
The Fed Has Bought 70% of Net Treasury Issuance Since October - baronmunchausen
https://thesoundingline.com/the-fed-has-bought-70-of-net-treasury-issuance-since-october/
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skat20phys
Every time I read about this I'm amazed it isn't getting more attention in the
wider press.

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seibelj
The US government's yearly deficit is over $1 trillion. 8.5% of the
government's budget alone goes to interest on our debt
([https://www.usaspending.gov/#/explorer/budget_function](https://www.usaspending.gov/#/explorer/budget_function)).
To pay for the deficit, the treasury sells bonds (debt) which is immediately
purchased by the Fed with newly printed money. Notice how equities are at all
time highs - money is flowing to whatever it possibly can (stocks, housing,
art, VC, anything) in order to chase yield. How people are saying inflation is
low... I think they are measuring inflation wrong!

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echelon
How does this get corrected? Do investments wind up losing all of the gains,
or do those who didn't have an opportunity to participate get left out and the
value of their holdings diminished?

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seibelj
An extremely controversial topic! If you are middle class to upper middle
class, owning assets to protect from the inflation (stocks, bonds, housing,
gold, bitcoin) would be one way.

If you mean unwinding our current loose-money global monetary system of fiat
currencies, I'm not sure that genie can or will ever go back into the bottle.
Let's hope the next recession is gentle.

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jsjohnst
> Let's hope the next recession is gentle.

On one hand I agree with you completely, on the other hand a very hard painful
reset is kinda needed too. I really hope it doesn’t come to the later, but I’m
not sure we can avoid it long term.

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nickthemagicman
Can anyone explain what this means for a noob?

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baronmunchausen
The Federal Reserve (the Fed), the central bank of the United States, prints
money and buys the national debt (treasuries) in order to increase bank
reserves and stimulate the economy. The Fed is doing this to such an extent
that they are now monetizing (printing and buying national debt) 70% of all
the debt issued since October, roughly when they started . They refuse to call
it quantitative easing (QE) (despite it meeting the literal definition of QE).
It's why markets are going up despite zero increase in overall corporate
profits and mediocre economic growth. Endless artificial stimulus like this,
is why the economy shuffles from bubble to bust.

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acdanger
Admittedly, I haven't read the article yet, but can you explain why they are
doing this now? All indicators seem to suggest the economy is strong, so why
are they resorting to tactics we last heard about in 2008?

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aaronblohowiak
i don’t agree with your assessment of the indicators.

We haven’t hit target inflation, because labor costs have been resisting
upward pressure due to underemployment. The fed thinks it can paper over
structural problems with cheap money, resulting in capital asset price
inflation and increased wealth disparity...furthering barriers to real wage
growth.

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ur-whale
Nothing new under the sun [1]

If history repeats itself, next step is empire falls.

[1]
[https://en.wikipedia.org/wiki/Debasement](https://en.wikipedia.org/wiki/Debasement)

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hurricanetc
Can’t wait to see what the Fed will try to do when the next recession hits.
They’ve been searching deep into their bag of tricks to keep this phony
expansion running.

The next recession is going to be a bloodbath. Not sure what else the Fed can
really do and it’s not as if Congress can cut taxes too much lower. The last
10 years we’ve been doing the opposite of what we should have. But at least
the boomers got one last big fake boom-bust cycle to live through! Just like
the glory days.

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fredgrott
What concerns me:

2008 Crash and how US Fed handled it means that they have to pump money into
stock market for the next 30 years(20 left) until all the mortgages that they
hold fully unwind. What could go wrong?

Well, the US Fed track record for such strategies being successful over 30
years is vacant as it never has been done before!

ie at least our problem with real estate-homes outpacing income gets worse

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yasp
I generally as a rule dislike ZeroHedge, but there is good pertinent
information in the following link.
[https://www.zerohedge.com/markets/944-trillion-reasons-
why-f...](https://www.zerohedge.com/markets/944-trillion-reasons-why-fed-
quietly-bailing-out-hedge-funds)

(Commence the downvotes.)

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mywittyname
A broken clock is right twice a day. ZH has an overt political bias and is a
perennial pessimist, but they do actually perform meaningful economic
analysis.

Edit: Then again, their articles sometimes feature near complete fabrications,
i.e., "Minneapolis Fed president Neel Kashkari [...] said that it was time for
the Fed to pick up where the USSR left off and start redistributing wealth",
which is not even remotely close to what was actually said.

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hogFeast
Read further. They explain this view. It is 100% correct, based on the
evidence they provide. What they are saying is that this was LTCM but instead
of banks coming in and forcing losses at 50 cents on the dollar, the govt came
in and bailed everyone out at par. I have no first-hand knowledge of the
extent of this trade but a lot of it sounds correct (the key premise of the
Fed is that this isn't leaking into the market...whether you believe ZH or
not, you should be extremely suspicious of this line).

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hcknwscommenter
> It is 100% correct, based on the evidence they provide.

This is very wrong. The "evidence" they provide is nonexistent. The ZH link is
typical ZH garbage. A bunch of assertions without basis with a few
misconstrued quotes thrown in.

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hogFeast
It isn't. Read the quoted section from Russel Clark, the BIS has been talking
about this (they specifically mention levered hedge fund positions), and they
specifically mention an arb between cash bond and derivatives (do you know the
history of this trade? It blew up twice in the 90s)/point out that some funds
are running with a lot of leverage (is this repo? I don't know, but it is
likely given that this has always been a financing source and the BIS are
saying that it is).

So not nonexistent. The quotes look completely fine (I have looked at
clearinghouses quite a bit, Russel Clark understands them...obv, the guy is
not an idiot).

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hcknwscommenter
The FED would love for hedge funds to INCREASE their cash bond and derivative
Arb activity. This would arb away the differential and hedge funds would make
a tidy profit in performing this service for the market. The problem is that
hedge funds, prop desks, banks, and pretty much everyone DIDN'T step in and
arb away the differential. This led to a massive 10%! rate for O/N repo, which
is supposed to be a risk free instrument.

