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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (22755)	12/2/2004 1:12:51 PM
From: SeaViewer	Respond to of 110194

The feds are amazingly bold in terms of monetizing. We will see the reserve data this afternoon.

To: russwinter who wrote (22755)	12/2/2004 2:17:43 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

From RodgerRafter on the Fool in response to your post.. BTW his explanation at the bottom makes perfect sense on those coupon passes IMO (bolding is mine) From Rodger... =========================================== I like Russ's response to your question: Message 20820633 "Those are various old bonds that the Fed has elected to print money up out of thin air, and buy. I'm presuming this is because foreigners are now dumping, and there is nothing but a printing press to support (artificially) the bond market (and defacto the stock market)." Inflating the supply of dollars only gives bonds a short term boost as everyone else will demand higher yields to make up for depreciating dollars. The stock market gets a longer term boost because the hard assets of a company are worth more relative to the dollars we use to buy shares. However, I disagree with this statement: "These permanent injections have about a 9x multiplier effect because of fractional banking,etc." The money only gets multiplied if there are people out there that want to borrow it. Good link on the South Korea story, too: South Korea's foreign-exchange reserves had a record monthly gain in November, surging $14.2 billion, as the central bank bought dollars to slow the won's gains. So... The Fed prints a billion dollars and buys up bonds that nobody else wants and foreigners are trying to sell. Banks could keep the billion as an asset and create another 9 billion to loan out if anybody wanted to borrow it, but nobody does in a contracting economy that already is buried ear-deep in surplus cash. South Korea prints up enough won to buy the dollars nobody else wants to hold and absorbs the inflation temporarily, but eventually those dollars will come home to roost. Can't wait to see what happens the next time the treasury tries to hold another auction: treasury.gov treasury.gov The Fed has been buying up all these bonds on the open market, while the debt limit was preventing the treasury from issuing new notes. Treasury has a lot of catching up to do. ============================================================== Debt limit now raised and obviously the limit is being used. Mish