Wednesday, August 11, 2010

Small mercies...

So the Fed, moving into the second phase of Quantitative Easing or QE II, has finally succumbed to the pressure piling on it. But in the bad news, there's good. Though, it'll use maturity proceeds from Agency debt and MBSs to buy more assets from the market, it will "restrict" itself to buying long-term treasury debt.

While I have very little faith in the efficacy of this quasi-Keynesian intervention, it will at least result in a better balance sheet for the Fed. That is, if one considers US treasury debt to be better than the maturing MBSs.

But this, only time will tell...

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