MediumTex wrote:
I don't see how $600 billion is going to do much of anything, though. In a deflationary credit contraction, $600 billion is like a few pieces of confetti in a ticker tape parade.
Couple of ways to look at this:
1. Face value: The Fed will do exactly as it says and is entirely sincere.
2. Reality: The Fed is showing only as much as is necessary. IMO, it's a tightrope--on one hand The Fed has to show the market it is willing to step in to boost asset prices. On the other, it has to show the market it is not going all "Banana Republic" and just print, print, print. Giving a less than grandiose number right now allows The Fed to calm monetary hawks while leaving the door open to increased amounts later. The Fed needs to instill confidence on both sides.
Remember this is just the
public version of what The Fed's intentions are.
Keep this in mind...according to TIC data (
http://www.ustreas.gov/tic/mfh.txt), the UK increased U.S. Treasury debt by over
400% ($344B) over the last 12 months while just about all other foreign buyers stayed neutral or made only temperate changes in either direction. That is a
massive outlier.
How is this explained? Dunno. There isn't a smoking gun. The U.S. sure as hell isn't running trade deficits with the U.K. to account for the size of the change. The #2 explanation is that China is buying through proxy in the UK. I don't see the advantage, though. The #1 explanation so far is direct BOE treasury purchases or swaps. Through a swap arrangement, The Fed could monetize with the assistance of foreign central banks such as BOE and attempt to stoke inflation on the flank.
Many roads to Dublin as they say....
