Re: moore on term structure

[wfhummel@xxxxxxxxxxxxxx (William F. Hummel)]

Hummel:
>> Are you implying that the Fed can control long term Treasury
>> rates (in a market totaling about $700 billion) at any desired
>> set point
Mosler:
>Yes.
Hummel:
>> simply by utilizing its power to enhance or dry up the
>> money supply?
Mosler:
>?  By offering to make a market- having a bid and an offer- for thedesired
>security it wishes to stabilize.  There are no real money
>supply implications.  Net purchases or sales would automatically
>be offset by open market operations, etc, to support the desired
>overnight rate.  Not that it matters, but the same securities purchased
>could be used as collateral for the offsetting repos.
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Are you saying the money supply (defined as deposits, not bonds)
will remain unaffected by the net purchase or sale of bonds due
to OMOs supporting the overnight rate?  If so, are you implying
that both the overnight rate and the bond rate can be pegged
simultaneously at arbitrary points by this method?  If so, can
this system work for a number of different bond maturities
simultaneously, in other words could the entire term structure be
controlled by the Fed by making a market in a range of longer
term securities while using OMOs to control the overnight rate?
All with caveat that the money supply would remain unaffected?
Please elaborate.

William F. Hummel