[preempalver]

Ok lets agree to disagree :). Just FYI, 10 Yr Aug UST low yield (best price for bank to buy) was 258bps. Highest rate for Aug was 278bps (highest point at which the fed could have bought). By doing the flip the bank could make a yield of 20bps. It has to front cash for capturing this yield. If it just kept the cash at the fed it would earn a risk-less 25 bps (IOER). The fed is sterilizing the purchase by IOER so it isn't monetizing the debt! This is the fundamental misunderstanding with QE, its just a tool to target the rate. If we were truly monetizing the debt, inflation would be soaring through the roof! I would strongly recommend reading this -> http://pragcap.com/understanding-quantitative-easing