On Mar 25, 2009, at 4:17 PM, Charles Bennett wrote:
On Mar 25, 2009, at 11:41 AM, Lawrence Sica wrote:
On Mar 25, 2009, at 10:24 AM, Charles Bennett wrote:
"The Federal Reserve starts purchasing long-term Treasuries today,
aiming to bring down borrowing costs by employing tools last used
in the 1960s."
"“Clearly the Fed has credibility and buying power at the moment,
so they can force prices up” on Treasuries, said Jay Mueller, who
manages about $3 billion of bonds at Wells Fargo Capital
Management in Milwaukee."
WTF!! The FED *IS* the Treasury, is US..
That is exacly the same as me "loaning" myself $100 by taking it
out of my wallet, putting in my pocket, and claiming that I have
$200 in assets
since I have $100 and I'm OWED $100... Of course, keeping it to
scale, in their case they intend to then go spend 3000 dollars,
mark the 200 as GDP and the rest as deficit so our kids can pay
the loan later.
Ehh not exactly. The Fed is not the US Treasury when it comes to
securities.
I understand, but it's not like they have a day job in China where
they earn spending money. My point was ultimately, it's all US tax
payers money, even the stuff they just print or make appear by magic.
You might want to tone down the mock outrage and chicken little
attitude and try and understand where the money comes from. It is
not all US Tax payer money. That is the point of Treasury, or any
bond, really. This is money that is raised outside of taxes. You
then get a return at a later date. Treasury bonds are considered risk
free because the odds ofthe gov't going under is ridiculously small.
I guess you could make a convoluted case that the return is tax payer
money but the system is so complex I want you to show me where you $10
is in there.
Securities like this are floated by the Dept of Treasury not the
Federal Reserve. Remember technically the Federal Reserve is not
fully a US Gov't entity. It's more like having your wife loan you
some cash.
Except she doesn't work and "we" pay her the allowance.
She does work. She works hard. She does a lot of things to help keep
the banking system going. She also has her own money she gets. Where
does she get her money? In this case the Fed gets money from fees it
gets from the banks for various transactions and loans among other
places. The Fed takes care of itself.
The Fed has owned various securities for some time. The Fed also owns
some of the debt incurred by other gov't agencies. This is why went
eh. This is not news in the way you are trying to make it out be be
dude.
Now do you want to know why they are doing it? It is to control
interest rates. Since they can no longer be lowered they need to do
something else to help encourage lending. Large scale buying of the
30 year should help this. I know last week they decided to buy up
2,3,5, and 10 year notes. This should bring down the long term
rates. It has worked too across the board from what I can see.
I saw a survey somewhere that 20% of the people in the US think that
the federal government has "it's own" money.
Kind of scary really. OTOH, more than 20% can't find North America
on a map so that may not be that exceptional.
Ignoring pointless attempt to show how horrible the US citizenry is
and stupid except for the few who are smart enough to have "outrage".
They are doing this to try and drum up some more volume and
confidence. Things have been relatively slow lately.
The Fed was actually considering floating their own bonds back in
December. I guess that did not fly, I recall there was talk if
they even could do so legally.
I wonder how that would work. Hey, they could sell them to
Treasury !
Are you kidding? If the Fed issued its own bonds like that you'd have
ppl going nuts over them.
--Larry
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