If the Fed really is selling short term paper, then it would flood the markets with dollars? Or are they really just doing pass throughs to longer dated paper? The statement says they are SELLING short dated paper. Buying long dated paper. If that is true will there be Trillions of dollars on the market? Since the short dated holdings are over 1.2 Trillion, and they are buying only 400 billion. Pass through to long dated paper or dumping of short dated paper into dollars, Which is it? These guys always lie to the public media since they own it. It just doesn't add up 1.2 Trillion for 400 billion? Is this cover for Euroland bailout?
They are only going to rollover short maturing holdings into long maturities. If they are targeting 400b, then thats how much will roll into long, and the rest will stay short.
As part of the short holdings, they may include the additional short maturities in the planned 3-month loans to the ECB starting in October, but again, this is exisiting cash not new cash, so no new dollars.
No new dollars = higher dollar. Loan facility to ECB with a 3-month payback window means ECB needs to print in order to pay back, so this is negative for the euro as more euros will be printed, and as a result, stronger for the dollar.
When the Fed takes 400 billion in short date credits loans off their banks books. That will be a contraction of money supply. Temporarily. Then they will create 400 billion in new credits loans to put back on their books. Longterm. As the other 800 billion in credits loans come off the Fed banks books. Will they replace those loan credits, with new loan credits? or will those 800 billion in short term loans credits coming off the Fed Bank books, causing a huge money contraction? Even if they sell those loans credits off their books to the Euroland entities, they still come off the books. Will that cause a monetary contraction?