Continuing the discussion on whether Reserves or Dollars are locked within the system when the Fed does QE purchases and how QE inflates asset prices.
https://twitter.com/profitsplusid/status/1480690953203556352
Here is an interview with Lorie Logan, VP Markets Group of the Federal Reserve Bank of New York.mercatus.org/bridge/podcast…
"When the Fed or the desk purchases securities from our counterparties (Primary Dealers), it raises the price of these securities and then lowers their yields."
"When the Fed or the desk purchases securities from our counterparties (Primary Dealers), it raises the price of these securities and then lowers their yields."
"And those counterparties who sold securities to us may then rebalance their own portfolios to invest in other assets, lowering yields broadly, and then easing financial conditions."
Essentially this means that these counterparties or Primary Dealers can mark up securities in their portfolios which inflates asset prices and lowers yields. Then sell these securities in the market to effect policy or market direction. AKA pushing the market higher.
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