Quantitative Easing Revisited, page-9

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timber1956

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30/10/14

22:17

Post #: 14211621
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Originally posted by Dazedandconfused ↑

Although the Fed is indeed making an on-paper profit with the bonds it has purchased, that is in reality completely notional. The Fed purchased those bonds at the unrealistic face value ... not the value those assets would have attracted if they were marked to market. These were the 'assets' which tanked in the GFC and which made the banks possibly/probably insolvent.

And yep .... the Fed calls the tune on interest rates. Possibly the biggest and loudest signal you could ever ask for .... it exposes the actual understanding the Fed has regards the true state of the US economy. Interest rates could rise if the economy could handle it .... so apparently that is not the case.

I take your point that the Fed can simply recycle its 'profits' to pay an interest rate. But on who pays the costs?....it is not the Fed which will ultimately 'pay the bill' ... it is the average US citizen who is already paying, most notably retired folk who are currently living off and eroding their life's savings.

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Dazed

"Although the Fed is indeed making an on-paper profit with the bonds it has purchased, that is in reality completely notional."

Get a grip!

- Do you think that mortgage holders pay notional interest to the owners of MBS?
- Do you think that the US Treasury pays notional interest to the owners of its T notes and T bonds?
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Quantitative Easing Revisited, page-9

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