> Ah. Yes. They can totally do that. Yeah, I had been thinking about how TARP required congressional approval but, of course, the _reason_ it required congress

> Ah. Yes. They can totally do that. Yeah, I had been thinking about how TARP required congressional approval but, of course, the _reason_ it required congressional approval was because the "troubled assets" in question were not Treasuries. A little investigation reveals that section 14 of the Federal Reserve Act authorises the Fed "To buy and sell, at home or abroad, bonds and notes of the United States". > ..whether the increased supply of USD would have a higher velocity than it did when China was sitting on it, which could lead to a weaker dollar or substantial inflation. Weaker dollar? Definitely. I expect the ECB and banks of England and Japan would buy dollars - both to help the US stabilise markets and to avoid their own currencies growing tooo strong - but I'd still expect to see a significant drop in the value of USD. 20%, maybe? Substantial inflation? Inflation is a longer-term, delayed reaction sort of thing so I reckon it would depend on what happened subsequently. The funny thing is that, having been through the turmoil of September 2008, the financial system is probably better prepared and positioned now, than it was before the Financial Crisis, to deal with the turmoil that would be caused by China dumping its Treasury holdings.