bendog
Diamond Member
Leaving your analysis of Obama aside, the truism in your post: The fed essentially created 4 trillion in dollars, and with that money the fed reserve system purchased bonds. The link says the fed paid 'above market" value for the bonds, but that's not quite true because the value of anything in a market changes from time to time, and it's worth what it's worth at a given time, and the value can go up or down. But that's just the writer's agenda, and the link is nearly 2 years old.
This is irrelevant.
The Fed is taking capital losses on its $4.3 trillion bond portfolio, and those losses will eventually accelerate. When the bonds that the Fed holds mature, it realizes losses because it paid above-market prices for most of them to begin with.
it is irrelevant because It is no longer true that "The Fed is currently keeping its balance sheet the same size, purchasing new bonds when old ones mature." That ended a year ago. What currently is happening is that when a bond owned by the Fed matures ... it dies. That happens because unlike you or I, the Fed can simply choose not to reinvest the value.
Your post is correct that the Fed no longer earns interest on the bond (or a new bond had it bought one), and the Treasury no longer gets to "earn" the interest from the bond. And that means the days of EASY MONEY for the debt are ending. We will have to pay other countries or investors to buy the debt.
Which is one reason the criticism of G5000 is laughably ignorant. If you didn't like Obama's deficts, you really won't like Trump's. LOL
However, we don't fully know how higher this will push interest rates on bonds, and how this will fully affect the bond and stock markets.
How Will the Fed Reduce its Balance Sheet?
That link is one year old. This week it appears that investors are anticipating rates will begin rising. If you buy a bond today for a dollar, and rates rise, you won't be able to sell it for a dollar. But if you own a bond worth a dollar, and rates fall, the bond is worth more than a dollar. And the stock market generally behaves opposite to the bond market. Not all the time though.
So, the Trump bull stock market might be at an end
