Re: questions on Fed actrivity

On Jan 25, 12:59 pm, "J.H.Boersema" <jo...@xxxxxxxxx> wrote:
"P. Maffia" <pmaf...@xxxxxxxxxxxxxx> wrote:

. Since the money supply is reduced when the U.S. Government pays down
. its /debt/, the unintended result of a government surplus could be a
. deflationary recession as the money supply contracts in the reverse
. of the process of monetization described above.
.

This is not true. The Fed attempts to sell any bonds that are about
mature. When Bonds mature, the Fed immediately uses the proceeds to
reinvest into new bonds. The decrease in the money supply is extremely
short lived. Any interest that is held that the Fed does not reinvest
goes back to the treasury. Any profits made from the Fed are paid to
the US treasury.


I'm reading: "... FED makes new dollars, acquires /bonds/ ... Government
pays down /bonds/ ...". I'm sorry for not feeling guilty for having
the idea that the USA Government buys bonds (I thought and read that
means "debt + interest") from the USA Central bank.

What? Buys bonds from the Fed? No they issue bonds. If a Fed held bond
matures the bond is gone when paid.

While on the site
of the USA central bank I noticed how the idea is how to insulate that
central bank away from real democratic politics/control.

That is by design. That way the Fed can be objective as to policy
rather than doing what is politically expedient. Independent central
banks do not show the degree of inflationary bias like those control
from the legislature, ie. Italy prior to the EU currency.

This seems to
be a violation of the USA constitution, which says something like the
Senate "regulates the value of the currency" (IIRC).

My copy of the constitution in my copy of the Federalist papers is not
at hand at the moment so I can not verify this. Try looking at the
constitution and see what it actually says. I highly doubt this is the
constitution. At the time there was no official currency. Even in the
civil war banks were still printing currency. A quick scan of article
I showed no ocurrance of the word currency.

http://www.law.cornell.edu/constitution/constitution.overview.html


With the Government
selling bonds to the USA central bank

The Government rarely if ever sells bonds to the Fed. T-bills are
bought and sold on markets. This is the secondary market where owners
of bonds want to sell their bonds either because prices for the bond
have risen or because they need liquidity. The Fed buys and sells
bonds through bond brokers not directly to and from the government.


Hence, I don't know what you're talking about: the USA Government seems
to be selling bonds to the FED, gets dollars back.

No the government sells bonds on the open market. Usually to banks and
individuals. For the most part, the Fed buys previously issued bonds
from banks and individuals.

The USA Government,
apparently not willing or able to use the proper method to acquire
funds, which is taxation, is apparently losing it, and is actually
buying money on interest from people within its own borders.

The interest is not just paid to citizens. Anyone can buy a bond. The
Chinese central banks holds a boat load of US bonds. They often buy
these to appreciate the yuan to the dollar so they can export more
easily.

opinionated claptrap deleted. Everyone is entitled to their opinion
and that is exactly what the rest of this message is.
.

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