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TMFBomb (89.34)

Bernanke to buy Treasuries...with Treasuries?

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December 01, 2008 – Comments (7)

Tired of pushing interest rates asymptotically toward zero, Bernanke said today that the Fed may buy Treasuries to help boost the economy.

So we've been funding the bailouts by opening up the Fed's printing presses and increasing our debt load.  Now we're cranking out more dollars to lower our debt load?  We're similar to a company that does a stock offering only to buy the shares right back...it's like we're buying Treasuries with Treasuries.  More to the point, we're talking about inflating our currency to make our debt position look better.

Crazy.  If you're question is, "Are we mortgaging our future again?", Berkanke's got an answer for you (from the Bloomberg article below...note that we'll surely be using this quote to chastise him a year or two down the road):

The Fed’s balance sheet “will eventually have to be brought back to a more sustainable level,” Bernanke said. “However, that is an issue for the future; for now, the goal of policy must be to support financial markets and the economy.”  

http://www.bloomberg.com/apps/news?pid=20601087&sid=ajcLVDMwN5To&refer=home

 

7 Comments – Post Your Own

#1) On December 01, 2008 at 6:51 PM, jgseattle (30.47) wrote:

If that policy is not inflationary nothing is!  The dollar is going to take a big hit sooner or later.  I just hope I will be able to refi my mortgage at 3% before rates go crazy.

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#2) On December 01, 2008 at 7:00 PM, treecircus (< 20) wrote:

just in... Bernanke bails out Bernake...

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#3) On December 01, 2008 at 7:04 PM, TMFLomax (46.94) wrote:

Oh yeah, actual sustainability is always a issue for some indeterminate point in the future eh... ;) Egads.........

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#4) On December 01, 2008 at 8:11 PM, DemonDoug (35.21) wrote:

 More to the point, we're talking about inflating our currency to make our debt position look better.

Ding ding ding! We have a winner! What do we have for him, Johnny?

Well, we have a big thought-bulb over the head, of someone who gets it!

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#5) On December 01, 2008 at 9:12 PM, rd80 (97.59) wrote:

I suspect the Fed printing presses are working overtime for two reasons.

1.  Auctioning all this new debt off without the Fed 'buying' some of it would be a zero sum game.  All the money being injected into the economy would get sucked right back out at the bond auction.

2.  It would will be really, really ugly when Treasury holds a bond auction and there aren't enough bidders to absorb the supply.

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#6) On December 02, 2008 at 12:32 AM, kaskoosek (37.40) wrote:

So is it like buying 20 year treasury using the money from the 1 year treasury?

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#7) On December 02, 2008 at 8:27 AM, XMFSinchiruna (26.98) wrote:

As a captain, I can't help but to think along these lines:

Our ship has hit an iceberg, and rather than attempting to repair the breach in the hull, we're trying to pretend its okay while our captain tells us we're just going to have to learn to be a submarine.

We're so terribly screwed! Got gold?

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