Thursday, September 24, 2009

The Debts of the Spenders: Fed Plans to Continue Treasury Buying Under New Name

Although the Federal Reserve is ending its Permanent Open Market Operations (POMO) for treasuries, it is already planning the continuation of downward pressure on yields through another front.

Translation: Money market funds will be buying treasuries. This is a sneaky trick that is a quantitative easing back door. If you have funds in a money market account (most US investors and/or depositors do - particularly those w/brokerage accounts), then you are indirectly buying treasuries through the routine sweeping of accounts.

Is it any wonder then that America's largest creditor, China, is already planning for the inevitable?


In case I haven't made it clear, the Fed is going to replace the full faith and credit of the US government w/the full faith and credit of Lehman, UBS, Bear Sterns, etc. CDO tranche writers. Keep in mind that said bankers in COURT documents BEFORE A JUDGE admitted that their products were "crap and vomit."[actual words used:]

It may surprise readers that I am actually BULLISH on sub-prime - for the simple fact that I am getting a higher interest rate than treasuries and corporate bonds AND b/c Bernanke is buying them non-stop 24/7 for the past year. His plan to stop buying MBS OFFICIALLY ends
at the end of March 2010 after a 3 month extension. (For those interested, I am going to do a post that focuses more on the RMBS Fed operation later this weekend, time permitting).

But just because I am taking the risk of buying these garbage pails does not mean you, other Americans, or the rest of the world should be too. I made a conscious decision and am aware of the risks involved.

Please read a more comprehensive assessment available here:

and here:
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