Debt ceiling and the Treasury's support of the Fed...

Discussion in 'Wall St. News' started by Mvic, Sep 16, 2009.

  1. Mvic

    Mvic

  2. There's no argument.

    All money is debt. The entire money supply is debt.

    They have to raise the ceiling. It's a non-issue. Just something for Congress to posture over.
     
  3. Mvic

    Mvic

    Maybe but the implication that the Fed won't have as much flexibility as it previously had even for a 6 week period may make some nervous.
     
  4. This winding down of the Treasury's SFP bills program reduces the debt, no?

    Also paves the way for a reduction in the Fed's balance sheet, i.e. it's suggest an imminent exit from the various liquidity programs. The formation of the special tri-party repo task force is a signal along similar lines.
     
  5. Mvic

    Mvic

    I don't think it is by choice though or do you believe what Geithner's has been saying around the world? I thought that was just for foreign debt buyer's consumption. If this really is a beginning to the end of these special liquidity programs seems rather ill timed from a market perspective not to mention an economic one. Either way the market doesn't seem particularly perturbed today though it is interesting to see the USD firming up a bit but maybe that has something to do with the Obama healthcare plan running in to some stiff opposition in the senate.
     
  6. Daal

    Daal

    I'm not sure if this signals exit strategy at all, this will increase the monetary base as the Treasury will be getting their reserves at the Fed and using it to pay off the people who bought the treasury bills. In fact Bernanke mentioned this program as a way to moap excess liquidity during the exit, if they are cutting back in the program this means they dont mind a increase in the money base
     
  7. The winding down of the program doesn't have an impact on the size of the Fed's balance sheet, just its composition. In my view, it's an early signal, because it shifts the Fed's liabilities to excess bank reserves. These can be drained more easily through the upcoming tri-party reverse repos (see the other Fed announcement) and the gradual decrease in the size of TAF.

    I also don't see why it's such bad timing, really.
     
  8. Daal

    Daal

    I dont see this as hawkish at all
    Treasury cash at the fed has zero velocity, excess bank reserves might have low velocity but can be lent out, so the Fed is getting inflation risk from this move(although its probably very small). Given that Bernanke didnt urge Geithner to not do this(I'm assuming that, given that Geithner went ahead) this means that Bernanke didnt care about a new rise in excess bank reserves