When the FED buys treasuries.......

gecko109

.......isnt that the same thing.....or even worse.....as simply printing new money out of thin air? I say worse because not only does this increase the money supply initially, but also requires that even more spending be done in the future to service the interest on those treasuries.

Second question: How can the FED even buy treasuries? What does the FED produce except inflation?

Third question: Rather than allowing the FED to continue to run the dollar into the ground, why doesnt the U.S. government bring the FED's job inside? Why borrow money from the FED with interest when the U.S. could simply just manufacture the currency in house? Is it a psychological thing? Would bringing the duties of creating cash into the direct control of the government make us seem more like a banana republic?

Fourth question: If the FED and rest of the world stopped buying treasuries, what would happen? Could the U.S. government force them to print more cash with nothing (treasuries) to back that new debt?

Fifth question: If the U.S. government continues to run $1 trillion + defecits for the forseeable future (this year makes 3 straight years) how will all that debt eventually be settled? How much longer can we live on our credit cards? As long as foreigners allow us used to be the answer. Now its the FED thats picking up the slack because foreigners have finally said no mas.

Sixth question: Is it any wonder that gold/silver keep breaking new record highs?

derryb

Fed is a private bank. All banks have only one purpose - create indebtedness to the bank's owners. It's nothing more than modern slavery and a way to transfer wealth to the wealthy on a massive scale. The Fed buys treasuries (with taxpayer QE money) for two reasons: (1) strangle the US taxpayer with debt and (2) provide unlimited congressional spending money so congress will continue to let the Fed strangle the US taxpayer with debt.

MsMorrisine

Interestingly enough, all currency has to be backed by something.

"the full faith and credit of the usa?"

well, yeah, something like that:

this is the primary source of assets the FRB holds to back the nations FRB notes:
U.S. Treasury, agency debt, and mortgage-backed securities pledged(1,2) 945,630 (millions)

1. Includes face value of U.S. Treasury, agency debt, and mortgage-backed securities held outright, compensation to adjust for the effect of inflation on the original face value of inflation-indexed securities, and cash value of repurchase agreements.
2. Includes securities lent to dealers under the overnight securities lending facility; refer to table 1A.


Federal Reserve notes outstanding 1,116,409 (all in millions)
Less: Notes held by F.R. Banks not subject to collateralization 154,542
Federal Reserve notes to be collateralized 961,867

Collateral held against Federal Reserve notes 961,867
Gold certificate account 11,037
Special drawing rights certificate account 5,200
U.S. Treasury, agency debt, and mortgage-backed securities pledged(1,2) 945,630
Other assets pledged 0

Memo:
Total U.S. Treasury, agency debt, and mortgage-backed securities 1,2 2,364,483
Less: Face value of securities under reverse repurchase agreements 49,650
U.S. Treasury, agency debt, and mortgage-backed securities eligible to be pledged 2,314,833

MsMorrisine

Presumably, the fed makes money off the debt.

They also have their overnight lending to member banks and member banks have to pay in to the system.

BigE

Here is something that will really tick you off, the FED pays full retail commissions (millions) to the brokers they buy treasuries from------------BigE

derryb

FRB Notes are backed only by another party''s willingness to accept them as payment for a service or good. And as time goes on that party wants more of them for the same service or good. The good news is the IRS is still accepting them from taxpayers. I just mailed 10,564 of them to the Man. The only thing you might possibly get from a Federal Reserve bank for a FRN is four quarters.

derryb

<< <i>Here is something that will really tick you off, the FED pays full retail commissions (millions) to the brokers they buy treasuries from------------BigE >>


That's because it doesn't come out of the Fed's pocket. It comes out of the taxpayer's pocket. They do have a responsibility to spread it around to each other.

MsMorrisine

third question: the fed needs assets to secure itself. it buy treasuries as the safest bet around.

they currently account for less than half of the government's national debt.


