qualitative easing” or the Federal Reserves power to print money to pay off debt, to buy shares of companies, and their power to issue debt to create money.

Because of the cold war, the free world central bankers never placed restrictions on the dollar as a global currency. Now that Russia, China, India, Brazil, etc. have entered into the global competitive market as competitors they understand how the dollar, as global legal tender, gives the US an enormous competitive advantage in the world’s market place.

Rightly, they want a change in the global currency system. France, the first country to oppose the dollar as a global currency, and Germany has joined as early participants in the quest to create a new global currency. So the focus will be how this change will come about: will currency panic induce policy wonks to act hastily? Or can the policy wonks establish priorities and develop a plan of currency change that will be the bellwether a smooth transition?

We are in the early stages of currency transition, it remains to be seen how this currency transition will occur and how the losers will react once they understand their privileged position is no longer.