A ’51% attack’ results when the Fed ‘owns’ 51% or more of the Treasury bond market; thus controlling the market and prices. Quantitative Easing, the buying of bonds the gov’t itself creates is an example of how how the gov’t maintains its stranglehold on the market.
Max Keiser
Financial War Reports
http://www.minyanville.com/trading-and-investing/fixed-income/articles/ben-bernanke-QE3-Fed-asset-purchases/9/21/2012/id/44206
The Fed at work–as I see it:
http://files.harrowakker.webnode.nl/200000058-28fec29f90/EscherOmhoogOmlaag.jpg
@Tom: sorta, kinda like nominal growth versus growth in real wealth (‘value’)?
Wow, I though that the ALL POWERFUL market could over power the government any time it wished.
Just another right wing myth I guess.
“Bond Vigilantes”
No such thing when you are not on the gold standard or an effective gold standard like the Euro Zone.
Just thought that I would point that out since right winger rarely mange these thing with out a little help now and then.
Seems like with the stealth inflation Ben is creating, money printing output is going to hot commodities like oil and food, and this can erode living standards fairly quickly, and erode balance sheets of overly indebted cities, counties and states. More defaults coming there, on the way. With that, bonds yields issued by those classes of entities will soar in spite of control by the Fed of T-bill yields. The secondary bond market will reflect the trouble that should be seen in T-bills, and so the Treasury market, like the stock market, will decouple from reality for a while.
Ultimately, no one will buy a Treasury bond, as the risk will be there and obvious, even if the yields are artificially held low…
It seems like artificial control of the bond market while doing a lot of money printing would accelerate devaluation, or even cause a discontinuous rapid devaluation at some point.
@ Mark Lytle
Err this is not money printing.
Only congress can authorize money printing.
That is fact.
@Gordo
No, it is money printing. The shadow banking system does it all the time, and they are not authorized by Congress to do so. Any loan brought into existence under our system is ‘money’ because currently, our money is debt based. Likewise, bonds issued without collateral, is still money, though it shouldn’t be.
Actually, Congress has largely abandoned it’s proper role, and that was built into the Federal Reserve act from the beginning.
The bond vigilantes will win the day in the end.
http://ericsprott.blogspot.ca/
@ After seeing Michael Hudson on OtE last month and after reading recommendations of his new book, The Bubble and Beyond, by PC Roberts and Steve Keen I ordered it and just got it.
@gordo
Since the left/right linear spectrum is inadequate to describe political positions (especially in recent years), please be a bit more specific in your criticisms. Dismissing issues or persons as “right wing” doesen’t say much.
Your “fact” needs to be qualified: you are speaking in “de jure” terms not in “de facto” terms. If you had not noticed, much of Constitution, statutory law and regulations are not enforced and ignored. The DoJ is a laughingstock. The “rule of law” is a laughingstock. The rule of law is only a tool to beat down the peasants.
Good article here. Shows the Fed is purchasing Bonds of all durations, (not under the control or by the specific instruction of Congress or anyone else)
http://www.philstockworld.com/2012/09/22/the-fed-now-owns-27-of-all-duration-rising-at-over-10-per-year/