1. Doesn't the government have to print more money to pay for the sale? I mean, I know that's just a speed bump, but this is a little different from the ordinary printing press operation since the money doesn't even get into circulation. Seems like it would be much more inflationary.
2. China would presumably immediately convert most of the dollars to some other currency, greatly increasing the supply of dollars in the currency market and making #1 even worse.
3. The US government has to find new buyers for bonds, which might be a little tricky when everyone is selling. Well, unless the plan is just to "issue" more of those "zero coupon" bonds, I guess, which of course makes #1 and #2 even worse . . .
They redeem an equivalent amount outstanding. Get rid of interest cost. Converting doesn’t increase the amount outstanding. Just different holders. There are no new buyers. It’s a shell game. Treasury “issues” new bonds, the Fed hit’s the magic money computer button, and the bonds are “sold” to the Fed. This is why the system is freezing up. Numbers are too big to hide anymore, and most are aware of the game now.
The more I thought about it, I would put out a sign “Open For Business”. “Please sell us your Treasuries and mortgage backed bonds. Bring your friends. Will buy theirs, too. Tell you what, to make it great, short holdings of other entities! Come on down”. 😀
But ... three things:
1. Doesn't the government have to print more money to pay for the sale? I mean, I know that's just a speed bump, but this is a little different from the ordinary printing press operation since the money doesn't even get into circulation. Seems like it would be much more inflationary.
2. China would presumably immediately convert most of the dollars to some other currency, greatly increasing the supply of dollars in the currency market and making #1 even worse.
3. The US government has to find new buyers for bonds, which might be a little tricky when everyone is selling. Well, unless the plan is just to "issue" more of those "zero coupon" bonds, I guess, which of course makes #1 and #2 even worse . . .
They redeem an equivalent amount outstanding. Get rid of interest cost. Converting doesn’t increase the amount outstanding. Just different holders. There are no new buyers. It’s a shell game. Treasury “issues” new bonds, the Fed hit’s the magic money computer button, and the bonds are “sold” to the Fed. This is why the system is freezing up. Numbers are too big to hide anymore, and most are aware of the game now.
Oh, right, I was missing the fact that the debt on the "old" bond is eliminated. Right. Jeez.
The more I thought about it, I would put out a sign “Open For Business”. “Please sell us your Treasuries and mortgage backed bonds. Bring your friends. Will buy theirs, too. Tell you what, to make it great, short holdings of other entities! Come on down”. 😀
The Federal Reserve Bank could give away toasters! I mean, that's what banks used to do, right?
Perfect!
Oh, wait . . . the toasters are made in China though . . .