>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).
Probably not. The Fed does these things pretty regularly, and unless a pattern develops, it's probably no big deal. From the sound of Greenspan's Chicago speech, he's preparing the market for a tightening, but it's probably not going to happen tomorrow.
>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?
The Fed would probably buy whatever it had to to stop a serious panic. Under law they're free to buy anything they want to - not just government paper, but even Amazon.com stock. Not that they would, of course.
Doug