Is this why the Fed and Treasury are playing this game?
From MarketWatch:
The U.S. has been after China to loosen the peg on Yuan against the Dollar. So far, China has committed only to a gradual devaluation of the currency into wider free-exchange bands. That may take too long, and this move to print money to buy up assets may force China to unload currency in that peg. Even if China holds on to its Dollar horde, the impact may be the same. Where this becomes a conundrum is that China would likely unload Treasury securities along the way and it would likely buy even fewer Treasuries as a percentage of its Central Bank assets ahead. That would imply that China could keep selling and large portions of the money freshly printed just went to buy up the debt held by China.
The FOMC wants inflation a bit closer to its 2% implied target, far higher than what has been seen. With the FOMC keeping short-term rates low at near-zero and with the Treasury increasing its balance sheet by buying Treasuries, this forces investors into risk-based assets. If you can magically get inflation to 2% and short-term and intermediate-term Treasury rates are so low, what does that do to real returns on an inflation-adjusted basis? Yep, negative real rates of return
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