4 ms·

>There's zero giving involved. Technically, the Fed gave the Treasury cash in exchange for debt, no? And it was giving the Treasury more in the past than it i

by RC_ITR 4y ago

>There's zero giving involved. Technically, the Fed gave the Treasury cash in exchange for debt, no? And it was giving the Treasury more in the past than it is now. To extend the metaphor, You (the treasury) have $100 in expenses (debt) that I used to pay (buy). Now, I (the Fed) pay you (The Treasury) $95 and you need to ask your friend (the financial markets) for the other $5. Sure, that's less than before, but nowhere near what actual removing liquidity would look like: actively selling holdings in addition to not replenishing matured Treasuries (in the metaphor: asking you to pay me the debt you owe me/giving you a new expense).

cs702 4y ago
The Fed is not allowed to buy bonds directly from the US Treasury, let alone give them anything (!?). See here: https://www.federalreserve.gov/faqs/money_12851.htm https://www.federalreserve.gov/faqs/money_12851.htm The Fed has been buying bonds by issuing new liquidity, and will be getting paid back, removing liquidity. This thread that you started is starting to feel... as if the purpose is no longer to find and agree on facts, so I will step away from it. This will be my last comment on it.
- RC_ITR 4y ago
  You can see my earlier comment about the ~20 prime brokers who bid at auction, but boy howdy does this feel like splitting hairs. Sure, the cash goes through intermediaries, and it's actually a huge source of economic rent/corruption that noone other than Song and Zhu seem to care about, but that doesn't change the ultimate flow of 'giving'. >In literal terms, the government holds an auction for Treasury debt at various maturities. ~20 primary dealers bid on those Treasuries. Those ~20 primary dealers know exactly how much The Fed needs to buy from them. That influences their bids. If The Fed weren't buying from those dealers, they would bid for higher rates. In no way do those dealers consider the amount of debt that has reached maturity that month, they only care about new issuances.

by RC_ITR 4y ago

cs702 4y ago

The Fed is not allowed to buy bonds directly from the US Treasury, let alone give them anything (!?). See here: https://www.federalreserve.gov/faqs/money_12851.htm https://www.federalreserve.gov/faqs/money_12851.htm The Fed has been buying bonds by issuing new liquidity, and will be getting paid back, removing liquidity. This thread that you started is starting to feel... as if the purpose is no longer to find and agree on facts, so I will step away from it. This will be my last comment on it.

RC_ITR 4y ago
You can see my earlier comment about the ~20 prime brokers who bid at auction, but boy howdy does this feel like splitting hairs. Sure, the cash goes through intermediaries, and it's actually a huge source of economic rent/corruption that noone other than Song and Zhu seem to care about, but that doesn't change the ultimate flow of 'giving'. >In literal terms, the government holds an auction for Treasury debt at various maturities. ~20 primary dealers bid on those Treasuries. Those ~20 primary dealers know exactly how much The Fed needs to buy from them. That influences their bids. If The Fed weren't buying from those dealers, they would bid for higher rates. In no way do those dealers consider the amount of debt that has reached maturity that month, they only care about new issuances.