In Buying US Treasuries Under QE2, The Fed Is Buying Primarily From The Purchases Made By Its Dealers Because These Are The Cheapest

There is a certain perversity, call it incest, about Ben Bernanke’s Quantitative Easing II, the primary dealers are making a killing on selling US Treasuries back to the US Federal Reserve. And in addition to being monetization of debt, yes debt monetization, which has sent investors out of the 30 Year US Government Bonds, EDV, at a great rate, and out of the 10 Year US Government Note, TLT, at a lesser but nevertheless strong rate, Cordell Eddings and Daniel Kruger of Bloomberg report Fed Spends 40% on Benchmark Treasuries as Newest Proves Cheapest. The Federal Reserve’s Treasury purchases already have succeeded in driving investors to junk bonds and stocks. Now, policy makers are focusing on benchmark government securities, helping contain rising yields that set rates on everything from corporate debt to mortgages. More than 40 percent of the government bonds the Fed bought in January for its so-called quantitative easing were auctioned in the previous 90 days, up from 20 percent in December and 15 percent in November, according to Bank of America Merrill Lynch. The central bank is concentrating on newer securities as its $600 billion program depletes primary dealers’ holdings of Treasuries to the lowest since November 2009.

QE 1 proved to be a nationalization of banks in a bloodless coup de etat, where money good US Treasuries were transferred out and toxic debt of all kinds accepted into the Fed’s holding, which had the effect of privatizing profits and wealth to the banks and privatizing losses to the taxpayer all with the effect of creating a beast of corporatism ruling America, and which inflated commodities, DJP, such as gold, GLD, and food, FUD, and caused a strong rally in emerging market stocks, EEM.

QE 2 is proving to be a surreal nightmare of growing profits to the banks that are the US Federal Reserve’s primary dealers.

Being the cheapest means that the dealers are short selling the Treasuries for the dealers gain and the others holders loss!


One Response to “In Buying US Treasuries Under QE2, The Fed Is Buying Primarily From The Purchases Made By Its Dealers Because These Are The Cheapest”

  1. James Says:

    Aman brother!

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