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>The treasury sets a fixed interest rate and face value on treasury notes and then whoever pays the most gets the note. Its important to point out that these a

>The treasury sets a fixed interest rate and face value on treasury notes and then whoever pays the most gets the note. Its important to point out that these are not market-based auctions. The Federal Reserve regularly steps in to purchase its own bonds (in effect skewing the price of the auction). The FED currently holds ~4 trillion worth of bonds purchased in prior auctions (its not currently increasing its holdings but it is repurchasing). https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... Central bank purchasing their own bonds can act to prop up the market, but also to disrupt market forces by keeping a "thumb on the scale". While this was initially done as an attempt to stimulate the markets after the crash of 2007/2008, it was never ceased, putting the whole financial system into real jeopardy when there is another crash and central banks have used up all of their bullets. This is a financial experiment with an uncertain end. The balance sheet of the BOJ as recently passed its annual GDP. https://www.reuters.com/article/us-japan-economy-boj/bank-of-japans-balance-sheet-now-larger-than-countrys-gdp-idUSKCN1NI07Z https://www.reuters.com/article/us-japan-economy-boj/bank-of...

gbumakefan 8y ago
And, as unpopular as bitcoin is, the above description of actions taken following 2008 is why bitcoin was invented.
neuromancer2701 8y ago
The FED has been unwinding the balance sheet this whole year. Granted the rate started out at 16 Billion/month and was capped at 40B/month. So there have been plenty of jokes about how it will take years to unwind 4 Trillion. I think we have just passed 150 Billion there is a pretty cool chart out there somewhere. The unwinding of this many treasuries has always been a concern about the whole 2008 crisis along with the unintended consequences of ZIRP.
- StanislavPetrov 8y ago
  >The unwinding of this many treasuries has always been a concern about the whole 2008 crisis along with the unintended consequences of ZIRP. One of many concerns! Given that the solvency of the USA and the entire global economy is predicated on interest rates not rising substantially, things are going to get very interesting (not in a good way) next time we have an economic crisis.
RobertoG 8y ago
"[..] The balance sheet of the BOJ as recently passed its annual GDP." Yes, and where are the promised terrible consequences? The true is the markets have to dance whatever the Central Bank sings [1]. [1] - http://bilbo.economicoutlook.net/blog/?p=40937 http://bilbo.economicoutlook.net/blog/?p=40937

gbumakefan 8y ago

And, as unpopular as bitcoin is, the above description of actions taken following 2008 is why bitcoin was invented.

neuromancer2701 8y ago

The FED has been unwinding the balance sheet this whole year. Granted the rate started out at 16 Billion/month and was capped at 40B/month. So there have been plenty of jokes about how it will take years to unwind 4 Trillion. I think we have just passed 150 Billion there is a pretty cool chart out there somewhere. The unwinding of this many treasuries has always been a concern about the whole 2008 crisis along with the unintended consequences of ZIRP.

StanislavPetrov 8y ago
>The unwinding of this many treasuries has always been a concern about the whole 2008 crisis along with the unintended consequences of ZIRP. One of many concerns! Given that the solvency of the USA and the entire global economy is predicated on interest rates not rising substantially, things are going to get very interesting (not in a good way) next time we have an economic crisis.

RobertoG 8y ago

"[..] The balance sheet of the BOJ as recently passed its annual GDP." Yes, and where are the promised terrible consequences? The true is the markets have to dance whatever the Central Bank sings [1]. [1] - http://bilbo.economicoutlook.net/blog/?p=40937 http://bilbo.economicoutlook.net/blog/?p=40937