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To: ahhaha who wrote (404324)	5/7/2010 3:33:07 PM
From: Real Man	Read Replies (1) \| Respond to of 436258

Yes, POMO also has MBS and Agency entries, which is what I was asking about. We agree on 300 Bln. in treasuries, but you claim that creating money out of thin air to buy MBS and agencies was not printing. Treasuries went to SOMA account as well, that's where they are sitting. So, how are treasuries different from MBS or agencies if they all wind up on SOMA, here? newyorkfed.org The Fed can print and buy stocks, as Bernanke Doctrine states. It will still be printing. They will be added to SOMA account. Now, I agree with you, if all that just sits in reserves, we'll see no inflation, but that does not mean the amount was not printed. Now, the Fed can REVERSE the process and SELL MBS, agencies, or treasuries from their SOMA account. That would be reduction of the monetary base, and like shoving dollars back into the printing press. If that ever happens, then yes, monetization will reverse and the effect was temporary. I doubt it will. Over the past year the Fed monetized or printed 1.75 Trillion, which is double the pre-crisis monetary base level. Where it sits is another question, but if they tried to reverse this, the markets will crash.

To: ahhaha who wrote (404324)	5/7/2010 3:46:03 PM
From: Real Man	Read Replies (1) \| Respond to of 436258

Now, here is another piece: If the Fed buys 1.25 Trillion MBS for it's account, creating 1.25 Trillion in the process, then sells said MBS, which are POSes, for 250 billion, their SOMA account is unchanged. They printed 1 Trillion dollars. BWTFDIK?

To: ahhaha who wrote (404324)	5/7/2010 5:01:10 PM
From: Real Man	Read Replies (1) \| Respond to of 436258

newyorkfed.org Yes, it is written here as well, p. 8. What is the term for MBS and Agency purchases, 1 or 28 days? PERMANENT MBS and Agency purchases were discontinued on March, 31. It was done. They are sitting on SOMA balance sheet. Until they are sterilized, they are permanent. I agree with you, the Fed can create value out of nothing. That's exactly what they did. I call it digital printing, Ben Bernanke does too, in his former speech. The Fed creates money, the banking system creates credit. If credit blew up and the Fed created money to replace bad assets in reserves, then they PRINTED that amount. If they sterilize it later on, then net-net it will be nothing. But that assumes blown up assets return to good, which is a wrong assumption.

To: ahhaha who wrote (404324)	5/7/2010 5:26:09 PM
From: Real Man	Read Replies (1) \| Respond to of 436258

I really think you are confused, regarding MBS and Agency purchases done by the Fed. That was part of Quantitative Easing monetary policy, and I characterize correctly that they printed it. Whether or not they sterilize the printing in the future is another question, for another time. For the time being, the Fed printed exactly 1.725 Trillion from December 2008 until March, 31, 2010, the stated size of their Quantitative Easing. Whether or not this leads to inflation, it's effect on various broad money measures that include banking system credit, is also a different issue. en.wikipedia.org "The process of purchasing financial assets with ex nihilo money is referred to as open market operations. The creation of this new money is supposed to seed the increase in the overall money supply[1] through deposit multiplication by encouraging lending by these institutions and reducing the cost of borrowing, thereby stimulating the economy. However, there is a risk that banks will still refuse to lend despite the increase in their deposits, or that the policy will be too effective, leading in a worst case scenario to hyperinflation.[1] Quantitative easing is sometimes described as 'printing money', although the central bank actually creates it electronically 'out of nothing' by increasing the credit in its own bank account."