Two very important points in this piece (which weren’t fully clear to me before) – (1) the Fed needs to keep interest rates low, or it will have to mark down it’s $Tn holdings of US Treasurys (if rates rise, prices on current bonds will fall, triggering mark-downs); and (2) the Fed’s exemption from the proposed Volcker Rule for banks to be able to keep trading Treasurys, will skew bank portfolios away from private sector to public sector securities – these are two sources of “corruption” in the system that can only lead to bad outcomes, I think –
