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RE: There’s Nothing Free Market About Federal Reserve Planning of GDP

in Proof of Brain4 years ago (edited)

Most economists forget that there’s always a buyer and a seller.
The Fed only can buy bonds in the secondary market if bond holders (mostly banks) are willing to sell.
They also forget when banks sell bonds to the Fed in exchange for reserves they are giving up interest income => less future money to spend for the private sector.
So, the banking sector is the driving force.
There are never too much or too less reserves in the system but it matches exactly the demand.
Besides that the Fed has to follow the futures markets (mostly Eurodollars) with her interest rates policy. Otherwise the Fed would create an arbitrage opportunity.