Quote from: hugolp on September 26, 2010, 03:41:03 PM

Quote from: redengin on September 26, 2010, 02:31:59 PM

I still trust that having come this far, the Fed will persevere and maintain order.

Mmmmm, are you a CNBC comentator? Grin

Can you be a bit more specific on the exact options and actions that the Fed could take to remove the money that sits as excess reserves in the banks? Also, do you believe that the treasury will be able to finance itself without the support from the Fed?

Btw, let me remind you again that Bernanke when starting QE1 said that it would remove the liquidity. Less than a month ago announced that it would use the money its getting from the maturing MBS into buying more treasuries, and has been doing so. So basically he is not removing the money.

Also, in the Jackson Hole meeting, Bernanke basically assured that QE2 will be a reality, or at least that is what everybody understood.

I think there is still a chance, albeit getting smaller as time goes on, that the Fed will be able to sell treasuries to mop up the excess reserves. It does appear that the banks still have quite a way to go with the new worries about credit unions. Until confidence returns, the liquidity is necessary to keep the economy moving. As certainty in the US's economic future returns, US investment should increase, and allow the Fed to act in kind to remove the excess reserves.