1. Skip to navigation   2. Skip to content   3. Skip to sidebar
Source link: http://archive.mises.org/1551/if-foreign-central-
banks-were-to-sell-us-treasuries/  If Foreign Central Banks Were
To Sell US Treasuries  February 11, 2004 by  Today, Federal
Reserve Chairman Alan Greenspan on Wednesday played down the
risk to U.S. bond markets if heavy official foreign buying dried
up.  Paul Kasriel (Northern Trust Company) has a thought about
what would really happen if foreign demand were to fall:  “In
effect, the Fed would monetize the U.S. government securities
being sold by foreign central banks. Although this would prevent
short-maturity interest rates from rising, it might actually
lead to higher longer-maturity interest rates. Why? Because the
Fed’s monetizing of debt has future inflationary implications.
Rising inflation expectations would drive up the nominal
interest rates on longer-maturity debt. So, Greenspan is only
partially correct about the effect of foreign central bank sales
of U.S. government secu