Originally Posted by g8trjax
It all sounds good on paper, but a few questions on all this. When the fed starts selling these treasuries, who the heck is going to buy them? When the fed starts making noise about 'no more QE', won't this cause the stock market to tank, big time? And last, how is Bernanke not held in contempt of congress, 'I will not monetize the debt'?
They will sell them at a discount to unload them in all likelihood because there will be more than zero inflation at the time and their value will have shrunk even before considering a market flood, hence the loss.
Yes the stock market will react negatively to an end to QE, but the Feds are trying to time it to when the economy is doing well on it's own, so the market will have natural momentum to absorb it. Whether or not they can do that remains to be seen.
As far as the Fed monetizing the debt, that becomes a much more complicated matter. Buying Treasuries isn't monetizing it, however the way they buy them could be considered as such. But they could also hold the paper and simply reimburse the government if they wanted to to pay it back down, which is sort of what they do already, they give any profits back to the government, in some years it is in the $70 billion range.
But here is how the Fed compares to our overall portfolio and historically. Two interesting graphs, the second one is the surprising one.