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<p>[QUOTE=&quot;InfleXion, post: 2249452, member: 29012&quot;]There is an implied logical fallacy here that the Fed and the banks are not symbiotic. The only reason the derivatives banks are solvent is because they are primary dealers of the Fed. So the Fed doesn&#039;t say &quot;buy these treasuries or else&quot;, they say &quot;here&#039;s some free money, you know what to do&quot;.</p><p><br /></p><p>Whether it&#039;s the Fed buying treasuries or the banks doing so, it doesn&#039;t matter whose balance sheets it is on, because the money the Fed creates for the purpose of purchasing this debt is conjured from thin air, whether outright purchase or loan creation for the dealers. And guess what, if that is used to buy Treasuries, well that is the definition of QE which this article makes no mention of.</p><p><br /></p><p>China not selling US Treasuries means more competition for the Fed to sell their quota, in addition to a net buyer becoming a net seller, so it definity applies downward price pressure due to decreased demand and increased supply for sale. If the Fed raises rates, then there will be that many less buyers as it cuts into the arbitrage banks get today with taking out zero % interest loans.</p><p><br /></p><p>So raising rates doesn&#039;t make much sense to me in this environment, and if USTs do start being monetized again I doubt they will call it QE because that would tip too many people off to how dire the debt situation is if yet more QE is needed even though the Fed has put forward that they are going to do the opposite in the &quot;near&quot; future.</p><p><br /></p><p>It is really no problem for the Fed to do more QE from a functional standpoint. Press a button. The problem with that is that it undermines their credibility since they previously said no more QE, and it also brings us closer to hyperinflation as the effectiveness of QE has gone down drastically since printing so much money the last few years that has no velocity because it only exists to shore up balance sheets instead of going into the economy. So every time QE is done it requires a bigger dose for the same effect. This default/hyperinflation dance is what they are managing. Every time they print money it makes the situation worse by creating more negative pressure. Artificial inflation&#039;s opposite and equal reaction is deflation, hence this commodity rout we are seeing. The elite should rightly be concerned about this, but there&#039;s no reason to think that they can&#039;t keep things afloat until QE is completely ineffective.[/QUOTE]</p><p><br /></p>

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