The Bubblemeister panicking?

[Enrique Diaz-Alvarez]

Interst rates have been rising fairly relentlessly for the last few
weeks. This means that the basic support for the US bubble, the orgy of
borrowing by households and businesses, may be in trouble.

In response, it appears that the Fed has been making coupon passes
(outright buying of Treasuries, essentially printing of money) at an
unprecedented rate: ten since 4/19, including two today for a total of
$1.6 billion. A couple of questions:

1) Is there a whiff of panic in these Fed actions? Is there precedent
for them outside major liquidity crises (which does not appear to be the
case today, with the DOW at 11k).

2) What are the fundamental limits to the amount of Treasuries the Fed
can buy/money it can print? Have these limits ever been tested?


>From 

http://cnnfn.com/markets/9905/17/bonds3p/

Traders said the morning's coupon passes, in
which the Federal Reserve buys Treasury debt
outright, were one of the sole factors keeping the
long bond afloat on an otherwise gloomy sea of
interest rate fears. Other Treasury issues were
lower, led by 10-year notes, down 6/32 to yield
5.65 percent, and five

-- 
Enrique Diaz-Alvarez            Office # (607) 255 5034	
Electrical Engineering          Home #   (607) 272 4808
112 Phillips Hall               Fax #    (607) 255 4565
Cornell University              mailto:enrique at ee.cornell.edu
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