| The opposite. If they buy every long term bond that means that companies (and the Treasury too), can put them up for any price, let's say zero coupon payment, that's a zero yield bond. No, to drive up rates would mean to restrict the buyers from buying (either via restricting the money supply - that means a combination of raising the overnight repo rate [FFR - Federal Funds Rate], raising reserve requirements, decreasing interest payment on reserves). But such a move means slowing down regular lending, VISA/MasterCard and the banks would have to increase consumer facing prices of credit, etc. It would slow down wage growth. And we are not seeing wage growth, we're not seeing inflation. To stimulate spending/consumption all the Fed can do is absorb more and more risk (buy bonds/assets - quantitative easing, keepr rates low, encourage lending, encourage the starting of new projects). Why people are not starting new projects? Well, for example look at NIMBYs, look at how Congress doesn't want to force mandate better EPA regulations, look at how municipal fiber plans were stopped thanks to Comcast lobbying, etc. Basically a lot of money goes into "rent" instead of innovation. (Asset bubbles.) |