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A question for Fed experts

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August 01, 2012 – Comments (3)

If the Fed wanted to drop the yield on the 10yr to 0.50%, would they be technically able to do that, even if the general population of the U.S. and the rest of the world no longer wanted to hold them? Feel free to pontificate about why they would never choose to do that or whatever, but I'm only interested in whether it's possible for them to exert that level of control over the price of Treasurys.

3 Comments – Post Your Own

#1) On August 01, 2012 at 2:35 AM, awallejr (83.92) wrote:

I would think it would take massive purchases on their part.  Possible yeah. likely I don't know.

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#2) On August 01, 2012 at 10:29 AM, Valyooo (99.45) wrote:

They can do whatever they want, but in order to do that, they would have to cause massive inflation.

 

Personally, I think they should raise mortgage rates to 6%.  Then the banks will make money, so they will want to lend more.  I don't think pushing rates any lower is going to spur more mortgage lending.  Banks are basically breaking even

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#3) On August 27, 2012 at 7:50 PM, rfaramir (29.34) wrote:

So long as it is legal for them to print money from thin air and legal to purchase Treasuries, yes they can.

The Treasury sells Treasuries at auction and has to offer higher interest rates when there are too few buyers. The Fed can step in and buy all the notes the Treasury wants to offer, which means the Treasury can offer any interest rate the Fed will tolerate, even as low as 0.50% on 10yr notes.

Not saying they will, and certainly they shouldn't. They should be shut down as the immoral counterfeiting operation they are. But yes, they can.

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