Quote Originally Posted by sbouslog View Post
We do have a bit more added risk by doing this. I dont believe that we are using derivatives to back these MBS's though (which makes it different then pre 2008).



So the US is selling 30 year treasurys at 2.95% and buying these MBS's at 3.4% (give or take a little). Unless we have another huge drop in the housing market this plan should work pretty well and generate a profit. ((.45%/12) X 40 billion per month). You can do the math.
Your statment implys you consider the US government and the federal reserve to be one enity? The US government creates debt (treasuries) most of it is bought by the federal reserve. The money created by the federal reserve to buy US treasuries is created out of thin air. The money created by the fed to buy these mbs and other purchases is created out of thin air. There is no wash. Currency destruction ala Zimbabwe pure and simple. If you consider the federal reserve and the US government to be one and the same, and im not saying your wrong if you do, the 16 trillon of US debt is on the feds books and this program will add 3/4 of a trillion to the debt a year on top of the four trillion of spending. The only wash is the two trillion of revenues (taxes). Or is your point that you feel that these MBS have more value than the Treasuries than the Federal reserve has bought with previous QE's? Please clarify.