The most important chart that
nobody at the
Fed seems to pay any attention to, and certainly none of the economists
who urge the Fed to accelerate its monetization of Treasury paper, is
shown below: it shows the Fed's total holdings of the entire bond market
expressed in 10 Year equivalents (because as a reminder to the Krugmans
and Bullards of the world a 3 Year is
not the same as a 30 Year). As we,
and the TBAC, have been pounding the table over the past year (
here,
here and
here as
a sample), the amount of securities that the Fed can absorb without
crushing the liquidity in the "deepest" bond market in the world is
rapidly declining, and specifically now that the Fed has refused to
taper,
it is absorbing over 0.3% of all Ten Year Equivalents, also known as "High Quality Collateral", from the private sector every week.