US Fed will start buying Treasury bills to manage market liquidity | Hacker News Reader

US Fed will start buying Treasury bills to manage market liquidity

reuters.com

37 pointsnimbius14 comments

Like watching a train wreck in slow motion. Maybe its not explicitly for quantitative easing (hah) but this devalues your dollar and your hard work even more.

Part of the dollar's value is based on its stability and the stability of the US market, which this love is intended to support...

Unfortunately, this pushes other countries to consider divestment from the reserve currency. Its a irreversible loss of credit in unparalleled value.

Places like russia and chine benefit when foreign held dollars are unloaded.

Title was changed from original. Fed has always bought treasury bills. This is just doing so with more nuance. This doesn't mean they've begun QE (yet).

Does it do this often? This is quite literally "printing money", right? Wasn't the Fed not supposed to be allowed to do that?

I'm guessing that if it doesn't do that, short term treasury yields will spike, and they don't want that to happen?

Doesn't this make treasury yields meaningless? If they're subsided by the Fed, then it means that nobody but them will buy them, since this subsidy means that short term treasuries are noncompetitive with other asset classes.

What am I missing?

The absolute least you can do is read the article. It is so frustrating to watch someone cry about being thirsty while water splashes their face

Who's crying?

I'm thinking the same thing. AFAICT this is still going to increase M0 and long-term inflation risk. I don't see how this rate cut is likely to change and/or stimulate the economy with the conditions we have today, just to add to the risk of stagflation.

This article is referring to something separate from the rate cut, not sure if you're aware.

There was a QA where they specifically called out this was NOT for QE (quantiative easing) or "money printing", but rather normal technical operations, I think build up more liquidity as needed.

> This is quite literally "printing money", right?

No, its not literally printing money. (That’a what happens in the big presses run by the Bureau of Engraving and Printing.)

It is arguably figuratively printing money, but that’s exactly one of the Fed’s primary tools to acheive its job, by design.

> Wasn't the Fed not supposed to be allowed to do that?

What gave you that idea?

I don't know, general principles. If you can balance your budget with money printed out of thin air, why bother with selling treasury bills to anyone but the Fed, at 0%?

The whole reason for a central bank with its own mission and decisionmaking on monetary policy is to separate that function from budgeting done by the Congress, so that the people controlling the budget cannot balance the budget through monetary policy.

Now, if you had evidence of the Fed making decisions on the basis of impact on budget fiscal balance rather than on the basis of balancing the tension in its “dual mandate” on full employment and price stability, then you’d have something the Fed wasn’t supposed to do. But money printing (in the figurative sense) is exactly one of the things that the entity handed the reigns of monetary policy under the law is supposed to use as a means to acheive its mandate.

Oh, alright, we speak the same language. Of course I don't have evidence, only hunches, and they of course mean nothing.

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