Home > General Topics > Economics > Fed buying treasuries question-----???

Fed buying treasuries question-----???

  1. the fed is buying 2-10 year treasures? buying alot of these instruments will bnring down rates on the aforementioned?
    am i correct? what are they trying to do by doing what they announced yesterday/
  2. Keep interest rates low and flood the market with money. When the Fed buys treasuries it is injecting money into the economy. When it sells treasuries it is withdrawing money from the market. What they are doing is massive injections of liquidity in the hope inflation will kick back in and inflate the value of assets yet again.
  3. So once again the middle class will be squeezed from every angle, all in the hopes of what?

    With out jobs people can’t borrow. People have way to much debt. Do they think households have corrected there balance sheets hahahaha.

    This is more financial engineering, and we all know were fancy financial engineering gets us, witness, FRE,FNM,AIG,LEH,BCS.
  4. ok..if they are buying U.S treasuries,how is that causing money to get into the economy?
    i know,i'm naive'.
  5. They're buying 350 bln worth of treasuries and 750 bln worth of non-treasury, severely toxic assets (we know they're severely toxic because under TALF, they broadened the range of assets that qualified to be purchases, as in, lowered the already low standards).

    This action, while not only not addressing the disease causing our problems (i.e. unemployment, high and rising), is providing artificial support that can't be sustained long term for treasuries and all those nasty assets such as mortgage-backed securities, troubled student, credit card and auto loans, etc.

    In an efficient, free market economy, the government would not intervene in rewarding companies dumb enough to not manage their risk by loaning money to deadbeats on expensive consumer and other goods, shifting the risk from those companies to the taxpayer, which requires printing massive amounts of dollars if you're the U.S. government, as we already have a 'real' national debt of 56 trillion dollars already (according to the former comptroller general of the United States, David M. Walker, whom I trust inherently more than Bernanke or Geithner).
  6. They can buy diapers for 1 trillion and the money will get into the economy. To bad for the diaper manufacturers that they decided to go with U.S treasuries.
  7. BLSH, while I agree with some of your views, pls get your facts correct.

    They're buying $300bn of USTs, $750bn of agency MBS and $100bn of GSE debt. Agency MBS is a very different story from the sorts of distressed assets they're talking about for TALF.

    Pls don't mix these up, they're completely separate programs. Moreover, while the Fed has already been running the MBS program for some time, TALF (and the distressed bit of it) hasn't even started.
  8. Watch them not buy any.

    Them saying they will buy them did the trick.

    Tricky Tricky. :]
  9. So, the trillion this Bloomberg article references is ON TOP of the trillion+ they announced yesterday?

    I'm asking because this specifically references "securities backed by loans for car purchases, college education and real estate..."


    "Current TALF

    As it’s currently set up, the TALF may lend as much as $1 trillion to investors from hedge funds and pension funds to insurance companies to buy recently created securities backed by loans for car purchases, college education and real estate. Applications for its first loans are due today.

    Broadening the TALF to include older, illiquid and lower- rated securities could allow the participants in the public- private investment funds to potentially repackage assets and sell them on to a wider group.

    The Fed’s policy-making committee, which met yesterday in Washington, said in its statement that the range of eligible collateral for the TALF “is likely to be expanded to include other financial assets.” The Federal Open Market Committee also pledged $1.15 trillion of extra measures to lower borrowing costs, including purchases of long-term Treasuries."
  10. Yep, TALF and TALF II are another $1trn. Come on, what's a $trn among friends?
  11. These people are literally insane.

    I use that word intentionally, and not for dramatic effect.

    They're truly insane. They should be drawn and quartered.
  12. You know what, I'm beginning to think that the worst case scenario isn't hyperinflation. There is going to be a mad dash to sell anything and everything and this deflationary spiral is going to be the end of our economy.

    Sure bread might be $12/loaf at the store but people will stop buying it because it's too expensive. The bread manufacturers will lay off people and the debt %/GDP will continue to soar even as the spending decline. The scamble for $s to repay debts absorbs all the liquidity!!

    We won't be able to extend credit anymore and the fed will be left with the entire economy on its balance sheet with no bid on anything.

  13. I remember hearing analysts and so called experts say that gasoline, medications, cigarettes, booze and gambling were all 'recession proof.'

    I have since learned that people have cut back on expenditures on all of the above, and some in a very serious way.
  14. They are but they aren't depression-proof or, "I ain't got no freaking money-proof." The only reason we aren't in a depression is because of the aggressive actions of the Fed but just how long can the Fed keep things propped up? They can lower rates all they want and flood the market with whatever paper they can create but they can't force people to borrow. Until Joe Citizen has cleaned his balance sheet all this liquidity isn't doing to do a damn bit of good.

  15. It could also be that $300 Billion is the amount that foreigners, like the Chinese, have stopped buying.
  16. Fed is running out of time.

    The other problem we have. Is the deficit we are running requires us to sell treasuries in order to finance the government.

    If we run a 1.5-2 trillion dollar deficit this year, were in the hell are we going to fund that gap?

    The 300 billion, is a downpayment, the FED is going to have to eat at least a trillion in T-Bills. this year.

    Its only March for Christs Sake!

    And the rate the government is expanding, if the economy flat lines next year, we could easily run a 2.5 trillion deficit.
  17. if i remember correctly from my macro theory in college, isn't it the case that with the fed injecting money into the economy, money supply shifts out, in hopes of bringing the real interest rate r down to spur investment, inflation is a possible outcome of this situation as well?
  18. Quote from NY_HOOD:

    ok..if they are buying U.S treasuries,how is that causing money to get into the economy?
    i know,i'm naive'.

    The feds are exchanging 'new' money for outstanding debt.
    This increases the money supply in circulation. Of course, we know the government does not have any money so they simply start the printing presses. The ultimate effect of all the simulation will be hyper inflation.