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Central Missouri | I don't know that higher rates will put a strain on the fed. If the feds plan as you state is to let all the mbs and treasuries go to maturity then they can just carry them on their balance sheet at face value and let them go to expiration. It is all created new money so the interest rates rising against them shouldn't matter.
I could be very wrong in this.
Now as to the Treasury dept. higher rates impact the federal deficit dollar for dollar so if rates rise the deficit rises which thus calls for more QE which expands the feds balance sheet. A very bad feedback loop that has the effect of devalueing the middle class's savings thus the big money is turnin to pm's. The central bankers of the world that have traditionally stored excess reserves in dollars (the reserve currency) are now net buyers of gold. Trading excess reserves in dollars for excess reserves in gold. (You have to see that they realize that their dollar reserves are being reduced in purchasing power.) For these very reasons. Gold is one of the only things that is easily storeable and easily sellable and can't be digitally created.
Edited by ehoff 11/25/2012 14:00
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I respectfully disagree with a key point of John Burns argument.
