šØATTENTIONšØ
š„There is news circulating that the FED has started QE with a PURCHASE of $20.47B in BONDS.
Is this really trueāļø Something happened, let me explain:
šThere was an "ACCEPTANCE" of $20.47B in SOMA for the exchange of 3-year BONDS.
šThe System Open Market Account (SOMA) is the portfolio with which the FED executes monetary policy.
šIt contains Treasury bonds and other assets that the Fed has historically purchased.
What happened with the $20.47Bāļø Were there purchases that increased liquidity in the systemāļø
šThat amount was a REINVESTMENT OF BONDS THAT HAD MATURED. In other words:
āŖļøIt is not new money.
āŖļøIt does not increase the size of the Fed's balance sheet.
āŖļøIt is not QE (Quantitative Easing), because QE implies creating new money to buy assets and increase liquidity.
āŖļøThey are predictable and scheduled purchases.
āŖļøThey are like renewing a fixed term: you keep your investment alive, but you do not put in new money.
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