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So, using your flawless logic, something truly horrible, akin to the creation of the Fed, must have also happened in the UK and the US in 1895... 'Cause, guess what, "a rapid increase in prices" (using your definition) occurred after 1895. Basically, there's too many things wrong with the...

I think he's referring to the crowding out effect excessive govt supply has. Basically, too little money available to fund productive economic activities, since it's all being used to fund govt borrowing. So it's not a money supply argument, per se. He makes the good ol' point (which I...

Yeah, Kaletsky is pretty good, but he's somewhat of an "enfant terrible" and, as such, prone to grand pronouncements.

Try here: http://www.wilmott.com/messageview.cfm?catid=11&threadid=7633

Nein

Well, I guess sell long-dated US rates vol, but I think we may be late to this party... There might also be some games to play arnd what bonds the Fed owns too many of (and thus can't buy, according to their own rules) vs which ones it can still buy. But, I guess, the simplest of them all is...

Seek ye the "Understanding the Yield Curve" series of papers by Antti Ilmanen of ol' Solly. I think I may have posted a link in one of the threads here some time in the past. Part I has the answers to your question. Otherwise, Tuckman's "Fixed Income Securities" is very good as well.

Sorry, atticus, I just couldn't resist... I promise not to take your name in vain again.

Just like with the banking system, the Fed's great white hope is that, given time, deleveraging in the private sector happens through retained earnings (i.e. increasing equity), rather than through asset disposals. Then the Fed balance sheet can gradually go away. Of course, that would require...

Oh, I can just picture it... atticus and his BFF FXWave, friggin' traders, rare breeds, relaxing with a manly beer or two after a hard day in the mkts! Good one, FXW :)!

Well, I can only hope you're right, but I just can't overcome my innate pessimism, y'know...

Have you seen Bernanke trying to explain x-ccy swaps (lines to foreign CBs) to Alan Grayson? What about the whole "audit the Fed" malarkey? Or how about counting the number of posts here on ET talking about "abolishing the Fed", bubbles and etc? These are all limitations...

'Cause we all scared...

?????????

Disagree... Degree to which V collapses is purely a function of the mkt and, as such, virtually unbounded. Fed has all sorts of limitations on just how much it can respond by raising M (e.g. coconuts in Congress). Same can be said of the ECB, where I observed this phenomenon in action...

Well, clearly this math can be refuted... Boosting of M achieves nothing if it's accompanied by a commensurate collapse of V.

IMHO, fiscal policy (xfer payments) was the main reason a collapse in nominal incomes was prevented. I don't really think the Fed's actions were particularly effective in terms of shifting the central scenario of the distribution. In fact, it was a lot more about risk management, i.e...

I actually agree with Koo and disagree with you here.

It was a Eurex vol interrupt, I think...

Well, to me, the focus on the size of the CB's balance sheet is very Japanese.