Please explain -

[epidural man]

---

Members don't see this ad.

I get the jist of this article.

The Feds purchase mortgage-backed securities so they earn money off our house payments.

They earn money by buying corporate bonds.

How do they Feds earn money by purchasing treasury bonds? Don’t the feds issue the same t-bills?

I get that if I purchased a T-bill, I would get the interest payment, but how can the Feds make interest in money they loan themselves?

“The income that the Federal reserve generates comes almost exclusively from their $8.8Tr portfolio of Treasuries and agency MBS.”

Powell Playing Tough Guy with the Math Stacked Against Him | The Bear Traps Report Blog

www.thebeartrapsreport.com

 

[runfastnow]

One of the main goals is to push interest rates up/down based on how much they buy sell. Since the Fed has unlimited money they will almost always be the biggest buyer of bonds/bills/notes since they introduced QE policies.

More demand for bonds from the Fed will push down interest rates on those instruments. That in turn pushes down interest rates on various other things (that have some hard/loose peg or other relation to a 10 year bond or 3 month bill) and encourages people to spend more through banks to loaning more money at lower rates ... i.e. the past 5-6 years of macro policy.

Also how other places in the world managed to push their interest rates negative.

 

[hyperalgesia]

I get the jist of this article.

The Feds purchase mortgage-backed securities so they earn money off our house payments.

They earn money by buying corporate bonds.

How do they Feds earn money by purchasing treasury bonds? Don’t the feds issue the same t-bills?

I get that if I purchased a T-bill, I would get the interest payment, but how can the Feds make interest in money they loan themselves?

“The income that the Federal reserve generates comes almost exclusively from their $8.8Tr portfolio of Treasuries and agency MBS.”

Powell Playing Tough Guy with the Math Stacked Against Him | The Bear Traps Report Blog

www.thebeartrapsreport.com

The Fed is separate from the Treasury. The Treasury issues T bills to fund the federal govt and the Fed purchases them.

The concept of "profit" is meaningless when talking about the Fed. The Fed works only with credit. When it buys something, its "balance sheet" increases and vice versa. It uses credit to buy mortgage backed securities only to influence the demand for that market and same with treasuries. It has no profit incentive.

It "buys" MBSs so that banks will continue to issue mortgages. It buys treasuries to keep the yield low so they don't attract investors out of the rest of the economy. All these measures were designed to keep investors spending their money, borrowing, and not worry about a "cash crunch", like what happened in 2008.

 

[epidural man]

The Fed is separate from the Treasury. The Treasury issues T bills to fund the federal govt and the Fed purchases them.

The concept of "profit" is meaningless when talking about the Fed. The Fed works only with credit. When it buys something, its "balance sheet" increases and vice versa. It uses credit to buy mortgage backed securities only to influence the demand for that market and same with treasuries. It has no profit incentive.

It "buys" MBSs so that banks will continue to issue mortgages. It buys treasuries to keep the yield low so they don't attract investors out of the rest of the economy. All these measures were designed to keep investors spending their money, borrowing, and not worry about a "cash crunch", like what happened in 2008.

But they do make a profit with MBS and the treasury would pay them the interest on the t bills they purchase, so they do make a profit, right?

But since the treasury and the feds are under the same roof, it seems pointless.

I mean I get the overall concept of QE and QT to increase or decrease money supply.

 

[hyperalgesia]

But they do make a profit with MBS and the treasury would pay them the interest on the t bills they purchase, so they do make a profit, right?

But since the treasury and the feds are under the same roof, it seems pointless.

I mean I get the overall concept of QE and QT to increase or decrease money supply.

Yeah, it's a weird entity. It can make a profit but like you said, it's pointless. The Fed already can create limitless money from nothing. The only mandates it has are to control inflation and unemployment. Its unbelievable power is a force of nature and it has been steadily increasing its assertiveness over the years. I think we have yet to see how destructive it can be.

 

[runfastnow]

The Fed's biggest power is setting Fed fund rates. It is one giagantic and powerful hammer, but is also the only real tool they have. Buying bonds/securities can prop up certain things for a while but typically not as powerful as manipulating rates directly.

I like to think about it as only having IV Fentanyl (Fed rates) and epidural injections (buying securities) in my tool belt - injections only go so far and eventually Fentanyl will kill the patient or the detox will be really painful ... see monetary policy the past 15 years and the pain that will come when we go through the "free money, 0% interest" detox.

 

[hyperalgesia]

The Fed's biggest power is setting Fed fund rates. It is one giagantic and powerful hammer, but is also the only real tool they have. Buying bonds/securities can prop up certain things for a while but typically not as powerful as manipulating rates directly.

I like to think about it as only having IV Fentanyl (Fed rates) and epidural injections (buying securities) in my tool belt - injections only go so far and eventually Fentanyl will kill the patient or the detox will be really painful ... see monetary policy the past 15 years and the pain that will come when we go through the "free money, 0% interest" detox.

The Fed can also purchase municipal and corporate bonds at will when it sees "an emergency". It can buy Apple and Meta bonds, for example, and can thus decide the fate of these chosen entities.

The central bank interest rate is powerful tool but broadly affects the economy. The purchasing tools are the ones the Fed can apply to accomplish its own nefarious and corrupt goals.

I don't have any reason to think that has happened to this point, but power of this nature seldom remains dormant.

The Fed is buying some of the biggest companies' bonds, raising questions over why

As the Federal Reserve moves deeper into its purchases of corporate debt, it faces more questions about the consequences of its unprecedented market interventions.

www.cnbc.com

 

[oreosandsake]

The Fed can also purchase municipal and corporate bonds at will when it sees "an emergency". It can buy Apple and Meta bonds, for example, and can thus decide the fate of these chosen entities.

The central bank interest rate is powerful tool but broadly affects the economy. The purchasing tools are the ones the Fed can apply to accomplish its own nefarious and corrupt goals.

I don't have any reason to think that has happened to this point, but power of this nature seldom remains dormant.

The Fed is buying some of the biggest companies' bonds, raising questions over why

As the Federal Reserve moves deeper into its purchases of corporate debt, it faces more questions about the consequences of its unprecedented market interventions.

www.cnbc.com

And decide the fate of who to bail out, Goldman vs Lehman bros