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

To: GST who wrote (99935)	11/26/2008 1:32:17 AM
From: alphaletter	Respond to of 110194

Care to discuss the implications of this? Going for a cup of coffee? Take some money with you...

To: GST who wrote (99935)	11/26/2008 1:46:53 AM
From: bart13	Respond to of 110194

The simplest implication is just plain relative inflation. The normal way the Fed monetizes is via permanent repos, otherwise known as buying Treasuries for the System Open Market Account (SOMA) with money created from thin air via computer keystrokes at the Fed. Eventually and if there's enough monetization, inflation starts rising - first hitting financial markets and in this case, probably commodities and gold too. How long it takes is complex since the Fed is trying to offset both debt deflation and dropping money velocity... but the markets will show it. Its also quite probable that the Fed will be buying Treasuries with the partial purpose of holding rates down, as per Bernanke's 2004(?) paper.