Tuesday, November 16, 2010

QE2 explained 

I don't care who you are, if you have the slightest shadow of a thread of a sense of humor and even if you work at "the Goldman Sachs," you will think this is funny.


By Anonymous Ignoramus, at Tue Nov 16, 12:35:00 PM:

I thought (1) that Little Timmy was walking down 19th Street NW to get the dollars from Big Ben that Little Timmy needs to make his 2011 payroll, and (2) that Big Ben was taking little Timmy's IOUs in exchange for these dollars.

The "official story" is that Big Ben is doing QE2 to bring down long rates to create a better environment for hiring. Instead it looks to me that there aren't enough buyers for $600 billion of new Little Timmy IOUs -- foreign governments already have their fill. If Big Ben doesn't buy, then Little Timmy would instead have to go to the USA domestic markets to sell these IOUs -- which would push real long rates much higher.

What am I missing? If I'm not wrong, won't Little Timmy have to do this again in 2012, 2013, ... 20nn?

I didn't know that Goldman was involved in this trade as a broker, although I know that they're one of 18 current Primary Dealers. It strikes me that the Goldman angle included in this video is a red herring -- unless they're the only Primary Dealer involved. Even so, once again a former Goldman partner can be made to look like he has a conflict.  

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