Paul Krugman economics: Deny, deny, deny!
- Thread starter Max E.
- Start date
That's where I thought you were going with this. You're saying the equity market is ok with it. Ah, I see. Well, of course the equity market would be ok with it. The Fed is throwing over $$85 Billion a month, or over a trillion a year, into it on a consistent basis.
The Zimbabwe Stock Market loved it when they did Quantitative Easing as well:
But when we're talking about whether the "market" likes the fact that the Federal Reserve is buying the debt, we're talking about the Debt Market. After all, the Federal Reserve isn't directly buying stocks (as far as we know). I would have thought you would have grasped this.
And when we look at the debt market, we can't look at rates - because the Fed is cornering it. But we CAN look at bids in the auctions on US Debt. Particularly, we look at the difference of Direct and Indirect take down of the debt. That is, who bids. In the Direct case, it is the primary dealers which flip it back to the Fed (because the Fed doesn't buy direct from the treasury). Indirect bidders are those representatives of foreign central banks, hedge funds, etc. The people you WANT to buy your debt because it indicates they trust it. Feel free to go to the US Treasury's website and learn all about direct and indirect bidders.
Instead, this is what we're seeing:
Direct Bidders Take 30% Of 2 Year Auction As Indirect Flight Continues
Another Record Direct Bid Award In Today's 3 Year Auction
Indirect Takedown In Today's 2 Year Auction Lowest On Record
And so on. This indicates less and less indirect bidders, and that is telling us (for those who know how to listen) that the market is definitely not ok. Incidentally, this is what I mean when you present an argument that is not just a one-liner/canned response.