The Federal Reserve (which is allowed to make money out of thin air, or destroy that same money) decided to create a new $300 billion dollars and use that to buy up debt from the Treasury. It may be related to the recent story about China backing away from buying Treasuries at the same furious pace they had been buying them.

It’s not clear what will happen when the economy turns around and Treasuries aren’t as attractive. It’s likely interest rates will have to go up.

I read a comment at Market Watch that the Chinese are buying short term notes hoping that the next set of bonds will pay higher interest rates and they won’t be on the hook for years. Heaven help us if they redeem their bonds and don’t buy new ones!