"In an interesting observation made on Aug. 27 by analysts at Bank of America, Chinese dumping of dollar reserves (Treasuries) may create such an impact on the United States, that the Fed would have to throw away any thought of raising interest rates and instead look very hard at implementing a new round of quantitative easing just to soak up the estimated $1.1 trillion that will be dumped onto the markets.
In fact, estimates of how much China may have to sell is so great, it is believed that China’s currency stabilization efforts would erase 60% of the gains created by the central bank under its last bond buying program of QE3.
...This alone is something the Fed is and has been deathly afraid of since day one of their historic easing and zirp policies… the market itself forcing interest rates higher with the central bank being unable to manage or contain it.
...This alone is something the Fed is and has been deathly afraid of since day one of their historic easing and zirp policies… the market itself forcing interest rates higher with the central bank being unable to manage or contain it.
To counteract the consequences of rising interest rates that would come from that much bond dumping by China, the Fed would have to almost immediately implement QE4 just to soak up these bonds or risk an absolute seizure in their debt markets..."
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