See, Treasury has only two options here:

1. If they issue all in the short end of the curve (as they're doing now) they flatten the banks, as the entire point of a bank is to borrow in the short-term market and lend in the long term. When you compress the yield curve you destroy their capacity to make money off their ordinary business model.
2. If they issue in the long end of the curve (e.g. 10s and 30s) then the long end will skyrocket in yield. Anyone remember 18% mortgages? They could reappear. This, of course, will destroy what's left of the housing and consumer credit markets.

Now sure, The Fed can start printing money like mad and buy all these Ts, making their balance sheet expand like a balloon - or a bubble. And Bernanke, yesterday in his testimony, claimed that this didn't constitute "printing money" or "inflating the money supply."

He may be technically correct but in practice he's lying through his teeth, and unfortunately Congress is both too uninformed to call him on it and lacks the balls to stop him (which they can do through the threat of, if not actual, legislation.)

His production of money in exchange for Treasuries is nothing more than a sham sterilization action. He thinks this will go unnoticed by the markets, because he's swapping a dollar for an "illiquid" asset.

The problem is that this is only monetarily neutral if the asset is actually worth a dollar. If it is in fact worth 50 cents then he printed the other 50 cents, and devalued every other dollar in the world by the same amount.

The claim, of course, is that these assets are in fact "money good" but illiquid.

I call bullshit on that claim.

http://market-ticker.org/archives/62...

My post from a day or two ago...

I sure hope the "experts" I follow aren't full of crap. Today, on Bloomberg, I heard that they are throwing another 500 billion or so to support money market funds. That doesn't sound like positive news to me (good for gold though). Yesterday I was watching CNBC and they had a clip of Bernanke responding to the question "will this huge global injection of liquidity be inflationary?" He stared straight into the camera and said "No...all of the liquidity injections are 'sterilized"' He is either stupid...lying or correct. Personally I think he is lying. It is really getting difficult to keep track of all the billions that different governments are throwing around in bailout schemes here. I'm balls to the wall with gold. I feel positive that now is our last best chance to grab up shares or bullion before it takes off. Check out Jim Sinclairs synopsis (JSMineset.com) of how, why and when the COMEX will implode....Good Stuff. My biggest fear is that I've invested in the wrong stock. Let's face it...these clowns down in Venezuela are short a couple of chromosomes...