“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.
We call this the “Quentin Tarantino” financing method.
“Does this sound insane to you or is it just me? Im 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!
when has it ever been sane??
Quick, more cards on the top to stabilize the structure.
its all on paper...maybe we can burn it..
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?
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).
More like investing bond interest (mortgages) into new bonds (Treasuries).
Does this sound insane to you or is it just me? Im 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.
“Im 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.
primarily Fannie Mae and Freddie Mac
^
Mortgage-backed securities; what if nobody is paying back the mortgage?
This is playing a game of Monopoly with a laser printer.
“ 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.