tag:blogger.com,1999:blog-378298074607497085.post5617008965367765692..comments2009-03-20T21:13:14.521-07:00Andy Harlesshttp://www.blogger.com/profile/17582263872850949568noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-378298074607497085.post-87578895697642484492009-03-20T21:13:00.000-07:002009-03-20T21:13:00.000-07:00Hyperinflation and the crash of the Keynesian model could be in the offing soon if the Chinese drastically draw down.<BR/><BR/> http://tinyurl.com/da295v<BR/><BR/>mBMichael J. Bernardhttp://www.blogger.com/profile/07788360983093692513noreply@blogger.comtag:blogger.com,1999:blog-378298074607497085.post-14942586904549621112009-03-17T15:55:00.000-07:002009-03-17T15:55:00.000-07:00Hmmm, very interesting. <BR/><BR/>But if the Fed increased its holdings of treasuries (in order to offset lost Chinese demand) wouldn't that in turn increase the money supply? If so, wouldn't that create side effects? (Granted, in a deflationary context those might be good side effects, but...)<BR/><BR/>So if China lost all confidence and unloaded $1T worth of treasuries, in order to keep interest rates the same the Fed would be buying it, increasing M0 by $1T (highly non-trivial, right?). <BR/><BR/>Granted, let me know if my logic is wrong :) (Maybe the Fed itself wouldn't need to offset everything since there could be other buyers at the right price.)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-378298074607497085.post-5896567867110941932009-03-17T13:38:00.000-07:002009-03-17T13:38:00.000-07:00what possible reason would they have any confidence in private equities or other securities? let see. equities are down what %50 in a year? and bonds are being discounted how much? the reason the flight to US treasuries occurred is simple. the trust between the investor and those pushing the securities has been trashed. and this isn't hampering the consumer as they are already trying to live on their diminished wages since credit dried up.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-378298074607497085.post-81651387376018098902009-03-17T04:01:00.000-07:002009-03-17T04:01:00.000-07:00Two comments<BR/>For what reason the fed to keep the fed funds<BR/>Rate at 0, 25 it must purchase enough T-bills to keep short-term US Treasury rates near zero?<BR/>Also if there are serious default or more likely inflation fears for the US there may be no or weak demand for short term T-bills at zero or low interest rates so the Fed has to absorb all the supply by printing money that can be highly inflationary<BR/>So although it is technically correct that it will be able to finance short term at a near-zero interest rate, since the Fed will purchase enough T-bills that carries with it a challenging trade-off.gghttp://www.blogger.com/profile/03508764295720396424noreply@blogger.com