If the Fed Stops Buying U.S. Treasuries, Who Will Buy Them? – Podcast 6.24.13

If the Fed Doesn’t Buy U.S.Treasuries, Who Will?

JM Bullion
Podcast Summary

Ryan and Louis discuss the recent rise in interest rates. Louis notes that when rates move higher they move fast.Louis note that the refi market was killed due to the taper talk from the Fed.

Louis thinks the economy will start to slow and that will give the Fed the ability to reverse course and continue to do QE.

Louis notes that without QE the economy would collapse. Louis notes that if the Fed reverses course there be a lot of volatility.

Ryan questions why the Fed started talking taper in the first place if they knew it would unsettle the market. Louis noted that they may have done it to show that the economy is doing well based on their QE programs.

Another theory is that they want to reign in the prices of gold and silver to keep credibility in the dollar.

Louis also notes that the BIS and other non sound money people are starting to question the efficacy of year of money printing.

Louis questions what happens if QE is unsuccessful in keeping interest rates low? Do they increase QE?

Louis and Ryan discuss the state of the economy and unemployment and student loan debt.

Ryan notes that now is a good time to sell a home. Louis discusses whether the housing market is in bubble. Louis notes that as rates rise there may be a temporary increase in mortgage applications as people rush to get approved before rates rise further, but that as rates rise further home prices and sales will drop. Louis notes that the 2005-2006 highs in housing prices are not the benchmark of “normal”.

Louis notes that QE has provided no benefits other than juicing the stock market and real estate market and that if they stop the program that benefit will go away.

Louis notes the limitation of a consumption based recovery.

Louis notes that interest rates are not rising because the economy is getting better but rather from the fear that the Fed may stop buying treasuries and mortgage backed securities.

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