Fed buying t-bills,stocks, futures, selling USD

Discussion in 'Wall St. News' started by businessstaxes, Sep 20, 2010.

  1. businessstaxes

    businessstaxes Guest

    Why is the fed buying t-bills,stocks,futures, selling USD in the open market?

    why give these wall street fraudsters money...it was 'wall street fraud' selling worthless CDO and naked shorting of financial companies that cause greatest financial meltdown not seen in 80 years...the money the fed is printing (QUANTATIVE EASING)is giving very little trickles down to main street it just makes goldman sachs and all the fraudster rich for doing nothing.

    problem is too much money is stuck in wall street in useless bonds and stocks.
  2. bone

    bone ET Sponsor

    It makes the Bank of China further beholden to the USA, with no realistic way out of the conundrum until their own domestic demand can make up the difference.
  3. Tsing Tao

    Tsing Tao

    and how does it do that?
  4. bone

    bone ET Sponsor

    Because China holding $1.5 Trillion in US sovereign debt is nothing. US private citizens hold well over $20Trillion in 401Ks. And collective US Wealth exceeds Chinese collective wealth by a crazy margin.

    1. If China ever wanted to sell U.S. holdings the U.S. Treasury would buy it before it hit the market en masse. And that's a big reason why $800B in stimulus funds remains unspent and sitting in the Federal Reserve. The U.S. Fed could take China out of their US holdings overnight without any Congressional involvement. It is understood on Capitol Hill. IMO there are stealth standing bids as such with all the B/D's. 2. The notional value of traded USTs on a daily basis is probably 3x China's holdings. 3. If China sold USTs it would further depress the US dollar, which is why the US is doing all of this to begin with. The US realizes the Chinese won't float the remnibi unilaterally, so the US will do it regardless. As the dollar weakens US manufacturing (and the US is still the world's largest manufacturer - check the World Bank) gets more competitive. This is all a concerted effort by the US to replace a chunk of it's services and financial sector with manufacturing. 4. The great lesson from the 20th century is that surplus countries with structurally weak domestic demand always come off worst in a trade war.
  5. bone

    bone ET Sponsor

    Check that, those are bank bail-out funds and not stimulus funds - this is all understood by both political parties and the Fed. That's why you don't hear any meaningful talk about repatriating those funds - it's understood. And since 2008 the Fed has unprecedented authority to act unilaterally in the open markets. They do and they will.
  6. and eventually they will blow up the country
  7. Tsing Tao

    Tsing Tao

    so the US devalues it's currency but the yuan is pegged to it

    and since china is the largest exporter to the US this helps create US based manufacturing how?
  8. bone

    bone ET Sponsor

    Well, there are common perceptions and then there are some stubborn macro factoids.

    The reason why Soros and Buffett and Friedman et al have been calling for much greater government stimulus spending is because when compared to the hard wealth assets held by US citizenery, the government, and all US domiciled corporations public and private the current US Govt account deficit as it stands is laughably small. And those hard asset values are wildly greater than China. Spectacularly. Not including real estate outside of REICs and REIFs. If someone could profer a value on US Intellectual Property generation the figure becomes outrageous.

    There are two big inflection points here:

    1. US per capita debt versus Chinese per capita earnings. 1 billion people in debt $40K each versus 10 billion people making cheap knock-offs for 25 cents per hour and strategically dependent upon one country to buy their stuff. Again, China's domestic demand is a fraction of their export economy.

    2. The Fed's orchestrated program to devalue the dollar intersecting with China's pain threshold where they give up and float the remnibi.

    Monster Wildcards and KingMakers:

    The Obama administration and organized labor are enamored with the German economic model of social democracy and wealth re-distribution based upon an export and manufacturing economy that brings currency into the country. That's why you see the Fed doing what they're doing, and that's why you see China with no real tangible options other than to keep buying US debt on one hand and watch the dollar denomination of those assets get eroded by the Fed. If China dumps the assets en masse it's trauma versus a slow bleed - the last thing China needs is for a US Democratic Congress to restrict Chinese imports, IMO the Democrats and the Labor Unions would love to presented with that excuse.
  9. bone

    bone ET Sponsor

    The RMB and by proxy it's principal unit the Yuan is a "managed float" in propagandist name only.

    The People's Bank of China stringently enforces ridiculous annual quotas and both citizen and non-citizen registrations/physical presence rules for exchanging currency.

    The PBC PEGS the currency in practice and reality through stringent management that purposely creates impossible bottlenecks by design and intent - and any other representation is not factual.
  10. bone

    bone ET Sponsor

    "so the US devalues it's currency but the yuan is pegged to it"

    Bottom Line: Gives the US legitimate legal cover internationally at the WTO and domestic cover for both US political parties to ultimately punish Chinese export capability into the United States. The Euro pegged countries would likely consider doing the same re: Chinese exports. A currency peg is a subsidy with standing at the WTO. It would be a messy situation for all involved, but the political climate in Washington, DC is ideal for it and indeed everything we have seen coming from the Fed supports lifting the PBC peg whether they do it or the US government does it.
    #10     Sep 20, 2010