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

To: Mike Johnston who wrote (46526)	12/3/2005 8:01:44 PM
From: russwinter	Respond to of 110194

Think there is a limit to what the Fed can monetize. Their SOMA balance sheet is about $744 billion, and over the last year they monetized $32.2 billion. In the last three months they have really picked it up, doing $13.8 billion or $55 billion annualized. Yet rates went up anyway, because the FCBs were MIA until recently. FCBs hold $1.507 trillion, and are five times more active ($181 billion yoy)in securities buying than the Fed, they really call the shots. Hypothetically the Fed could do more, but will they? How would the market react to say $75 billion in debt monetization (10% SOMA growth) in a year? Where would the money go with such obvious inflationary pressure? The Fed can't really control that aspect, so probably into flucht in die sachwerte (flight into real assets) plays like energy, or gold, would backfire, not where it was intended. What would the foreigners do if they saw the printing presses raging? I lean towards the limits of such policy, they will be overwhelmed unless the twin deficits get under control and fast, not going to happen, so rates will keep spiking until credit growth is really choked down (). Too much for the FCBs to handle either. () some signs of that beginning to happen? siliconinvestor.com Message 21939281 Message 21939715