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  • Is Inflation Next? [View article]
    To Asbytec

    I'd like finish-up discussing the problem with taxing excess (unbacked) dollars 'out' of circulation (before going on to "borrowing the excess unbacked-dollars 'out'):

    After any “monthly” issue of unbacked money, it might take 1 or 2 years for inflation to emerge and be successfully brought under control, that is, if the authorities impose the right amount of inflation-fighting tax on the first try.

    Taxes levied to fight inflation would have to occur at random times and in random amounts, because inflation can emerge slowly or quickly, with a destructive strength or a constructive whisper. Inflation-fighting taxes slow the economy as normal taxes do - only more so. That’s because taxes that occur randomly (in both timing and amount) can inject such uncertainty into both individual and business financial planning that virtually everyone becomes hesitant to spend, which can slow GDP long before the actual inflation-fighting tax is even imposed.

    Proceeds of the inflation-fighting tax must be held idle, in a vault, until the economy’s real growth warrants a larger money supply. You might call this a classic “Catch-22”, i.e., the tax proceeds do eventually re-enter and stimulate the economy, but only after the economy has been sufficiently stimulated.)

    Every type of tax is bound to fail to generate the exact amount projected to be generated; sometimes it generates more tax revenue, sometimes less. And inflation-fighting taxes have lags due to the need to announce the tax, and allow sufficient time to pay it. Thus an inflation-fighting tax can never be an accurate and timely policy instrument. And any subsequent attempt to ‘re-adjust’ the money supply (via an inflation-fighting tax) is bound to be another inaccurate and untimely surprise.

    Finally, for simplicity sake, we ignored the fact that the Sovereign would surely be spending his newly printed unbacked money every month. So, if issuing a uniform monthly amount of unbacked currency for a year or two proves to be inflationary, one can imagine a constant uncertainty would result regarding the inflation-fighting taxes to be levied far into the future.

    CONCLUSION: Let's not consider taxation as a viable means of reducing an unbacked money supply ever again.
    May 22 11:23 PM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    To Asbytec

    << If I am following you, the easy way to inject or withdraw it from circulation is either being backed by US debt as federal reserve notes or buy means of our debt for commercial lending. >>

    Yes, Sir, all I've said is something you already know:
    The Fed injects money into circulation by buying assets with newly printed dollars. (We can talk about withdrawing dollars from circualtion later)

    Those assets might be T-bonds, MBS, foreign bonds, gold, or silver, and each of those assets has it's own advantages and disadvantages.

    US denominated bonds (T-bonds or MBS) have the advantage of returning to "face-value" as maturity approaches, and it doesn't matter whether the value of the dollar falling like a rock or high as a kite. Therefore, the populace can be pretty sure the Fed will always have enough bonds to sell (or allow to mature) and thus reduce the money supply as needed.

    The Fed's selling of gold wouldn't normally be a good strategy for reducing the money supply (if the Fed were indeed allowed to sell it) because The Gold Market is much smaller than the T-Bond Market, and if the Fed tried to sell much gold, the price of gold would drop like a rock, assuming all other things remain unchanged. Therefore, the Fed wouldn't be able to withdraw much money from circulation when the price (i.e., Fair Market Value) of Gold drops due to the Fed's selling. That's the disadvantage of gold.

    The advantage of gold would never be realized unless the US dollar crashes and its existance as "money" is seriously undermined and threatened. Being (theoretically) able to exchange dollars for some small amount of gold gives the dollar some "intrinsic" value, which is a (theoretically) minimum value for the dollar. And we all know that the price of gold soars when the dollar crashes because gold is widely considered to be a safe haven.

    Dollar denominated bonds in the Fed's portfolio don't provide any such "floor" for a crashing dollar, because such bonds become worthless just as quickly as dollars become worthless, after all, bonds are merely a (highly reliable) promise of the future delivery of a (wasting, worthless) asset if the dollar were to be crashing.

    A crashing dollar ceases to be "money" when it takes a wheelbarrow of $100 bills to buy a loaf of bread. Gold held by Uncle Sam in Ft Knox prevents that, in theory, by creating a "floor" which is defined by the fair market value of gold which rises wildly when the dollar "crashes". (Yes, yes, the Fed holds not "gold" per se, but "gold certificates" which only allow the holder to feast their eyes on the gold-bars in Fort Knox for a number of seconds proportional to the number of certicates held.)

