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Sellers will still be competing to sell to the Fed, and if the Fed openly announces that it's buying then the market knows that the surge of demand isn't introd
by OscarCunningham 7y ago
Sellers will still be competing to sell to the Fed, and if the Fed openly announces that it's buying then the market knows that the surge of demand isn't introducing any new information about fundamentals.
EDIT: This doesn't mean the price won't rise. The purpose is to cause price rises, i.e. inflation. But they won't be overvalued; the true dollar value will have increased.
- ghouse 7y agoThe fed is shifting risk from the free market (which the price is set to balance supply and demand) to the tax payer. > the true dollar value will have increased. The very definition of inflation is to reduce the value of money. Can you help me understand how they're trying to cause inflation, but also increase the "true dollar value"
- OscarCunningham 7y agoI mean the Fed's actions will increase the nominal value of bonds, but this increase will be due to inflation rather than because they're paying more than the rational valuation.
- aaronblohowiak 7y agoWhy do you think the tax payer is on the hook? Where do you think the Fed’s money comes from? The fed’s balance sheet impacts people who hold dollars, not people who pay taxes.
- OscarCunningham 7y agoEven then it only impacts them to the extent that it causes inflation, which at the moment it's failing to do.