The gov't is borrowing from every one.

It is government spending that has run amok, not the Fed's borrowing. The fed is choosing to buy Treasuries(no surprise there) with its money.


The national debt is going up because of un-funded wars in Iraq and Afghanistan and plain deficit spending. Don't blame the Fed for this. They didn't decide to go to war, nor spend on the pet projects.

MsMorrisine

<< <i>Here is something that will really tick you off, the FED pays full retail commissions (millions) to the brokers they buy treasuries from------------BigE >>



That's bizarre to me.

I'd imagine they could set up a section to place bids along with the rest of the bidders. very puzzling. Perhaps they decided to separate gov't-business powers on this one???

MsMorrisine

<< <i>FRB Notes are backed only by another party''s willingness to accept them as payment for a service or good. And as time goes on that party wants more of them for the same service or good. The good news is the IRS is still accepting them from taxpayers. I just mailed 10,564 of them to the Man. The only thing you might possibly get from a Federal Reserve bank for a FRN is four quarters. >>



Well, that's true as far as the "full faith and credit of the us gov't" saying goes.

However, the FRB notes are backed by assets.

The primary assets are listed above: US and other Debt. Which amounts to the full faith and credit of the government paying back the debt the FRB holds. Thus the line.

derryb

<< <i>

<< <i>FRB Notes are backed only by another party''s willingness to accept them as payment for a service or good. And as time goes on that party wants more of them for the same service or good. The good news is the IRS is still accepting them from taxpayers. I just mailed 10,564 of them to the Man. The only thing you might possibly get from a Federal Reserve bank for a FRN is four quarters. >>



Well, that's true as far as the "full faith and credit of the us gov't" saying goes.

However, the FRB notes are backed by assets.

The primary assets are listed above: US and other Debt. Which amounts to the full faith and credit of the government paying back the debt the FRB holds. Thus the line. >>


Take a FRN to the nearest Fed Reserve Bank and let me know what they offer to give you for it. Like I said, maybe four quarters. FR Notes can only be used to satisfy debt and only if the one owning the debt is willing to accept them. When you buy something with them you are paying a debt with them.

derryb

<< <i>Presumably, the fed makes money off the debt. >>


They are bankers, their sole purpose in life is to make money off of debt. It is their lifeblood. If congress were to tell the Fed tomorrow that they can no longer profit from debt, the Fed would end itself.

MsMorrisine

fourth question is purely theo-rhetorical...
all the Treasury Debt has a maturity date. As each mature, the debt needs to be aid back.

If they can borrow anymore they would have to pay it back with cash on hand and current cash from income.

In reality higher taxes and spending cuts will happen first.



If they couldn't generate enough free cash and income to pay back the debt they would go into default.

Going into default could lead to bankruptcy, potential debt "forgiveness," austerity measures from other entities like freebie cash for doing nothing more than spending too much of it, etc.



In reality, if fewer and fewer people bought the Treasuries, we'd see interest rates rise substantially first. You know, some people will take the chance when interest rates hit 10%, 12%, 15%, etc.

derryb

Keep in mind that higher yields (interest being paid) are a result of higher risk.

MsMorrisine

<< <i>

<< <i>

<< <i>FRB Notes are backed only by another party''s willingness to accept them as payment for a service or good. And as time goes on that party wants more of them for the same service or good. The good news is the IRS is still accepting them from taxpayers. I just mailed 10,564 of them to the Man. The only thing you might possibly get from a Federal Reserve bank for a FRN is four quarters. >>



Well, that's true as far as the "full faith and credit of the us gov't" saying goes.

However, the FRB notes are backed by assets.

