SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : John Pitera's Market Laboratory
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: rich evans who wrote (10907)12/14/2008 3:25:46 PM
From: Hawkmoon1 Recommendation  Read Replies (1) of 33421
 
a sale of treasuries to withdraw 68 bill dollars which could have a multiplier to 680bill. My thinking is that this is being done to counteract the large increase in the money supply

Actually, I'm curious, if the Fed was doing what you say, why the 10 year bond is at such a low rate?

Could it be that the Fed is attempting to alleviate the huge surge in demand for T-bonds by selling it's own supply, while then purchasing corporate and mortgage assets and injecting liquidity directly into those non-governmental bond markets.

It's pretty apparent, IMO, that the Fed's attempts to purchase T-bills to inject liquidity is not succeeding. There just isn't enough treasury debt available to meet the demand, hence the historically low yields on government treasuries.

I personally believe that the velocity factor of money supply is possibly even lower than many of us suspect. And without velocity of monetary transactions, traditional treasury repo transactions wouldn't have much effect, because everyone is heading for he safety of T-bills and that just makes the Fed a rival to the commercial banks.

So if the Fed is selling T-bills, it isn't to sop up liquidity. It's likely to finance the purchase of commercial bonds and other distressed assets.

Am I screwed up in this line of reasoning?

Hawk
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2026 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News