Smaller portions, more often says Ben

The WJS reports on a Ben discourse. Ben says to QE2 in smaller doses, more often. Another good idea from the bankers.

Ben is rebuilding the short end, the higher frequency end. Rebuild by trading at the edge where the curve meets the noise, about the one year mark. The stimulus here is to get traders to think in six month gains.

Assume we want NGDP to grow 3% next year. Ben anounces to thw world that he intends to lose 3% of GDP dollars in a game of betting on paper, over the next year. So far so good. What will he trade? Trade long term treasuries.

So, traders now understand that Ben intends to lose $300 billion next year trading long term. What is the game plan?.

Ben sets the rules, he will trade something like a $100 billion every month or so in volume, either buying or selling.

Now we have Ben and the Japanese Finance Ministry Japanese Finance Ministrydoing the drunards walk

I love this game, can we sell it?  Ben intends to sell the long bond on a downward drunkards walk, with month to month variation in buying.

If it works, it will be a liquidity pump, the traders organizing a production line to distribute planned growth in NGDP.  The central banker is going to buy high an sell low to lose money.  That is, extend the peaks and lower the troughs in the short term government bond cycle. Now the central banker can only make short term trades that do not lose too much all at once,  otherwise they piss away too much NGDP at once and destablize the economy. cause the structure to invert when short term rates suddenly jump.