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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: smh who wrote (108625)	11/27/2014 12:08:25 PM
From: bart13	Read Replies (1) \| Respond to of 219951

While its true that the Fed sends a lot of money back to the Treasury, they don't send it all. If memory serves, they keep about 6% of the total for both operating expenses and "profit". CB accounting practices are a rats nest and I don't recommend studying the area without a strong stomach. <g> The following is controversial, but is my best guess: The BoJ is also much looser in how they're playing QE and don't have anything like the Fed concept of Excess Reserves, which keeps much of the money created by QE out of the broad monetary system - it's locked up in banks' accounts at the Fed itself although the Fed does pay interest on it (IOR = Interest On Reserves) at around 1/4%. So the BoJ is literally monetizing the debt, while the Fed has a brake on monetizing since much of the money created doesn't get into the circulating money supply. And Japan has a quite similar issue with velocity, which is partly why they haven't been able to kick up inflation very well. nowandfutures.com As far as servicing the debt, virtually all CBs have their governments back and will pull out any tricks that they can to minimize economic effects when rates do finally go up. They can be quite "clever" when trying to avoid economic calamities, but history shows that they will eventually fail since their actions are based on previous failures like not properly controlling things like the 90s stock bubble or the housing bubble as well as very poor TBTF activities control or regulation enforcement (aka, regulatory capture). Fees wise, by law the Fed can't directly buy in the markets so it must go through the Primary Dealers ( Primary dealers list ) for any purchases or sales so I don't think that's an issue. And besides, its in the Fed's interest to support the banking system. By the way, I may be late answering any further posts. I'm fighting a flu bug.