So, essentially, this is just another way to destroy the appetite for higher #yields. Clever. And investors can use the #bonds as collateral, get interest on them, and if they don't get the principle back or are 6 feet under, no big deal.

The Fed stopped buying #bonds when #QE ended and yields still declined. The point about lack of yield being an attack on capitalism is interesting and yet, the Fed has succeeded in establishing massive demand for bonds through use as collateral.

I have trouble seeing main street being awash in money, unless the author considers that the monopolistic housing situation is just taking extra money out of the hands of main street.

Market monetarists would argue that the Fed was too tight in 2008-2009. I agree with them. And the Fed is do nothing now, as overall inflation is still under 2 percent. The Fed destroyed the entire subprime lending market (the CP market) to sterilize any money supply increase even though it only truly failed in 4 states. That took mainstreet down and installed Wall Street as landlord and price setter in real estate. And it destroyed wages after a time as well.

Thanks for sharing Fischer's quotes. They are revealing to be sure, Chris. I am not sure about animal spirits if banks know that mainstreet is broke, and that interest paid on reserves keeps banks from lending to anyone but big business. And fiscal spending is just another sneaky way to get more bonds since they are scarce as collateral. But I wrote a response to Fischer's fear of raising rates:

"One would think that Fischer, saying it is difficult to tamper with interest rates in these economic times, would jump for joy for real helicopter money which would not increase government debt. But people like Richard Koo no doubt scare the Fed with sky is falling pronouncements about helicopter money. But clearly helicopter money would not necessarily promote massive lending once people pay off their debt. Lending can be controlled, still, by credit score requirements, by payment of interest on excess reserves, and by government advocating what millennials now do - practice frugality. Government can teach people that banks are foolishly procyclical and will pull the rug out from under you if you get into too much debt."

www.talkmarkets.com/.../sane-and-silly-economics-from-sumner-yellen-and-the-bis

I left out that banks can be controlled by additional capital requirements. So, I just don't think Central Bankers want to help main street, because by helping the little people moral hazard is created. But then, helping banks and weak financial entities somehow doesn't create any moral hazard. You can see why Americans are frustrated by central banks that don't even trust all the tools that they have.

This just adds to the reasons why the Fed has a hard time raising rates. Firms also are buying treasuries as counterparties to the banks. And those firms appear to be so weak that they can't stand the thought of buying more treasuries when rates rise and their current collateral declines in value. The Fed not only protects weak firms in the real economy, but also weak counterparties.

I wonder how many of these bonds can be used as derivatives collateral. And if so, perhaps people see they are safer than junk bonds here at home? Just wondering, Jack.

Politicians shutting down markets is a real potential problem. But, if the central banks were not so do nothing within the framework of structured finance, they could actually get money into main street, which is, unlike Wall Street, starving for cash. Maybe this German banker wants them to eat more cake so they will only be able to afford pitchforks..

This must be what #Yellen says when she says #inflation will run hot. Lol, hot compared to temps on the darkside of the moon isn't that hot.

Ultimately, the single European state is the goal of the Eurozone, and the pound will no longer exist as all the member nations will be required to adopt the Euro.