Federal Reserve – $85 Billion/month – interest rates?

1-10-2014: Ok..so now the Federal Reserve decided to taper back $5B of both MBS and Treasuries….and the unemployment rate is down to 6.7% near the next taper…but due to >300,000 people leaving the job market without ope but alot of change…the process begins but where does it end?

I’ve not been accused of being a very deep thinker, but if the Federal Reserve is currently (tossing money around, fueling future inflation, ignoring their creation of 90% of their $ from nothing but 10% deposit, and) buying $40 Billion of mortgage securities per month and $45 Billion of Long Term Treasury securities to keep interest rates low, at what interest rate are they buying them?

If they are buying current mortgages at 3.5-4.5% rates, and the mortgage interest rate rises to 5% or higher, then my math suggests they will have to sell them at a discount to investors to yield 5% or higher…does that mean sell at a loss? And if so, where does that loss show up, higher interbank rates? or higher interest rates for loans? Or printing more money?

And if they are buying Treasury securities at such low rates as 1.5-2%, and Treasury rates rise, then will also sell them at discounts for the going desired ROR?

Is this any concern at all or are we “trusting” the Fed will unload all securities at a break-even price and not cost anything to taxpayers or borrowers? Yeah, right!

Note: Of course, the pullback from purchasing the securities will probably drive up rates and inflation.

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