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Adding demand and thereby liquidity to a market creates a windfall that wouldn't have been there otherwise. Whether it's because you were sitting on a bond that
by tesseractive 13y ago
Adding demand and thereby liquidity to a market creates a windfall that wouldn't have been there otherwise. Whether it's because you were sitting on a bond that was impossible to sell and now you have money because you sold it, or because you would have gotten $1000 for it and now you got $1200, that's a windfall.
Whether that money goes into buying groceries or buying other securities, I assume most of it will continue to circulate in the economy. If it doesn't, then it's pretty much a failure as a quantitative easing.
- kaonashi 13y agoNobody is ever involuntarily sitting on bonds, they are easily liquidated at any point; you sit on bonds because you don't want to spend the money. >If it doesn't, then it's pretty much a failure as a quantitative easing. It doesn't do much of anything, true.
- wintersFright 13y agoCentral Banks sit on bonds because holding USD in their reserve banks does not earn interest.
- kaonashi 13y agoCentral banks sit on bonds because they buy them as part of their open market operations, and they are legally required to make a market for treasuries so the government is funded.