Anyone watching treasuries?
- Thread starter MrDODGE
- Start date
I missed where he said it is a Japanese replay. I've heard him complain that the Japanese not being good at taking losses (and letting the system outright flush) is the path we are going down, but I've never heard him prognosticate our outcome will be the same. His 30y call is as you say a contrary outcome to the Japanese situation.
Regardless, Japan's problem is that they never printed *enough* money to go along with their fiscal stimulus. This is according to Milton Friedman himself. Side by side since 1990, the US has grown its money supply (on a percentage basis) more aggressively than Japan even despite Japan needing so much more stimulus.
Everyone likes to look sophisticated saying we are in for a Japan repeat without quantifying the correct *amplitude* (and scope) of money printing is just as essential as the existence of the money printing bias. That's where Japan likely got it wrong. If you put enough cash into the banking system, it *will* move. The problem is that 'enough' was never properly addressed.
It wasn't a flight to anything today (although I do believe the S&P is in for a new low). Bernanke said the Fed's going to start buying treasuries, so they went up understandably.
I've read about quantitative easing. I'm still a little confused. Can someone explain to me how the Fed has money to buy treasuries? Is it basically just magically making a few ledger entries and we have more money? That's what it seems to me.
I've read about quantitative easing. I'm still a little confused. Can someone explain to me how the Fed has money to buy treasuries? Is it basically just magically making a few ledger entries and we have more money? That's what it seems to me.
the moneys (M0) were already created when treasury debt was issued. the only thing that is happening now is that Fed releases them into the economy.
in other words what was initially replacing private investment through higher rates is now off the market - and moneys are finally printed into the real economy.
quantitative easing is a moniker for running printing presses (much) faster!
of course 2 things can happen as a consequence. either the moneys get stuck in banks' cash reserves (or are turned into treasuries again) or they are lent out - therefore easing the credit crunch and potentially feed inflation via "potent demand" > "supply" logic.
maybe some expert here can explain in more detail...