In simple terms, if the liquidity or risk characteristics of securities differ, so that investors do not treat all securities as perfect substitutes, then changes in relative demands by a large purchaser have the potential to alter relative security prices. The same logic might lead the central bank to consider purchasing assets other than government securities, such as corporate bonds or stocks or foreign government bonds. (The Federal Reserve is currently authorized to purchase some foreign government bonds but not most private-sector assets, such as corporate bonds or stocks.)
Straight from the pen of Ben "Mr Money" Bernanke hissownself, in a little monograph he authored in 2004. The question that caught my attention is whether or not, given the Fed's propensity for doing every-bloody-thing it can do legally, the US Treasury has been buying Greek Government Bonds? You can thank Zero Hedge for this insomnia-inducing question - and if you're like me, fear the answer.
Prepare for the coming hard times.
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