Weak, politics-infused thinking by minor potentate policymakers, amounting to tyranny by bureaucracy, is almost as bad for Amricans as the plague of poor pastors American Catholics have been allowed to endure by an angry God.
Forgive me for injecting terms I’m sure you know well, but they will help me understand your perspective better down the line.
Quantitative easing is the Fed clicking vast amounts of U.S. dollars into existence and immediately using that money to purchase debt on the open market (i.e., the “secondary market”). In 2008 and during the years that followed, the Fed embarked upon an astonishing campaign of being the buyer of last resort, employing the nakedly manipulative tool of Quantitative Easing to purchase objectively crappy and risky (that is, until the moment the Fed stepped in to prop up prices and thereby artificially stabilize this niche market) agency debt that among other distinguishing characteristics was NOT backed by the full faith and credit of the U.S. Government (as U.S. Treasury bonds of 2-, 3-, 5-, 7-, 10-, 15-, and 30-year maturites all are).
Thus we were presented with a garish display of buying power on the part of a specially-empowered private bank which, when used, “expands the balance sheet” of that entity. What could be a less fear-inducing and more soporific event to the unwashed masses, a bigger euphemism, that the Fed saying: “Oh, don’t mind us, we’re just expanding our balance sheet over here...”.
The Fed could go on to say:”Can’t you see now? There’s nothing to worry your pretty little heads over. Be good little children and go use the brand spanking new new U.S dollars we just infused into the ailing secondary debt market to buy an equivalent number of units of a debt asset that is marginally higher on the total-crap-to-gold-standard scale of quality, over and over and over again, until the prices of the entire spectrum of debt asset classes are propped up to our liking.”
Quantitative tightening, by comparison, is the whole process in reverse. It’s the Fed receiving back, in cold hard cash, at the expiry of a bond, the principal or nominal amount on the face of thst bond (e.g., $10,000), and instead of instantaneously going out and purchasing an unexpired bond in the same amount on the secondary market, unclicking that $10,000 sum back out of existence, thus completing the life-cycle of that particular $10,000 sum. In other words: “Don’t worry your big red head, Orange Man Bad, we’re just contracting our balance sheet back to the size it was before. We’re seriously not trying to torpedo the magnificent economic growth you’ve been working so hard to facilitate!”
As I see it, the latter is an example of raising rates by sopping up excess liquidity.
Now as I imagine it, the Treasury beginning to gradually issue new gold standard 50- and 100-year maturity bonds in the primary market as various and sundry units of 2-, 3-, 5-, 10-, 15- and 30-year T-bills come to the end of their terms and expire/mature, no quantitative easing or tightening is taking place. The overall size of the debt market stays the same. It’s just that the average length of T-bill terms inches higher over time, and the U.S. government does itself a solid favor by locking in marginally lower and lower interest rates over time as the huge number of units of principal previously locked up in higher-interest-rate short term debt (thank you Obama) gradually migrates over to lower-interest-rate long term debt.
As I see this latter process, undertaken over time by the Treasury Secretary, it is NOT an example of raising rates by sopping up excess liquidity. Am I correct?