Greg Ip said what?

Greg Ip: Yet focusing solely on the dollar’s fall gives a blinkered view. As the Fed bought bonds, their yields fell, and so investors rushed to other markets in search of better returns. While that pushed those countries’ currencies up, it also pushed their interest rates down and stock prices higher.

Let's check:

 Ten year yield, red,  rises when Fed is buying bonds, blue.

Perhaps Greg meant relative to trend?

Nope, the ten year headed down hill in a fairly consistent manner. Nothing in the blue line seems to have much effect.

DC sold more than the Fed bought, says Larry Summers.  Mostly what happened is the long term trend simply shifted. It is still a bit of a puzzle.



But the best explanation I see is that the bond dealers consider QE an implicit tax. The Fed bought some 800 billion and DC was selling about a trillion of new debt.  So the bond market bought about 200 billion at ten year yields of 3.2%, mostly by restricting trade, as near as I can tell. This must be a controlled market How did the big banks compute the optimum yield?

They must have known the budget constraints before hand, and had the Treasury elasticity function. The Fed gave that money at .23%, basically the IOER plus dividends, minus earnings from the rest of the portfolio.   So, on net, Treasury paid a combined 1% (market plus Fed)  or so relative to 2% before QE2.  I guess, in the end, the bond traders got their half of the tax cost paid for, with hiked rates.  That is a 15% tax per year on the government bond market.

What was going on then?
GDP had reached its pre crash level, and federal spending stayed at that level.  And everything remained stable at those levels. The only thing different would have been roll over of the old debt was swamping the system. The entire mess was likely the sudden roll over of thirty and ten year debt from Republican deficit spending in the past. The Republican recession problem always hits the oil supplies first because that is the import.So the claim that the ten year rate was lower is mainly a claim that all parties agreed to a 15% bond tax on interest evenues because of the rollover problem. A problem almost entirely created by Republicans, especially Reagan and Cheney.