Fed is buying treasuries

Discussion in 'Wall St. News' started by RiceRocket, Mar 18, 2009.

  1. This is not good. US consumers don't need a weak dollar on top of everything else. The other programs were working. Scheisse.
  2. I smelled this coming. A retort:Encouraging the American consumer to buy from Asia is not a solution. Weakening the dollar and making American manufacturing competitive IS a viable solution. EVERYONE is trying to drive down their exchange rate. Stocks will dig a little dollar weakness....

  3. What?

    Please explain which other programs were actually working and for whom.

    I'm dying to hear this.
  4. Everyone except the EMU. I'm curious what China's reaction to this will be. I can't imagine ol' Wen is going to appreciate this.
  5. Most commentators seem to be in the "it's printing money" camp. The alternate view is that the Fed has lost control of the long end of the yield curve and this is the only way to sop up excess supply of long-dated Treasuries.

    If that's the case, potential dollar shorts have been given a solid green light to lay out a Soros-like Break The Bank plan.

    Pabst - I agree that encouraging consumption of imported goods is the wrong thing to do. I think, though, that I would go at it a little differently (if I understood your inference correctly).

    Rather than focus on trying to directly manipulate dollar strength/weakness I would rather see a national trade policy that ends the unsustainable trade deficit. Not overnight, of course, that would probably be too traumatic. Just set the bounds for the game and let market forces figure out the winners and losers. This would let the dollar will weaken on its own, and more naturally.

    The US economy cannot subsidy world growth forever...
  6. Actually I'm in the camp RC that they're motivated by protecting the long end. (a cap at 3% 10's, 4% Bond)

    Steeper curve=good for banks. REAL steep curve=bad for assets. Very tricky game they're boxed into....

  7. Asset backed lending facility, Mortgage backed securities purchases. The commercial paper market was successfully backstoped. Mortgage rates have come down substantially since November.
  8. Mortgage rates have come down because of a massive increase in their subsidy. IMO this is not a sustainable definition of "works".
  9. So, you support the addition of buying treasuries? My point was, that the fed was already doing more than enough, and now they have gone off the reservation.
  10. No, I don't. To me this is just more politically-motivated evasion of the fundamental problems.
    #10     Mar 18, 2009