I think one on my minor points in my original post that started this conversation was that you can be successful in banking or trading and not have a clue about the inner detailed workings of the fed or the Treasury. I admire your success, but I do wish you could take the time to catch up on the topic of my post before you insist that all is nonsense. I promise you, it will be a great awakening. Will it make you a better trader or investor, perhaps, but I doubt it. Soros can likely do that however! I'll look for only my most recent mea culpa and see if I can post it for you. I'm not inclined to look them all up. I hope you understand.
I don't have great answers to either of these questions, particularly the latter. Regarding the second question, I think the only reliable guide any of us will have are the FOMC minutes. But doesn't it make sense that if we watch the official measures of inflation and we see inflation is heating up -- from our consumer perspective it has already heated up -- that we can expect the fed to tighten and reduce its bond purchases? Ii could even sell bonds which would drain reserve accounts. When the fed buys bonds as in QE it causes reserve account to swell forcing down the funds rate which of course other rates key off of. It makes sense to me that if the fed sees inflation increasing too rapidly they will want to curb bond buying. Regarding the first question, I really haven't thought much about this. It's a good question. I'll take a stab at it but please be aware this may be incorrect. I'm guessing that when the fed buys a bond created in the private sector then they are loaning outside money to the private sector expecting it to be paid back with interest. The outside money they use for this purchase could be any combination of newly printed and previously printed outside money. The net result when the bond matures, and the bond originator pays the fed the par value, should be a small decrease in the total amount of outside money spent into the economy equal to the amount of interest paid to the fed by the bond originator.
Nice. I beginning to really like this guy. Please keep these topics regarding "when they will finally tighten" going in a extended thread or set of threads. You have brought out some very interesting answers.
Hard to ignore this massive market manipulation. Spectacular sums of money flowing into markets is causing irrational behavior and covering up the laws of economics. RIP free market. It's forcing me to re-evaluate my models and way of thinking about the markets. Real moral hazard here where decision-makers do not feel consequences of their decisions.
Oh really? How would you know? I can assure you that you would not survive a single year in any fixed income group in any of the banks without a deeper understanding of economics and how central banks operate and governments finance themselves. In fact I traded with BoJ and Fed traders almost every day for years. Your assertions are completely made up. You made several points in your previous post that are entirely wrong and I even explained in detail why they are wrong. You cant even inconvenience yourself to respond in kind nor have you posted a single of your past contributions where you apologized, ever, as you claimed. Whats the point to converse with you?
The FF rate is not a market yield that is subject to supply and demand. It is a policy tool that the Fed sets at its own discretion. Another of your plentiful confusions. Also the Fed does not loan anything to the private sector other than via commercial paper purchases in extraordinary times . They set benchmark rates, such as ff or reserve ratios that in turn motivates or even requires banks to increase or lower the money in circulation. You may want to study more about this subject matter, your assertions are shockingly false.
Do you contest the fact that the Fed has 120B/month of QE flowing into markets? See the following reference, and I imagine that this is just the tip of the iceberg. This article doesn't talk about corporate bonds, commercial paper, munis, and other QE. I wonder how many AAPL 30-year bonds they've bought? https://www.spglobal.com/marketinte...conomic-vaccination-goals-fall-short-63773209
It's not flowing directly into equity markets. There is no market manipulation. It's an economy boosted by liquidity and low interest rates. Conditions conducive to profitable corporations. US retail sales are at an ATH. I chose since October to focus on Cdn commodity related plays only. I know the companies well, I know how to value most of them, and I know how they trade. If you can't figure out an area of the market, don't trade it until you can.
I guess you didn't realize I am not trading fixed income for banks. So that I wouldn't last long at it is not much of a concern for me personally. The knowledge one needs to trade successfully particular financial instruments is specialized knowledge, and whether it is based on correct ideas is not nearly so important as whether it leads to profits or losses. Whatever your knowledge of money theory was, it was obviously adequate for your needs. I am happy for you.