>ps2. There was a report in the NYT today about how retirement of the US'
>long term debt was undermining fed attempts in some such way . Seemed
>pretty important to understand. Read it too quickly.
Debt retirement pushes long rates below what they would otherwise be. If the Fed wants to slow the economy, it needs higher long rates, not lower ones. It's going to be much harder for the Fed to do open market operations - which depend on buying & selling government securities in a deep and liquid market - if the quantity outstanding shrinks towards zero.
But a giant U.S. Treasury market is a relatively recent thing. Back before the great Reagan deficits, the T-bond market was a sleepy place. But everything was tightly regulated then. This is new territory, and no one knows how it will work.
Doug