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To: John W; dfwgator; dalebert; NormsRevenge; MNJohnnie

“The Fed bought $1.25 trillion in mortgage-backed securities, and another $200 billion in debts owed by government-sponsored enterprises, primarily Fannie Mae and Freddie Mac, and completed the purchases in March. The Fed had planned to allow the size of that portfolio to shrink gradually over time as the debts matured or were prepaid. Instead, the Fed will now reinvest those principal payments in longer-term Treasury securities.

The central bank said it will continue to roll over its holdings of other Treasury securities as they mature.”

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Does this sound insane to you or is it just me? I’m only one of the “small people” but putting this in my terms sounds like using a credit card to pay off a credit card.


10 posted on 08/10/2010 11:54:40 AM PDT by sinanju
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To: sinanju

We call this the “Quentin Tarantino” financing method.


11 posted on 08/10/2010 11:55:20 AM PDT by dfwgator
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To: sinanju

“Does this sound insane to you or is it just me? I’m only one of the “small people” but putting this in my terms sounds like using a credit card to pay off a credit card.”

Or, perhaps more accurately, using a credit card to buy piles of steaming, stinky turd. You’re welcome, bad banks!


19 posted on 08/10/2010 11:56:49 AM PDT by mn-bush-man
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To: sinanju

when has it ever been sane??


21 posted on 08/10/2010 11:57:43 AM PDT by God luvs America (When the silent majority speaks the earth trembles!)
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To: sinanju
I think it is more like using the copying machine to pay off the credit card.

Quick, more cards on the top to stabilize the structure.

22 posted on 08/10/2010 11:58:06 AM PDT by KarlInOhio (Gun control was originally to protect Klansmen from their victims. The basic reason hasn't changed.)
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To: sinanju

its all on paper...maybe we can burn it..


26 posted on 08/10/2010 12:00:11 PM PDT by dalebert
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To: sinanju
Does this sound insane to you or is it just me?

What's insane to me is having the Treasury, which has no oversight, owning so much of our debt. Gee, just imagine if we wake up next week and they decide to call it in?

46 posted on 08/10/2010 12:20:40 PM PDT by raybbr (Someone who invades another country is NOT an immigrant - illegal or otherwise.)
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To: sinanju

It’s called monetizing the debt.

Only the Fed can “create money”, not the gvt. So the fed creates money (out of thin air), and buys the fed’s bonds.

End result? The gvt has real dollars (for whatever they’re worth) and the Fed has equivalent gvt debt (for whatever that’s worth).


47 posted on 08/10/2010 12:21:18 PM PDT by Pessimist
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To: sinanju
but putting this in my terms sounds like using a credit card to pay off a credit card

More like investing bond interest (mortgages) into new bonds (Treasuries).

61 posted on 08/10/2010 12:38:31 PM PDT by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: sinanju

Does this sound insane to you or is it just me? I’m only one of the “small people” but putting this in my terms sounds like using a credit card to pay off a credit card.


That’s exactly right. We’re living on borrowed time.


66 posted on 08/10/2010 12:41:14 PM PDT by unkus
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To: sinanju

“I’m only one of the “small people” but putting this in my terms sounds like using a credit card to pay off a credit card.”

Worse than that, more like taking out a 3rd mortgage to pay off the credit cards you charged up after taking the 2nd mortgage.


67 posted on 08/10/2010 12:42:26 PM PDT by driftdiver (I could eat it raw, but why do that when I have a fire.)
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To: sinanju

primarily Fannie Mae and Freddie Mac

^
Mortgage-backed securities; what if nobody is paying back the mortgage?


79 posted on 08/10/2010 1:22:24 PM PDT by Son House (The Bush Tax Cuts Produced Better Results Than All The Democrat's Stimulus Bills Combined.)
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To: sinanju

This is playing a game of Monopoly with a laser printer.


83 posted on 08/10/2010 1:33:13 PM PDT by henkster (A broken government does not merit full faith and credit.)
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To: sinanju
Exactly!

In theory, it sort of makes sense. Use the profits from the mortgage portfolios to buy Treasuries (i.e reinvest).

In practice, it's a fools errand. Since Fannie Mae and Freddie Mac just asked for another bailout, their portfolios are not profitable. They are not performing.

It's like you or me buying a small store-front business to use the profits to pay off our personal debts, even though we know that the store-front business is losing $5,000 a month.
86 posted on 08/10/2010 1:56:35 PM PDT by atomicweeder
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To: sinanju

“” but putting this in my terms sounds like using a credit card to pay off a credit card.”

They’re not. When the Fed purchases securities they are exchanging cash for illiquid paper that is held by a bank. Their goal is to encourage banks to make loans. Giving them cash in exchange for the securities on their books is designed to push them into making loans.


151 posted on 08/10/2010 10:09:12 PM PDT by Pelham (Deport illegals now.)
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