    << I cannot fathom how the government would spend unbacked money according to your view. >>

    Well, I thought you were advocating that under certain circmstances, it would be "beneficial" if the Fed (or Treasury) could simply print dollars and spend them, rather than spending the proceeds of taxing and borrowing.

    If the Fed buys "assets" with newly-printed dollars, those "assets" can be sold to withdraw the dollars from circulation. - However -

    If the Fed buys "provisions" with newly-printed dollars, those "provisions" can NOT be sold to withdraw the dollars from circulation. The dollars created by the purchase of provisions are unbacked dollars.

    << That's why I hate this definition and trying to explain it in terms of backed and unbacked? What the heck is unbacked money to you? To me, it's nonconvertible and "unbacked" by full faith and credit. >>

    Backed money can be injected or withdrawn from circulation with minimal economic effect: injecting money is usually a bit stimulative, but can lead to inflation; Withdrawing money is usually a bit anti-stimulative, and can lead to deflation. Let's call the stimulative and anti-stimulative effects simply "monetary effects"

    Injecting and withdrawing unbacked money has the same "monetary efffects" but with "fiscal" effects added on:

    Government spending is stimualtive. So when unbacked money is "injected" into circulation, such injection is accomplishd by government spending ("fiscal") and an increase in the money supply (monetary) at the same time. Monetary and fiscal effects are joined at the hip.

    If such spending produces too much stimulation, that means inflation. How does one fight inflation? Reduce the money supply. How does one reduce the money supply of an unbacked currency?

    Taxing the money out of the economy is one way. However, taxes always slow the economy. And if you believe that, which you should, then it's easy to understand that if you use taxation to reduce the money supply, you'd also be reducing GDP. IF you reduce GDP by 1% while (successfully) targeting a reduction of the money supply by 1% (to reduce unacceptable inflation), well what have we accomplished? Nothing but 1% fewer goods and 1% less money. Inflation is unchanged, and a few million people have lost their jobs. It doesn't have to be exactly like that, but it could be something similar. Taxes slow the economy, reducing GDP which offsets the effect of reducing the money supply. So it would appear that taxation is not a good choice. That leaves -

    Government borrowing.
    I will have to explain this later. I've already mentioned some points regardingthe Bond Barket and preice discovoepno wich is

    gotta go
    bakc later.
    May 13 09:57 PM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    to Neil_Anderson

    "Unbacked money must be taxed or borrowed out of circulation, either of which creates a bigger economic effect than buying bonds ... "

    What I meant to say is this -

    "Unbacked money must be taxed or borrowed out of circulation, either of which creates a bigger economic effect than [SELLING] bonds ..."
    May 12 01:52 PM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    To asbytec

    << If you're saying the government spends without taxing and borrowing, I might agree it can be inflationary and maybe very much so depending. This is what Larry was explaining where the government taxes and borrows to help keep inflation in check and where I am making the distinction such policies are monetary in nature rather than fiscal. >>

    Let's address this later.


    << I am still not keen on the idea of backing, what I think of as being convertible for (or residing opposite the money on the asset side of a balance sheet) and you seem to be defining as collateral. So, I do not understand what you mean by mixing backed and un-backed money. It's all born of debt and some is backed by collateral, like a house, I guess. But, the house did not create the loan, the signed loan agreement did. >>

    In my opinion, backing is not important to the "intrinsic" value of money. Unbacked money, like "Bitcoin", seems to do just fine without any backing at all. So, why does the dollar "need" backing? It already has the government fiat which requires it to be used by nearly everyone. And if you ever did get Ms. Yellin to exchange your dollars for its backing (as collateral) all you'd get is something else (a bond) that promised delivery of more dollars in the future. No benefit to "backing" on this score that I can see.

    In my opinion, backing has importance for only one reason: It gives us an easy way to inject it or withdraw it from circulation without creating effects that spending, borrowing or taxing has on the economy. Unbacked money is injected by purchasing provisions, that's stimulative. Unbacked money must be taxed or borrowed out of circulation, either of which creates a bigger economic effect than buying bonds (in the open market, where everyone can see price discovery in action) to reduce M2 which is a backed money supply.


