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Politics : Politics for Pros- moderated -- Ignore unavailable to you. Want to Upgrade?

To: skinowski who wrote (391258)	11/4/2010 3:40:16 PM
From: rich evans	Read Replies (1) \| Respond to of 794280

If the Fed buys directly from the Treasury a new issue, then yes, the Money could get into the economy and Money supply M1/M2 would go up. But if it is a rollover of treasury debt coming due, then it depends on who held the bonds. If the dealers held them, then the money would go to them and be deposited with the Fed Reserve and you could get the same result as the Fed buying directly from the Banks/Dealers. But the QE which the Fed did and is now doing again is to buy the Bonds ftrom the Primary Dealers/Banks not the treasury and they deposit the funds with the Fed Reserve and there it has been sitting. That is why Bernanke and Geitner have said they are not monetizing the debt. One can see this by looking at the charts at the ST. Louis Fed Reserve internet site. The money supply numbers are not going up that much but the monetary base has gone way up. Also the money multiplier is about .8 instead of the usual 3 or so. Banks are not lending. And the Fed could sell its bonds to take the money back out of the monetary base if it wants. These are just electronic transactions and can be reversed. There is no actual printing of greenbacks and dispersal like Zimbabwe where the money was put out in the country as actual paper and could not be retreived.