Re: moore on term structure

[Warren Mosler <mosler@xxxxxxxx>]

Doug Henwood wrote:
>
> Michael Perelman wrote:
>
> >Is Doug saying the the fed cannot influence long term rates?
>
> Heavens no. As the astrology columns used to say, with long rates, the Fed
> can impel, but it can't compel. Or as Jim Grant once said, it can play an
> engaging tune, but it can't make people dance. The fed can (strongly)
> influence long rates, but not set with the precision that it can set the
> funds rate - the bond traders have the last word.
>
> Doug

Doug,

Of course, this is by choice.  It does have the option, for
example, to 'make a market' in the 10 year Tsy, or, better
still, the 10 year swap.  There is no way the market could
trade 'through' the Fed's bid and offer.  However, as with
current policy with overnight rates, there could be 'consequences,'
etc., that would result in the Fed voting to change its rate
target/policy.

Greece, for example, sets the one year bill rate exogenously,
and has been doing so for some time.

Warren
--
Warren B. Mosler
Director of Economic Analysis
III Finance

See:

"Soft Currency Economics"
"Full Employment AND Price Stability"
=========================
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http://www.warrenmosler.com