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This move could act as a de facto Quantitative Easing (QE) without involving the Federal Reserve directly. Banks might buy large volumes of Treasuries to keep yields low, thereby reducing the government's borrowing costs and allowing it to continue spending and issuing more debt. This "shadow QE" mechanism would enable the government to finance increased spending even as official Fed intervention diminishes.
Potential Consequences
If banks undertake massive bond purchases, it could lead to lower interest rates on government debt temporarily. The government could then refinance existing high-interest obligations at lower costs, fueling further fiscal expansion. However, this approach carries tremendous risks: