> ... On that call, Powell and most of his colleagues reluctantly endorsed buying defaulted Treasury securities — an unprecedented move to maintain financial st

> ... On that call, Powell and most of his colleagues reluctantly endorsed buying defaulted Treasury securities — an unprecedented move to maintain financial stability — if a legislative debt ceiling solution did not come in time. This is a red herring. The Fed doesn't "buy" treasuries. It can't, at least not with dollars. The Fed conducts an asset swap in which it accepts a treasury, and credits the Fed account of the seller with bank reserves. These reserves are not spendable outside of the Federal Reserve system. No new money is created. QE has done nothing to aid economic recovery - not here, not in Europe, and not in Japan, except to influence the psychology of people who don't understand what's going on. If it ever comes to the Fed doing QE on defaulted treasuries, the same thing will happen. Big psychological boost for gullible investors, but nothing in terms of actual help to the economy.