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Napanee, Ontario | "So when they have to start buying 100% of treasury bonds, then they will have absolute control of interest rates?"
They are already buying 100% of the treasuries issued as NEW debt, and then some. But yes, still only 50% of bonds traded.
Without the Fed, no one would be buying new gov't issues.. and in fact there wouldn't be enough demand to even buy the additional bonds people are selling beyond the govt sales.
The fact they are buying even a significant amount of the bonds is already controlling the price, Alberta. it probably started at around 10-20% or so of the market where they really took over.
Think about the corn market... it doesn't take much oversupply to tank the market right? imagine where the price of corn would be if there was 50% oversupply? (so, a 6 billion bushel carryout created in 1 year alone). Now if there was a buyer for all those extra bushels, essentailly, that person would be supporting the corn market, controlling the price... Same with bonds....or any market.
Edited by OldMcdonald 11/21/2013 11:03
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It IS Different this Time.
