Fed Weighs Debt Sales of Its Own

[Rex84]

the concept of the Fed issuing its own debt would be struck down by the supreme court. Our constitution protects us against taxation without representation.

 

[harkm]

Quote from luckybastard:

What these guys are missing is that the FED obviously got to this idea in an attempt to avoid hyperinflation: They've printed a shitload of money, shipped it to the banks who in their turn dit NOT pump it into the private sector. Just yet ! If they start lending again, inflation is going to be an issue and they obviously are scared that that might get out of control (and that it's going to be damn difficult to take money out of the economy again without crashing it even harder)

Hence the FED's creative idea to borrow money instead of print it. Borrowed money is money that's in circulation already, so it won't cause any extra inflationary risk.

However, this is of course going to give additional problems. For instance, the FED notes will compete with treasury for money in the same market. It will be difficult to coordinate their common need for money.

Very interesting points. So if the Fed issues bonds so they don't have to print money they will pay them off at a later date with printed money? So, essentially, the Fed is deferring money printing? There is no way they are going to sell this. The Fed is out of control.

 

[Anaconda]

Quote from luckybastard:


Hence the FED's creative idea to borrow money instead of print it. Borrowed money is money that's in circulation already, so it won't cause any extra inflationary risk.

You need to educate yourself on how the banking & financial systems of the world work. Whatever money the Fed borrows will be then multiplied via fractional reserve banking.

 

[harkm]

Quote from Anaconda:

You need to educate yourself on how the banking & financial systems of the world work. Whatever money the Fed borrows will be then multiplied via fractional reserve banking.

Nice tact.


This might be a way of redirecting capital from money market funds to specific areas.

 

[FerdinandAlx]

The Fed will issue this debt against their ability to create money. The debt will eventually be payed off with newly created funds which means that inflation is inevitable.

The basic idea behind this plan is to give the Federal Reserve a tool to spread out inflation more evenly. Since new money won't be created untill the debt is redeemed they can spread out inflationary pressure across a redemption time frame.

 

[harkm]

Quote from FerdinandAlx:

The Fed will issue this debt against their ability to create money. The debt will eventually be payed off with newly created funds which means that inflation is inevitable.

The basic idea behind this plan is to give the Federal Reserve a tool to spread out inflation more evenly. Since new money won't be created untill the debt is redeemed they can spread out inflationary pressure across a redemption time frame.

Very interesting points. So if the Fed issues bonds so they don't have to print money they will pay them off at a later date with printed money? So, essentially, the Fed is deferring money printing? There is no way they are going to sell this. The Fed is out of control.

Didn't I just post that?

 

[Random.Capital]

Wouldn't these Fed notes compete directly with the tsunami of Treasury notes, thereby pushing upwards on interest rates for both parties?

 

[harkm]

Quote from Random.Capital:

Wouldn't these Fed notes compete directly with the tsunami of Treasury notes, thereby pushing upwards on interest rates for both parties?

Yeah, it is amazing that there is demand for the Treasury's notes at these rates to begin with. This whole money printing event can't end without repurcussions...can it?

 

[luckybastard]

Quote from Anaconda:

You need to educate yourself on how the banking & financial systems of the world work. Whatever money the Fed borrows will be then multiplied via fractional reserve banking.

No, that's why they created the SFP.

Quote from harkm:

Yeah, it is amazing that there is demand for the Treasury's notes at these rates to begin with.

I'm pretty sure almost all buying is done by the FED. This is the 2007 treasury ownership chart:
http://upload.wikimedia.org/wikiped...hip_of_US_Treasury_securities_by_category.gif
You can pretty much guess how the december 2008 chart is going to look

Quote from Random.Capital:

Wouldn't these Fed notes compete directly with the tsunami of Treasury notes, thereby pushing upwards on interest rates for both parties?

Yep, that's indeed one of the big problems it creates.