đ¨ATTENTIONđ¨
đĽA news is circulating that the FED has started QE with a PURCHASE of $20.47B in BONDS.
Is this really true? Something happened, let me explain:
đThere was an "ACCEPTANCE" of $20.47B in the SOMA for the exchange of 3-year BONDS.
đThe System Open Market Account (SOMA) is the portfolio with which the FED executes monetary policy.
đThere are the Treasury bonds and other assets that the Fed has historically purchased.
What happened with the $20.47B? Were there purchases that increased liquidity in the system?
đThat amount was a REINVESTMENT OF BONDS THAT HAD MATURED. That is:
âŞď¸It is not new money.
âŞď¸It does not increase the size of the Fed's balance sheet.
âŞď¸It is not QE (Quantitative Easing), because QE implies creating new money to buy assets and increase liquidity.
âŞď¸They are predictable and scheduled purchases.
âŞď¸They are like renewing a fixed term: you keep your investment alive, but you do not put in new money.
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