    << Question 1. I dunno, I guess something that might employ some resources and improve technology. >>

    In my opinion, there's no circumstance that warrants issuing unbacked money. I thought you'd have said that if Uncle Sam can't find enough buyers of bonds (for whatever reason) then issuing unbacked dollars would be a fail-safe. In my opinion, issuing unbacked money has bad ramifications that I will have to explain later.

    I didn't think about food stamps as money, ok, alright, good point. I guess they are money, but are they backed or unbacked? Backed by dollars, I'd bet.


    << Question 2. As for the Treasury having difficulty finding buyers of US securities, as long as folks hold dollars they will probably want to park them somewhere safe. With price discovery, I don't see this as a problem as long as the government keeps it's full faith and credit intact. >>

    My answer agrees with yours: If the Treasury has difficulty finding buyers of bonds that it must sell, then the Treasury simply does what it always does in that situation: raise the interest rate offered on the T-bonds.

    Price discovery is the result of raising the offered interest rate, because price and interest rate are inversely related. Raising the interest offered is equivalent to lowering the price, and that's price discovery, by definition.

    Full faith and credit need not be intact. If not intact, Treasury just keeps lowering the price until enough buyers are found. If the resulting interest rates offered prove ruinious, that's a problem for Congress, not the Treasury, not the Fed.

    What do you think?
    May 12 11:35 AM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    TO JasonC

    I'm embarrassed to admit I got confused while reading your response and lost the your real point, so my initial reply (earlier above) runs on a tangent that fails to address your point at all.

    I surmise from re-reading your response that "total credit outstanding" is the sum all notes accepted by banks and nonbanks.

    And after rereading your message, I have to agree that repayment of a bank loan does not necessarily reduce M2, and my glibness was inaccurate. And I understand now what you mean when you say I confused bank credit with "money creation", however I'd say in self defense that I should have used the word "sometimes" in stead of "always" (to show a truer understanding) and specified "bank loan" instead of "loan" (to avoid confusion.) The difference here is that I'm merely guilty of manslaughter, not murder. Well, at least not the unrepentant premeditated murder of truth and accuracy.

    My confusion in your response seems to have stemmed from my presumption that deposit-liabilities aren't repaid per se, but canceled.

    Thanks for your sage advice.
    May 12 10:35 AM | 1 Like Like |Link to Comment
  • Is Inflation Next? [View article]
    To JasonC

    If I get a $1003 loan from my bank, and my bank gives me a demand-account on which to draw on the $1003 loan, the bank has created $1003 of money "out of thin air" as some like to say.

    However, as soon as I have written checks totaling $1003, my loan is "tapped-out" and I can no longer write checks because the bank's $1003 liability to me has been fulfilled and is now $0. And, the $1003 that the bank initially "created out of thin air" has mysteriously disappeared.

    The $1003 got created and then uncreated. My $1003 Note was traded for a $1003 demand-account, and then my demand-account was turned-into $1003 cash.

    If 100% of that $1003 that I spent were to be deposited by chance right back in my bank in someone else's deposit account, then my bank's total deposits, cash and loan balances would all be the same as if I had never written checks totaling $1003, at all. So, in this admittedly outlandishly random (but possible) event, it seems that the $1003 of bank liabilities (a.k.a. "money") was re-created. But as random as this event appears, it does seem to illustrate a larger point.

    Millions of people are doing "same as me" every day. Money is being borrowed from one bank, and deposited in another. Amounts borrowed Monday at Bank A don't always get neatly matched-up equally with random deposits from Banks B, C and D on Tuesday, but to the extent that they do get (randomly) matched-up (on a vague time frame), the Banking System does seem capable of creating money even if each loan is immediately fulfilled in cash and taken-out of the lending-bank in cash.

    Given a growing number of Notes like mine sitting as assets on all banks' books, and given that loans usually don't sit idle as available demand accounts ... it seems plausible that even fully-funded loans (i.e. loans characterized as an exchange of cash for a Note, i.e., an asset for an asset) do create money, albeit indirectly.

    Plausible, but not proven. As you have probably surmised, I've assumed that the Banking System as a whole operates with the same results as if there were only one bank in the whole nation. Truthfully, I'm not sure this is a good assumption, nor am I convinced the logic is airtight.

    Awaiting your comments.
    May 12 03:01 AM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    "...you will see that literally printing money to be spent ends in disaster."

