Hi Rich, .... interesting. It has always seemed to me that they issue their own debt in the sense that they would purchase US Treasuries, and GSE's and that would expand the money supply since the 19 Primary Dealers would have sold some of their treasuries to the FED and then they would have those funds to lend out, thus increasing the Money Supply and also we would see the Money Multiplier in effect as the loans those banks made would then be used by Corporations etc to expand their businesses etc. I know from Macro Econ 101 that of course the Velocity of the Money flows changes at different times in the long term cycle. When people have the built in expectation that prices are going to be higher next month, they spend the money as quick as they get it. If they think prices will be lower then the Velocity and how quickly they utilize their cash flows and new credit slows way down.
It seemed to me that their was a monetary Control Augmentation in 1980, that gave the FED expanded powers to purchase a much more extensive array of assets to Provide liquidity and prevent market Freeze up's such as we saw in Sept. and October.
It's fairly widespread wisdom that the FED intervened directly into the US Equity market The day after Monday October 19th 1987, by purchasing SPX Futures aggressive when the market became untenable mid morning on Tuesday Oct, 20th. <I was actually outside of the NYSE on that day I was standing on the steps of the courthouse, because I was interviewing with Chase Manhattan that. That interview got postponed for one week, as you can imagine. I had also been at the same location the Friday prior to the crash as I was coming on the subway down from the headhunters office at the Pan Am Tower at Grand Central (MetLife these days).
It was reasonably quite on Friday Oct 16th, but it was pandemonium, with all kind of News Vans their with the enormous satellite dishes which where perched on the an roofs in those days. People everywhere. OK so I have veered off topic.)>
It seems like we've heard talk of the PPT , the so called put protection team, being utilized in on a few ocassions in the late 1990's and then again in 2002.
The FED officials have also been admitting that they have been engaging in Quantitative easing since October.
Naive as I am, I kind of thought that since the FED was purchasing creating their own debt, by expanding their balance sheet from 800 billion earlier in this year to well over $2 Trillion. (I think the number is actually a few Trillion north of 2 Trillion)
and as Lee has pointed out, We are all walking around with Federal Reserve Units of currency. I'm going to post a few other people's perspectives. This entire situation, circles back to my key premise of the past 2 years that when the 55 Trillion Credit Default Swap market started to contract, it would do so by at least 10 or 20 Trillion dollars and was going create a monumental blow up of asset values followed by a serious inflationary event. Maybe then another round of deflation, etc.
Thanks for your response... It seems to me that the FED is still trying to increase the money supply and the monetary base.
I've got an interesting post from FT alphaville.... lets look at that perspective.
John |
