Fed to Spend $600 Billion More To Help Boost US Economy

[miller]

The facts are the precise dollar amounts published by the US Treasury. No one can buy US Treasuries unless they use dollars. China is loaded with dollars. They can't convert dollars into any other currency to buy US Treasuries. That's a simple fact. China quit buying US Treasuries. The question is when will they dump US Treasuries which are going to take a steep dive as the dollar is destroyed by the Fed.

I posted the precise amounts from this website.

http://www.ustreas.gov/tic/mfh.txt

 

[antagon]

no. china's position is not as heavily in treasuries like it has been historically. they have bought more in the way of euros as part of their monetary policy, although treasuries remain the vast majority. i've just pointed out that should they buy euros, the euro bank will buy treasuries in very short term. this is why QE is virtually ineffective, save for the losses to the system i've described, and why a fix to deflation on the street has been so elusive. granted that, it is not likely $600 billion is going to precipitate hyperinflation. that's quacksauce.

 

[Flopper]

The problem with the fed actions is they can never tell how much intervention is needed. Further, they have no way of knowing if their intervention is successful. Every time they change interest rates, reserve requirements or margin requirements, or intervene the market, it's an experiment with no real way of measuring success.

Their intervention in the market for treasuries sounds good, but it always does. In this case, increasing the money supply and pushing interest rates down encourages expansion and lending and at same time pushing the dollar down encouraging exports.

 

[Norman]

no. china's position is not as heavily in treasuries like it has been historically. they have bought more in the way of euros as part of their monetary policy, although treasuries remain the vast majority. i've just pointed out that should they buy euros, the euro bank will buy treasuries in very short term. this is why QE is virtually ineffective, save for the losses to the system i've described, and why a fix to deflation on the street has been so elusive. granted that, it is not likely $600 billion is going to precipitate hyperinflation. that's quacksauce.

No way that is going to cause hyper inflation. But the real question is, Does it stop there?

Also US could end the PEG by simply not having more debt... Afterall buying US debt is pretty much what enables china to PEG. If china hoarded the money or invested it into US economy, results would not be as bad.

Of course gov doesn't want to do this but....

 

[loosecannon]

Guaranteed to destroy the dollar. We'll all be busted with worthless paper. OBAMA & Bernanke are idiots and Americans are stooges going right along to the shit house.

China has quit lending to America. Here are the precise amounts.

Aug July Jun May Apr Mch Feb Jan Dec Nov Oct Sep

868.4 846.7 843.7 867.7 900.2 895.2 877.5 889.0 894.8 929.0 938.3 938.3

Printing fake money never worked and never will work. Treasury futures contracts are being rigged.

china's forced to borrow in lockstep with easing if they hope to maintain the ratio with the dollar. it wont matter if they lend directly or in euros because it all will come back to US treasuries the same day.

there is very scarce chance of hyperinflation for this reason.

I have no idea whether what you are saying is true. But here is where that notational value you mentioned earlier comes into play:

China has very few yuan in circulation, so they don't have to buy as many dollars to ballast their puny yuan circulation.

The US on the other hand not only has a gazzillion dollars in circulation but even worse we allow unlimited multiplication of assets via synthetics like derivatives futures etc. Since the dollar's value is a reflection of those "counterparty" assets which are denominated in dollars the greater their net worth or sheer number the more effort is required to drive inflation by introducing new liquidity.

As was the case in the carry trade when that liquidity is used to create whole new generations of multiplied assets the effect can be counterproductive to the intention of increasing inflation. As the existing dollars are supported by an ever expanding asset volume.

Which is why China has been raising it's reserves to collapse it's money supply.

 

[loosecannon]

No way that is going to cause hyper inflation. But the real question is, Does it stop there?

Also US could end the PEG by simply not having more debt... Afterall buying US debt is pretty much what enables china to PEG. If china hoarded the money or invested it into US economy, results would not be as bad.

Of course gov doesn't want to do this but....

It could easily cause hyperinflation if the impact is to scare the world away from reliance on the dollar as a safe haven. The world is awash with dollars that primarily are held for exchange and reserve purposes not direct utility.

 

[Paulie]

I don't see this as being helpful, at all. This sort goes with my proviso ala the dollar in Williams Bond thread.
I see this as walking further into the abyss.




The Federal Reserve launched a controversial new policy on Wednesday, committing to buy $600 billion more in government bonds by the middle of next year in an attempt to breathe new life into a struggling U.S. economy.
Sheet of US one hundred dollar bills


The decision, which takes the Fed into largely uncharted waters, is aimed at further lowering borrowing costs for consumers and businesses still suffering in the aftermath of the worst recession since the Great Depression.

The U.S. central bank said it would buy about $75 billion in longer-term Treasury bonds per month. It said it would regularly review the pace and size of the program and adjust it as needed depending on the path of the recovery.

In its post-meeting statement, the Fed described the economy as "slow", and said employers remained reluctant to add to payrolls. It said measures of inflation were "somewhat low."

"Although the committee anticipates a gradual return to higher levels of research utilization in a context of price stability, progress toward its objectives has been disappointingly slow," the Fed said. (Click here to read Fed statement.)



News Headlines

If the FED is retiring US debt are they really SPENDING?

Or are they merely putting more money (in the form of actual cash) back into circulation?

The Fed is not sterlizing these treasury purchases. It is 600 billion more dollars being added to the monetary base.

They aren't retiring the debt, because at some point in the future they will sell those treasuries on the open market.

The majority of treasuries being bought fall under the 2-10 year maturity sectors, with about half being from 5 years and longer.

It's anyone's guess as to whether they hold them for that long, but regardless, they aren't going to just cancel that debt and say the government doesn't owe them that money, as much as Neubarth seems to think they would.

There's no 'get out of debt free' card.

 

[loosecannon]

I disagree.

 

[antagon]

I have no idea whether what you are saying is true. But here is where that notational value you mentioned earlier comes into play:

China has very few yuan in circulation, so they don't have to buy as many dollars to ballast their puny yuan circulation.

The US on the other hand not only has a gazzillion dollars in circulation but even worse we allow unlimited multiplication of assets via synthetics like derivatives futures etc. Since the dollar's value is a reflection of those "counterparty" assets which are denominated in dollars the greater their net worth or sheer number the more effort is required to drive inflation by introducing new liquidity.

As was the case in the carry trade when that liquidity is used to create whole new generations of multiplied assets the effect can be counterproductive to the intention of increasing inflation. As the existing dollars are supported by an ever expanding asset volume.

Which is why China has been raising it's reserves to collapse it's money supply.

i haven't considered the quantitative leverage that you're talking about between the dollar and the yuan, but the peg certainly dispels the idea that china isn't trying to lend to us. its the basis of their monetary policy.

i agree with you that the dollar is a massive cauldron relative to which $2 trillion in easing is a 'drop in the pan'. the extent that foreign central banks tug on dollars and treasuries further drowns out whatever the fed intends with this money-magic.