The Fed Buys Last Week's Treasury Notes

[jakeXT]

The Fed Buys Last Week's Treasury Notes


Thursday, August 6, 2009, 12:11 pm, by cmartenson


...


In concert with the claims I made in the prior Martenson Insider post, The Fed bought $7 billion in Treasuries today and even more yesterday.

This is at the upper end of their recent range of already exceptional purchasing activity.

If things are so rosy that every single dip is being bought in the stock market with a vengeance, I wonder why these printing operations are really necessary?

This $14 billion plus buying activity by the Fed represents fresh money created out of this air that was exchanged for the sovereign debt of the US. However, since the Fed has, for all practical purposes, never undone its permanent operations (hey, that's why they are called "POMOs") we can consider these additions of money as good as permanent themselves.

...

http://www.chrismartenson.com/blog/fed-buys-last-weeks-treasury-auction/23880

[Po_d Mainiac]

1. another $100 billion is scheduled next week k/r n/t

[progressoid]

2. Not unexpected.

A little inflation is good for them. Sucks for us.

[unblock]

3. actually, a little inflation is good for a lot of us these days

as so many people are overleveraged, inflation is actually one of the easier and better ways out of this mess. inflate the value of houses while keeping mortgages constant and soon enough people aren't underwater. of course, this presumes that wages keep up with prices, which never quite works out to be the case. then again, wages haven't been keeping up with the rest of the economy for years anyway.

of course, inflation sucks for those who have wealth and/or are on fixed incomes, rather than who are in debt, but then those people aren't dragging the economy down.


mind you, i'm NOT advocating this, nor do i think it's the best solution. i just mean that it has a simple and obvious upside to go with the simple and obvious downside.

[clixtox]

4. There couldn't be worse news for our last bubble. The US Dollar!

The US Dollar!

There are nowhere near enough willing, independent buyers of the "investment" fantasy we are peddling. So-called "Treasuries".

There is no conceivable way to salvage the paradigm he have enjoyed so long, that we will be recalling ruefully, too soon.

Our empire, it's maintenance and repression has, like so many empires before, literally bankrupted us!

Consider how the government can reverse this situation?

Only by a large increase in the interest offered, to counter the world's declining confidence in our fiscal probity and reliability, could the Treasury attract investors.

The glut of Treasuries pounding the market relentlessly, for the foreseeable future, just doesn't seem sustainable for much longer.

But it must!

Somehow...

I am seeing another dramatic shock on the horizon like Naomi Klein writes about in her enlightening book, SHOCK DOCTRINE.

It will be something like New Orleans after Katrina, except affecting the whole country, and to some extent, the whole world.

The fascists are not going quietly into the night, not after the taste of power they have now.

[unlawflcombatnt]

5. Great Info--Thanks for posting it--N/T

:thumbsup:

[hg4]

6. pls explain monetzation for debt

pls assume:
1. The Fed prints X amount of money "out of thin air"
2. They use said "X" amount of money to buy a government bond on the open market.

Question: Please do the accounting on the above transaction - what happened to the books
of the Fed and the Treasury? I assume the Fed now owns the bond, and is now collecting
interest on it. Does the Fed owe anyone for the money it printed? Is this a case where
money was created w/no debt? Pls correct any misconceptions I may have expressed above.
:->

Can they or do they *destroy* the government bond? If not do they
collect interest on it, or do they sell it again on open market later?

Here's where I got the above example (skip in 13m 35 sec):
Thomas H Greco
related link

[jakeXT]

9. I think the Fed gets interest and they have to pay only if they want physical paper dollars

The Bureau of Engraving and Printing (BEP) is a government agency within the United States Department of the Treasury that designs and produces a variety of security products for the United States Government, most notable of which is paper currency for the Federal Reserve
http://en.wikipedia.org/wiki/Bureau_of_Engraving_and_Printing


but I'm not 100% sure

[girl gone mad]

7. Maybe these two ideas are not mutually exclusive:

"If things are so rosy that every single dip is being bought in the stock market with a vengeance, I wonder why these printing operations are really necessary?"

I have seen much speculation that the current rally is being driven by expected weakness in the dollar.

[jakeXT]

8. Hudson blamed a short squeeze

http://renegadeeconomist.com/headline/renegade-economist-special-dr-michael-hudson.html

and others the usual suspects

Most interesting is the correlation between Money Market totals and the listed stock value since the March lows: a $2.7 trillion move in equities was accompanied by a less than $400 billion reduction in Money Market accounts!

Where, may we ask, did the balance of $2.3 trillion in purchasing power come from? Why the Federal Reserve of course, which directly and indirectly subsidized U.S. banks (and foreign ones through liquidity swaps) for roughly that amount. Apparently these banks promptly went on a buying spree to raise the all important equity market, so that the U.S. consumer who net equity was almost negative on March 31, could have some semblance of confidence back and would go ahead and max out his credit card. Alas, as one can see in the money multiplier and velocity of money metrics, U.S. consumers couldn't care less about leveraging themselves any mor

http://www.zerohedge.com/article/money-sidelines-fallacy