raghu: > I don't know what the legal aspects of this are: but imagine if the > Treasury issued $600B worth of new debt directly bought by the Fed and > basically put in a vault for perpetuity? That would give the Treasury > essentially $600B cash for free - cash that the Fed wanted to print > anyway. This would have been a whole lot more stimulative than the QE > that we actually got.
No! There is no difference, provided that the Fed rebates 100% of the coupon payments. The difference is that the Fed rebates only 85%. The Treasury does not have to pay the Fed the principal. The Treasury never pays the principal, anyway. By the way, the long term Treasuries the Fed buys through QE2 are Treasury notes with maturities less than or equal to 10 year. Best, Sabri _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
