<<treasury bond debt owed by the federal government is owed to... none other than the Federal Reserve
First time I saw that I was genuinely dumbfounded. I honestly can't find an explanation of it other than 'stability of the system', but even that appears to be something of a stretch since to a person like me just appearance of that kind of meddling creates hesitation.
I think US is really milking the whole 'the only game in town' in terms of stability. The issue is.. that will not always be the case. At some point, reality will set in.
And I am saying all this as ( minor compared to the rest of stuff ), US bond holder.
The fed purchases treasuries in order to fulfill several different goals, all under the broader umbrella of monetary policy. It isn’t nefarious and is something that is done by central banks all over the world. This isn’t some sort of “only game in town” type of a deal.
Just as an example, what would you suppose would be a better mechanism to expand/contract the money supply? Just handing out money to random individuals? Randomly taking it away?
<<just handing out money to random individuals? Randomly taking it away?
I do not want to derail this thread, but one could argue that post-2008 FED response almost exactly just that[1]. Granted, I guess I myself am stretching word random here as it is highly likely that criteria for selection for cash infusion were almost certainly not random at all.
<<It isn’t nefarious and is something that is done by central banks all over the world.
It may not be inherently, or even intentionally, nefarious, but it does undermine investor's view a little bit. It is not the same, but it is a little like me trying to pump shares of my own company to give it an appearance of strength. And just because everyone does it, does not make right.
<< The fed purchases treasuries in order to fulfill several different goals, all under the broader umbrella of monetary policy.
I would have been willing to accept this rationale pre-Powell tenure. His clearly political response to badgering from, at the time, Trump WH ( and then Biden WH ), made it clear to me that monetary policy is dangerously aligned with political issues ( where by design it was supposed to be apolitical or at least independent of political pressures ).
I’m confused here, in your first comment you suggested that you had a problem with the Fed using treasuries as it’s primary monetary policy instrument, and now this comment would appear to suggest that you are put off buy activity that falls outside of that scope?
What exactly would you like to see the Fed do?
Also, keep in mind that the fed is quasi private. It is the central bank. While it is governed by a publicly appointed board, its primary responsibility is undergirding the banking system (and fulfilling its “dual mandates” by congress). It’s creating was bought on in response to numerous banking panics in the 19th century.
You are not going to like my answer ( and it is the same as my answer for Treasury, HUD and multiple other agencies ). I would like FED to do less. I do not want it constantly engaged in trying ( and failing ) to follow signals it cannot or will not comprehend.
Frankly, if we are going to have politicians run monetary policy, we might as well move it back to congress where it belongs.
<<It’s creating was bought on in response to numerous banking panics in the 19th century.
I know the rationale, but isn't that FDIC's job now to basically say to people 'your money is fine; don't panic'? Oh, you say, 'yes, but that does not preclude general market panic.' And this is where I have a problem.
To a reasonable person, 2008 shockwaves for any other type of business, would have created a massive pain for everyone involved. Somehow, there were only few casualties from that event. Instead of actual wave of bankruptcies that would have made people think twice before putting entire system at a precipice of oblivion, we had government effectively reward bad behavior. I personally would argue that a system, where incentives reward dangerous behavior is a bad system.
And the most amusing piece is that we are still paying for it ( not in money either, but the bad system that encourages that dangerous behavior remains in place, which means we will eventually deal with another like market panic sooner rather than later ) edit: all while the original reason for the instability was never really addressed.
Additional comment, I find this confusing as well:
>> << The fed purchases treasuries in order to fulfill several different goals, all under the broader umbrella of monetary policy.
I would have been willing to accept this rationale pre-Powell tenure. His clearly political response to badgering from, at the time, Trump WH ( and then Biden WH ), made it clear to me that monetary policy is dangerously aligned with political issues ( where by design it was supposed to be apolitical or at least independent of political pressures ).
Is monetary policy no longer monetary policy simply because it is political?
This is really a rhetorical question on my end. The truth is that monetary policy is always political in nature.
I wouldn't worry too much about it, because games like this are almost always going to happen in politics. It's when the system gets rigid and these games stop being played that you have more issues.
The USD isn't the "only game in town." It just happens to be the best game in town because it's backed by a successful, resource rich country with a mighty military and a massive, diverse economy, and no capital flight controls.
No other country can match it. Switzerland has an economy that's far too small, China has capital controls in place, and middle eastern countries are too reliant on oil.
<<No other country can match it.
<<The USD isn't the "only game in town."
The two statements are at odds with one another. I am not disagreeing with your assessment of US capabilities, but those clearly only create the situation, where US is, in fact, the only game in town.
Right and while being the best within the choice of currencies we currently have, it has proven time and again that it’s pretty miserable at balancing the needs of the world while acting as a global reserve currency vs balancing the domestic needs as acting as “our” (US’s) currency.
First time I saw that I was genuinely dumbfounded. I honestly can't find an explanation of it other than 'stability of the system', but even that appears to be something of a stretch since to a person like me just appearance of that kind of meddling creates hesitation.
I think US is really milking the whole 'the only game in town' in terms of stability. The issue is.. that will not always be the case. At some point, reality will set in.
And I am saying all this as ( minor compared to the rest of stuff ), US bond holder.