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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Moominoid who wrote (88731)9/11/2007 1:43:17 AM
From: HawkmoonRead Replies (2) of 306849
 
So I have a question here, amidst all this discussion of monetary policy (FF vs Temporary)..

Exactly how would you, or Grace factor in the inverted yield curve on Government T-Bills?

Am I hearing folks trying to convince us that the rate on government long term bonds is irrelevant to where the Fed sets the FF or discount rate?

It is not natural that the Fed should seek to find equilibrium between the FF rate and the rate at which the government creates money via issuance of public debt?

Because that's what the Government does when it issues debt.. It creates money backed by the full faith and credit of the American people (and taxes them to pay it back). All the Fed does to influence money supply is buy (inject) or sell (drain) government debt. And when the public is competing with the Fed for a diminishing quantity of public government debt instruments, why is it that the Fed keeps rates higher than the the price the private market is willing to accept as a return on government debt?

Why is not relevant that the Government can now borrow money for 10 years at a lower rate than commercial banks can borrow from one another (or from the Fed via the discount window)?

I'd really like to know, because I'm not seeing anyone discussing what I perceive as the "elephant in the living room"..

Hawk
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