"The problem with socialism is you eventually run out of other people's money" - Margaret Thatcher
"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design" - F.A. Hayek
Friday, March 8, 2013
The Treasury is now the Fed's biggest political constituency...and that frightens the hell out of me.
"The Fed is still buying long-term bonds in an effort to temporarily drive down long-term interest rates by a few basis points. It has concluded it can survive the loss in mark-to-market value of its bond portfolio that higher interest rates will imply, when they come, by suspending its customary interest-rebate payments to the Treasury. If the Treasury was counting on that roughly $80 billion per year, that is Treasury's problem. If higher rates cost the Treasury $900 billion a year, that is Congress's problem."
How wonderful it is that the value of our money to exchange for debt is largely beholden to a handful of bankers (and money experts) unelected by the people.
"Will Congress and the public really agree to spend $900 billion a year for monetary tightening?"
But, why should we? Why would it be rational to do so?
"The Fed is still buying long-term bonds in an effort to temporarily drive down long-term interest rates by a few basis points. It has concluded it can survive the loss in mark-to-market value of its bond portfolio that higher interest rates will imply, when they come, by suspending its customary interest-rebate payments to the Treasury. If the Treasury was counting on that roughly $80 billion per year, that is Treasury's problem. If higher rates cost the Treasury $900 billion a year, that is Congress's problem."
ReplyDeleteHow wonderful it is that the value of our money to exchange for debt is largely beholden to a handful of bankers (and money experts) unelected by the people.
"Will Congress and the public really agree to spend $900 billion a year for monetary tightening?"
But, why should we? Why would it be rational to do so?