Why is the Fed. Res., Inc. purchasing $500B of agency debt thru June?

Because nobody else wants it.

Holdings by foreign central banks, over the last one year, were a net decrease. A net sell-off.

Meanwhile, Treasuries spike, as this is the preferred ‘safe haven.’

So in case you were wondering ‘who funded the housing bubble?’ there is the answer.

Chart above plainly tells the story: red line tracks foreign purchases of agency (FNM and FRE) debt (notice how it ends below zero); yellow line reflects the humongous recent increase in the purchase of Treasuries. To the moon Alice! TO THE MOON!

Housing Doom picks up Brad Setser’s article and runs with it.


It is neither “Federal” nor “Reserve.”


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