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jesusfreakinco (28.33)

Federal Reserve Accounts For 50% Of Q2 Treasury Purchases



September 21, 2009 – Comments (8) | RELATED TICKERS: GLD , SLV , TRX

Can someone say "QUANTATIVE EASING"?  Or Helicopter Ben?  Or devaluing our purchasing power?  Or PPI to soar?

"The degree of intermediation by the Federal Reserve in the issuance of US Treasuries hit a record in Q2, accounting for just under 50% of all net UST issuance absorption. This is a startling number, as the Fed's $164 billion in Q2 Treasury purchases dwarfs the combined foreign/household UST purchases of $101 billion and $29 billion, respectively, over the same time period. In fact, the Fed was a greater factor in UST demand than all three traditional players combined: Foreigners, Households and Primary Dealers, which amounted to a $158 billion in net Q2 purchases. "

Got Gold? Got Silver?  Got guns and ammo?


8 Comments – Post Your Own

#1) On September 21, 2009 at 4:08 PM, davejh23 (< 20) wrote:

So, if it weren't for the Fed's purchases, would long-term treasury rates already be rising rapidly?  How long can they keep this up? 

There's lots of talk of a "shadow inventory" in housing...banks holding onto inventory and waiting for the market to improve.  How is housing going to look once long-term rates start to increase significantly, AND the market is swamped with existing and new bank-owned properties?

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#2) On September 21, 2009 at 4:15 PM, russiangambit (28.84) wrote:

It is a catch 22 for the FED. They can't allow interest rates to rise, so they have to continue QE  and dollar devaluaiton. Yet the QE is set to expire  in October and the country is no mood for more bailouts. However, the country is in no mood for higher interest rates either.

However, the FED has been very inventive ( or shoul we say devious?) so far with coming up various ways to keep the game going. Let's see what they come up with this time.

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#3) On September 21, 2009 at 4:22 PM, Option1307 (30.45) wrote:

Good find JFC!

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#4) On September 21, 2009 at 4:27 PM, jesusfreakinco (28.33) wrote:

Dave - So, if it weren't for the Fed's purchases, would long-term treasury rates already be rising rapidly?  How long can they keep this up?

Answer - as soon as our creditors holding treasuries get FED up (pun intended) with the Fed devaluing their holdings.  China has already spoken out against this and have been using their USD holdings to secure.   The rise in Gold and the fall of the USD in the past few weeks are warning signs...

Russian - you're right.  The FED is caught between a rock and a hard place.  Sinclair's commentary today "The most important news today is the Secretary of the US Treasury suggesting a study on US Federal Reserve Governance and Structure. The US Federal Reserve rejected this suggestion.  There is a battle between the Fed and the White House that will end in either QE to infinity or a dismantling of the Fed."

I can't see Obama undermining the Fed because it would (or will) crash the economy and markets along with it.  However, the fact that the Administration is having to pretend to fight the Fed is a sign that the million man marches in DC and other protests are starting to get to our politicians.  We'll see...



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#5) On September 21, 2009 at 5:53 PM, uclayoda87 (28.69) wrote:

I also believe that russiangambit is correct.

If the market has a sudden sharp correction in October, repeating last years event, then the US dollar may rise again because of its "safety".  This may give the fed more room to do more QE to help "stimulate the economy".  Did I just suggest that the US government should crash the market so that it would be able to spend more?  Now I'm confused.

If this happens, buy more GLD and CEF when the US dollar index rebounds up.

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#6) On September 21, 2009 at 6:11 PM, jesusfreakinco (28.33) wrote:


I think we have seen a slight disconnect between gold and the USD. Not a major disconnect, but a disconnect nonetheless.  I am hoping the China put will keep the floor on Gold in spite of any rally in the USD.  However, I disagree that there will be a USD rally.  There are just too many fundies working against the US economy, even relative to other currencies / economies.  I think the USD is no longer considered a safe haven, but a funding mechanism for the carry trade.

That being said...  it all comes down to confidene in the Fed.  If foreigners believe the Fed will get us out of this mess, they'll continue to poor $ into the USD.   If not...  look out below.


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#7) On September 21, 2009 at 8:18 PM, lquadland10 (< 20) wrote:

But Health Care is the most pressing problem according to our current president puppit. Sounds just like the last president puppit. IMHO

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#8) On September 22, 2009 at 2:52 AM, uclayoda87 (28.69) wrote:


 In Peter Schiff's update Crash Proof 2.0, he basically agrees with your above statement.  He believes the dollar will fall but gold will not this time.  I'm hedging my bet.  i sold all my GLD but plan to buy CEF on a price pull back.  I have enough in mining stocks and a baseline position in CEF that if gold spikes higher, I would be conforted in the fact that my other stocks likely went up.

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