Short Term Trading Member Forum

[techcharter]

$200B Liquidity Injection

The FED just figured out how to pull money out of treasury investors and put it in the floundering banks. By pledging agency mortgage as collateral for US Treasuries, banks can sell short. This would trigger global investors to sell their US Treasuries or face losses. If banks make 10% on the $200B, its money that doesn't have to go on the government's/taxpayers' debt. Banks would then have enough to avoid margin calls. The FED could raise rates after enough of the bonds have been sold to make sure the banks covered at a profit. This could cycle a few times until the banks recapitalize, or the system crashes due to the Treasury markets drying up. This also strengthens the dollar as inflation would be perceived as being in check.

The FED and BANKS don't have much time to pull this off as this is probably wave a of bear market rally. Tomorrow is wave b down, Thursday UP wave c, Friday may top out, and the week closes for a gain.