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Should have quoted:

If it were to signal that it was no longer willing to accommodate debt-based stimulus, then buying US treasuries would suddenly become dangerous.

There still wouldn't be an asset that is inherently safer than treasuries. In Europe you could rank national debt after how credible the non backing by the ECB was.

by generic on Thu Mar 14th, 2013 at 01:34:19 PM EST
[ Parent ]
Yes, if the Fed were to signal that it was willing to put ideological purity ahead of financial stability, or the maintenance of the full faith and credit of the US government; in other words, if the Fed were to signal its willingness to let the US government default, then buying US treasuries would become dangerous.

But faced with the choice of defaulting on the debt or shutting down the government, both the US Congress and the Treasury appear to lean on the side of shutting down the government. So even in case the Fed decided to become the Bundesbank US treasuries would remain safe.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS

by Migeru (migeru at eurotrib dot com) on Thu Mar 14th, 2013 at 01:44:48 PM EST
[ Parent ]

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