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With the goal of flattening the yield curve, the Fed may scoop up Treasuries in the hope of reigniting the equity and mortgage markets.
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So much for the idea of a flattening yield curve bringing investors to the risk table.
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Regarding the effects of quantitative easing on savers, Bernanke acknowledged that flattening the yield curve eroded savings and caused hardship on some, but noted a weak economy was even more dangerous.
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But according to Takuji Aida, an economist at UBS in Japan, long-term yields remained very low because of deflationary expectations, thereby flattening the yield curve (the difference between short- and long-term interest rates).
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This takes money out of one pocket, pours it into another and ends up plain and simple flattening the yield curve, which is bad for the economy, not good.
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