The primary assets are listed above: US and other Debt. Which amounts to the full faith and credit of the government paying back the debt the FRB holds. Thus the line. >>


Take a FRN to the nearest Fed Reserve Bank and let me know what they offer to give you for it. Like I said, maybe four quarters. FR Notes can only be used to satisfy debt and only if the one owning the debt is willing to accept them. When you buy something with them you are paying a debt with them. >>




I'm not saying you can get the assets backing the notes, but that doesn't mean there are no assets backing them. (And if you call american debt an asset these days.)

derryb

Debt is an asset to the one that holds the debt. Banks love being loaded with this type asset. It means they own you and a piece of your future income. This is what makes the IMF so dangerous to desperate, failing economies. The IMF comes in and "owns" the nation with the understanding that things will now be done the way the IMF (and whoever controls them) dictates.

MsMorrisine

5th question is the key question for all the "SHTF" people.

no one has a firm solution.

Spend less.
keep interest rates low to keep debt interest payments low (lie about inflation)
print phoney money to buy back debt. (QE(infinity))
Tax more.
Collect on what people owe.


if you have any ideas.... please share.... we need all the help we can get.

derryb

<< <i>Fifth question: If the U.S. government continues to run $1 trillion + defecits for the forseeable future (this year makes 3 straight years) how will all that debt eventually be settled? How much longer can we live on our credit cards? As long as foreigners allow us used to be the answer. Now its the FED thats picking up the slack because foreigners have finally said no mas. >>


(a) We are too far down the road with monitization. Our soverign debt can no longer be settled, it is too big. It can only be monitized (postponed by settling with more created, borrowed money) until it cannot be monitized any longer (creation of new money has inflated current supply to the point of little or no value - Hyperinflation). At that point there will be default ("you ain't gettin' paid"). As far as our foriegn creditors are concerned this is when having the most powerful military in the world will become important - "you ain't gettin paid and there ain't nothin' you can do about it."

(b) You can live off your credit cards until no one accepts them for payment. Same holds true for dollars.

(c) The Fed is picking up the slack courtesy of the US taxpayers. This will continue until the taxpayers run out of money or say "no mas."

Now for the good news: Japan is ahead of us with this problem as are some "piggish" european nations. Most all other nations are in the same boat. The strongest survivors will be the one's that complete the process first and then get to a "recovery" or "rebuilding" mode.

CaptHenway

<< <i>Here is something that will really tick you off, the FED pays full retail commissions (millions) to the brokers they buy treasuries from------------BigE >>



Say what????

Justacommeman

<< <i>

<< <i>Here is something that will really tick you off, the FED pays full retail commissions (millions) to the brokers they buy treasuries from------------BigE >>



Say what???? >>



Mainly though The Goldman Sachs.....................MJ

gecko109

Thanks for all the replies. I feel its vitally important to understand as much as possible about a scam while it is in progress to best minimalize the damage that it can do to me. Make no mistake either......once the FED starts to purchase U.S. treasuries, we are then in the final throes of the most massive ponzi scheme ever created by humans. When foreign banks and governments are willing to lend us money for our wasteful and extravagant spending, thats one thing. But when they stop, and a domestic entity that produces nothing but debt and inflation steps in to start lending only because the borrower DEMANDS it be lent.....well, the end of that system is quickly approaching.

jmski52

<< Here is something that will really tick you off, the FED pays full retail commissions (millions) to the brokers they buy treasuries from------------BigE >>


Say what???? >>


Mainly though The Goldman Sachs.....................MJ

And mainly through the New York District, Timmy Geithner's old stomping grounds.

derryb

And don't forget the most important detail - the is all done with taxpayer money.

mrearlygold

And don't forget the other scam

derryb

How Likely is QE-Three?

percyb

People act like something can be done to fix the problem. Aint so. We are now toast. The illusion is that something can be done to remedy our problem.

The Fed is the main buyer of Treasuries these days as other nations quit buying or have limited their purchases to the short term notes. China and Japan and Britain come to mind.

Keep buying the silver and gold dips. The Sh$$t has hit the proverbial fan.It's over now...here and now in the present. Not tomorrow or next week or next month or next year. It's over!