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Napanee, Ontario | The whole point of buying this stuff in the first place was that there was no buyer. Who are the buyers that are going to magically appear later to unload it to? Yellen is dreaming if she thinks she can dump this back on the market. If that was really the case.... why did they need to buy it in the first place?
here's How I think it's going to go down.
they do a structured default. Ie. on only the amount of bonds the worldwide central banks have on their books. Load up as much treasuries as you can onto the Fed, and then once you got enough in there, pull the pin on just that amount. Called a haircut. IMF recently wrote a paper on it, and someone else posted it here not to long ago. And since all the banks are acting in a co-ordinated manner to print and buy bonds right now, i would expect that they would do the same in respect of this plan. Global structured default.
Basically a big reset. I.e. if the US owes 18 trillion and the FED holds 3, treasury defaults on the 3 and reduces it's debt back to 15 trillion, making it more serviceable to the bonafide third party holders.
The only losers are the central banks.... but that's fine since they printed the money out of thin air to buy the bonds in the first place. It would be little more than an accounting entry.
Oh.. and the people losing purchasing power through 0% deposit returns, and the continued monetary inflation implicit in this strategy. Yea, they lose too.
The kicker is that anyone who got to unload treasuries / gov't bonds/ toxic securities to them at record high prices over the last 5 years (BANKS, BIG INVESTORS)....well they come out smelling like roses. The middle class gets even poorer, and the whole merry go round can start back up for another 20 years.
As to 1234's question - if you own a 10 year, 5 year or whatever maturity it may be - the interest is paid from the treasury to the holder, regardless if it is the FED or Joe Blow. In the FED's case, the interest income is remitted back to the treasury, less a service fee. So in essence, it is a wash, but the money is still paid and goes through the channels.
Edited by OldMcdonald 10/30/2014 09:15
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The 4.5 trillion dollar balance sheet. Continued QE
