>>> "we will not monetize the debt" line. ..... WTF else do you call it when the Fed buys garbage MBS from banks with funds newly created out of thin air? <<<
I think that you have to cut Ben some slack in that this is one of those situations that depends upon "what the definition of "is"" is. I suspect that when Heli Ben is talking about THE DEBT he is talking about the public debt.
Of course the purchase of MBS is a monetizing action, but we will return to that.
Monetization of the public debt would represent the direct purchase of Treasuries. I don't think that the FED is showing up at Treasury auctions. Of course if yo read ZeroHedge, you will find ample evidence that certain mysterious hedge funds based in Tyson's Corners Virginia show up at the auctions and buy mountains of Treasuries, and somehow the CUSIP numbers of those securities end up in the FED's vaults a few days later. This happened in a very timely and expeditious fashion about six monts back when a Treasury auction went very badly on a Wednesday (?) and it appeared certain that an auction on the following day was sure to fail. But that would not be monetization. For that, Ben has to show up in person and bid. Its a matter of definition you see.
Then there is the matter of what I call "street name" of the Treasuries at the Treasury. Our foreign benefactors are not so stupid - well maybe they are because they lent to us before they kicked the tires hard enough. It seems tat the US Treasury hold both MBS and US Treasuries "in street name" for foreign (governments?). The foreigners didn't want the implicit (nw explicit) guarantee of the MBS, preferring the more sound Treasuries. So Ben went in there and bought the MBS from the foreigners, left those MBS in the Treasury vaults, and the foreigners took the cash, bought Treasuries with them and left them at the Treasury. Soooooooo it wasn't as if Ben bought Treasuries or otherwise monetized the debt. You see its a matter of definition.
Now back to the MBS directly. There is no hiding the mountain of MBS on the FEDs balance sheet. There is an explicit, open, intention to campaign to purchase $1.25 trillion of them before March 31. They are about 95% there. Buttttttttt ... ummmmm ..... aren't you and I (the public) proud owners of Fannie and Freddie, and as such responsible for its liabilities? And aren't we responsible in the exact same fashion for the liability represented by US Treasuries?? So when Ben buys a MBS, he has bought a Treasury, and I bet if you went down to the FED and asked to exchange a Franklin in your wallet for something in kind, the clerk would ask you if you rather have a Treasury or a MBS. Sorry Sir, no gold today - just paper.
So when Ben says that he has not been or will not monetize, he has shown himself to be either grossly incompetent or a liar of the most profound nature. Rather scary really.
I was despondent after he was reappointed. I am rallying and about to resume calling my Reps to have Geithner expelled and thrown in jail.
Oh. And then there is he matter of the Obama impeachment. Banning foreclosures!?!?! What an idiot. Can't somebody please go to Glasgow, disinter Mr Smith, do a DNA reconstitution, and have him go to the Oval Office to provide a few tutorials on free markets.
A good friend of my wife's was in town for dinner last night. Someone not seen for 30 years. Her mother had just died. The family now has to give up their Manhattan apartment which the parents had held for about 50 years. Rent controlled of course. The rent??? A mere $200/per month. I know I don't have to explain, but I suspect that you can't get a hotel room in Manhattan for less than $250 per day. Do you think that the landlord was motivated to do any maintenance on that unit. The period losses must have been enormous. All of that helped the tax base of course.
A foreclosure ban!?!?! What an idiot!!!! There is an Article in the Constitution that stipulated that all taxation must be equal. One wonders what taxation means. Is it the net balance of transfers between the government and an individual, or is it exclusively the face amount of checks written to the Treasury - a one way flow. I think tat the average middle class annual tax check to Treasury might be around $8K. So if you let a bum live in a house for two years for free under a foreclosure ban, the imputed rent might be about $48K - or about six years worth of taxes. I am going to go ask my Clowngressman for some Preparation H.
Has anybody stopped to ask if a foreclosure ban is even Constitutional? |
