The View From 1776

Case Study: Misbegotten Federal Intervention

The Fed’s near-zero short-term interest rate policy distorts the market, with many ill effects and none of its proclaimed benefits.

Posted by .(JavaScript must be enabled to view this email address) on 03/26 at 05:04 PM
  1. How can the Fed impose "artificially low interest rates for short-term Treasury securities"? If it's an open auction, they have to take whatever rate will provide the amount of funds. OTOH, I suppose if the "open market" guys monetize more debt they can hold the rates down at the cost of dilution of the money supply.

    I tracked the rates for a while as best I could just looking at the end of day rates published by some of the financial media. They've been doing something to break/distort the economic supply - demand - price connections, but I don't know exactly what.
    Posted by .(JavaScript must be enabled to view this email address)  on  03/27  at  11:03 AM
  2. The Fed, to impose artificially low short-term interest rates, is itself the buyer. The NY Fed's Open Market Desk creates money out of thin air by going into the open market and bidding up the price of Treasuries (which lowers the interest rate return), then crediting the account of the seller's bank with fiat dollars that didn't exist beforehand.
    Posted by .(JavaScript must be enabled to view this email address)  on  03/27  at  03:05 PM
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