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Chimera Investment Corporation Message Board

  • mxximus mxximus Sep 20, 2013 9:18 AM Flag

    Why Bernake Can Never Stop QE

    Bennie always uses the excuse that the ecomomy is still too weak to taper off the Fed's enormous bond buying.The truth is,being the Obama lackey he is,he knows if interest rates rise even a little,that the Federal government would not be able to service the huge debt that burdens it,and financial collapse would be enevitable.

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    • great synopsis. for. an. elementary school. tea bagger.
      knowing that history. and reality. are not your strong points - perhaps consider. bush appointed bernanke. not obama. and ...this may be difficult for you - there continues to be substantial buying of u.s. debt from foreign purchasers. when rates go down and yields go up ... there will be even more. while the fed says it wants no inflation, a little bit will actually help, and they know it.

      but hey, keep on reading those 'govmint' is evil' comix.

      jmho ....

      Sentiment: Hold

    • Mxx,

      Additionally, there is very little conviction, both within and outside our borders, for anyone to buy US bonds. After the falling value of the dollar and the tax burden, almost no-one would come out ahead buying 0.1 -3% interest bearing vehicles that would virtually guarantee a loss in the investment. Since almost no-one is buying, and since the US continues to spend more than it receives, someone has to feed the Treasury money. So here the Fed steps in. It creates 85 billion new dollars out of thin air and buys 85 billion new bonds issued buy the Treasury...month after month after month.
      Until inflation arrives that will allow (force) an increase in the interest rates there will not be anyone willing to buy our bonds...except for the Fed. Herein lies the problem. The Fed would really like to stop creating money and buying bonds, but the US government seems unable to stop deficit spending. If the Treasury raised the interest rates to cover the real world perceived risk of the investment (speculated buy some to be ~6% for the 10 year and ~11% for the 30 year) then the economy would simply tank. If the Fed did stop buying, the government would default. So everyone sincerely 'hopes' that the Fed can slowly taper off, and interest rates slowly rise so that outsiders will slowly begin to nibble at financing the deficit spending again. So far it does not seem to be happening.

      It's really that simple...and that complicated...

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