I have always wondered what would happen to interest rates if an agreement between the Treasury and the "authorized dealers" at the Treasury's daily auctions didn't exist. Most if not all of the authorized dealers are members of the Federal Reserve System, and they are required by the agreement to buy all unsold bills, bonds, that are not bought by others.
Recently an auction for the 20 year Treasury Bond went with no bid. The news of what happened didn't describe anything more, but in the end, the authorized dealers had to buy them according to their agreement with the Treasury.
That agreement almost came to an end in the fall of 1980 before Volcker and the FOMC raised interest rates to 20% which in turn forced yields up on all Treasury issues sold later that year with some reaching 16%. Carter didn't like it, but if it did not happen, the authorized dealers were going to balk at buying future bills and bonds. The federal government could not allow that to happen, so the government, including Carter, gave in to the demands.
So who has the ultimate leverage here?
My opinion is that interest rates today would be at a minimum, twice what they are now if that agreement did not exist, and the market decided what interest rates should be.
What we have are two entities, the federal government and the Federal Reserve, who together rob the economy every day, and in the process, destroy the middle class.
So while they fight in the news every day, both continue to drain the wealth of America's middle class while few notice what is being done to them.
One other note. Post WW2, America's exports greatly exceeded its imports, which added to the GDP every year. Europe's infrastructure had been destroyed, and they depended on those American exports, and low interest rates helped to keep them coming
Today that situation is in reverse and has been for over 30 years
The only reason the Fed exists outside of the Treasury department is to ensure that the money center banks get their vig. The "need" for this function was based on the same reason everyone had to wear a mask and stand six feet apart; the politics of fear. J.P. Morgan was a slick operator and used a minor crisis to get a foothold for his criminal gang of extortionists (used to call them robber barons) and imbed them in a framework of legitimacy as an independent agency of government.
[The Fed is]... all PR and political games. I'm not sure that JayPow and the gang are that good a game playing. But, they play their cards. it's a laughable notion the Fed maintains that “price stability” part of its dual mandate to mean that it should target 2 percent annual price inflation (HA!!!) as measured by various official statistics."
Using the year-over-year Consumer Price Index (CPI-U) data, U.S. inflation has been consistently above 2% for at least 49 consecutive months..." And the hedonic adjustments and Owners ' equivalent Rent are so far out of reality (purposely) the real rate is more like, what 7%+ compounded? Gas is cheap, but housing, Food, insurance, autos out of sight and tariffs haven't really had an impact yet, all of which results in the continuing immiseration of the population. Bread and Circuses only last so long...
I have always wondered what would happen to interest rates if an agreement between the Treasury and the "authorized dealers" at the Treasury's daily auctions didn't exist. Most if not all of the authorized dealers are members of the Federal Reserve System, and they are required by the agreement to buy all unsold bills, bonds, that are not bought by others.
Recently an auction for the 20 year Treasury Bond went with no bid. The news of what happened didn't describe anything more, but in the end, the authorized dealers had to buy them according to their agreement with the Treasury.
That agreement almost came to an end in the fall of 1980 before Volcker and the FOMC raised interest rates to 20% which in turn forced yields up on all Treasury issues sold later that year with some reaching 16%. Carter didn't like it, but if it did not happen, the authorized dealers were going to balk at buying future bills and bonds. The federal government could not allow that to happen, so the government, including Carter, gave in to the demands.
So who has the ultimate leverage here?
My opinion is that interest rates today would be at a minimum, twice what they are now if that agreement did not exist, and the market decided what interest rates should be.
What we have are two entities, the federal government and the Federal Reserve, who together rob the economy every day, and in the process, destroy the middle class.
So while they fight in the news every day, both continue to drain the wealth of America's middle class while few notice what is being done to them.
One other note. Post WW2, America's exports greatly exceeded its imports, which added to the GDP every year. Europe's infrastructure had been destroyed, and they depended on those American exports, and low interest rates helped to keep them coming
Today that situation is in reverse and has been for over 30 years
The only reason the Fed exists outside of the Treasury department is to ensure that the money center banks get their vig. The "need" for this function was based on the same reason everyone had to wear a mask and stand six feet apart; the politics of fear. J.P. Morgan was a slick operator and used a minor crisis to get a foothold for his criminal gang of extortionists (used to call them robber barons) and imbed them in a framework of legitimacy as an independent agency of government.
[The Fed is]... all PR and political games. I'm not sure that JayPow and the gang are that good a game playing. But, they play their cards. it's a laughable notion the Fed maintains that “price stability” part of its dual mandate to mean that it should target 2 percent annual price inflation (HA!!!) as measured by various official statistics."
Using the year-over-year Consumer Price Index (CPI-U) data, U.S. inflation has been consistently above 2% for at least 49 consecutive months..." And the hedonic adjustments and Owners ' equivalent Rent are so far out of reality (purposely) the real rate is more like, what 7%+ compounded? Gas is cheap, but housing, Food, insurance, autos out of sight and tariffs haven't really had an impact yet, all of which results in the continuing immiseration of the population. Bread and Circuses only last so long...