The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who wrote (76676)	12/26/2006 7:56:33 PM
From: jimmg	Read Replies (2) of 110194

<In otherwords if over a year you combine $45 billion in coupon passes with $300 billion in FCB purchases (almost all housing agencies and TIPS) that is NOT a casual relationship at all.> It may not be casual but it is most certainly not causal. Where do you think the FCB's got $300 billion in the first place? The FCB's don't create us dollars out of thin air. They get US dollars from their domestic manufacturers who sold goods to American consumers. The FCB purchases of US debt and equity securities is an effect, not a cause. The FCB's get us dollars only after Joe Sixpack decides to get a home equity line of credit to buy a bunch of crap made in China or Japan. Btw, I believe the Fed did more like $30 to $35 billion in coupon passes this past year which grew their balance sheet in line or slightly less than the nominal growth % rate in gdp and far less than total credit growth %.

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