    What I meant was -
    “… literally printing money for Uncle Sam to spend on all the things that Congress has approved, instead raising money by taxing and borrowing, would be a disaster.”

    I surely didn’t mean to create a straw-man for you to knock down while characterizing it as <<printing for the heck of printing … printing willy nilly. >>

    To be concise:
    Issuing money, by buying assets, creates ‘backed’ money.
    Issuing money, by buying provisions, creates ‘unbacked’ money.

    Utilizing newly-printed money to buy provisions approved by Congress creates unbacked money. (Let's presume we need not worry about unapproved spending.)

    I don’t think it's a good idea to mix backed and unbacked money in the economy. There are loads of possible problems. For starters, I suppose both currencies would have to be called dollars, or we’d have two currencies.

    Please give these 2 important questions some thought:
    (1) Under what circumstances would you advocate issuing unbacked dollars for Uncle Sam to utilize on programs and spending duly debated and approved by Congress?
    (2) If the Treasury is having difficulty issuing the bonds (i.e., finding buyers for the bonds) it absolutely has to issue immediately, what is the one simple thing that the Treasury can always count-on to virtually assure the necessary bonds are always sold (i.e., enough buyers are always found)?

    Let me know when you're ready to compare answers.
    May 12 01:24 AM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    T0 Asbytec


    << I am not sure how the Fed can buy bonds outside the bond market. >>

    I am sure that if the Fed bought bonds directly from the Treasury, then that transaction would not be considered a result an open market operation (OMO). In other words, if the Fed transacted directly with the Treasury, that transaction would occur outside the Bond Market.


    << But, price discover is pretty much what the Fed is accommodating. >>

    I disagree. I am sure that our current laws are the guide-posts which ensure, not just accommodate, price discovery because currently it is against the law for the Fed and Treasury to transact outside the bond market.

    Any transaction directly between the Fed and Treasury snuffs out any possibility of price discovery.
    May 12 01:19 AM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    To Asbytec

    You have asked and I have followed and all I can tell you is that if you look at the historical record (such as the Civll War, or the Weimar Republic, etc) you will see that literally printing money to be spent ends in disaster.

    I don't deny that money can be destroyed by the government, and I don't ask you to prove it. It could be happening for all I know, except that I know it's not necessary. There's no reason to assume things are not as the government claims. There's no benefit to analyzing the workings of government as if these things were true, in fact, it simply blinds you to the truth.

    For instance -

    What is the typical annual deficit for Uncle Sam expected to be in the next 5 years, and what's the Fed's expected typical annual "bond purchases net of bond sales and redemptions" to grow M2 at roughly 6%, remembering that the Fed's trying to taper QE, the Fed's balance sheet is already bloated and velocity needs to rise, and can rise all on its own because there is no entity that can control velocity.

    I contend that Uncle Sam's deficit is going to be roughly 500 Billion to 1000 trillion every year for the foreseeable future, and generally have an upward drift. I contend that the Fed cannot forever increase it's assets, and the money supply. I contend the Fed cannot fund Uncle Sam in the manner you advocate. And what about when the economy is "normal"?

    What might the bond market's reaction be if the Fed, who is probably the largest bond buyer that ever existed, bought bonds T-outside the bond market? If you don't think "price discovery" is an important feature of our markets, then don't bother.

    Instead of parroting MMC descriptions and prescriptions, think about why our present rules are as they are. The sovereign in other nations can take advantage of the markets, but not here in the US. What happens when large lots of bonds are transacted by the sovereign without the usual price discovery that goes around with it? Is it really in his interest to do that, or is there a subtle (yet huge) price to pay?
    May 11 02:54 AM | 1 Like Like |Link to Comment
  • Is Inflation Next? [View article]
    To Asbytec

    I accidentally "liked" your comment when trying to hit "reply" and was unable to undo my error. Unfortunately, I don't like your comment at all, I disagree with nearly every statement within it. But I'm not going to venture any further reply because I would be just repeating myself.

    Oops, well, I guess I do have two things to add, here goes:

    (1) "Modern Monetary Theory" is not a "theory" at all. It is a "conjecture" or "hypothesis" at best. A hypothesis doesn't get "elevated" to the status of "theory", until it has been proven consistent with the axioms which form the basis of our understanding. Heck, since this is economics, we should lower the threshold from 100% of axioms, to 50% +1, which is a simple majority. However, because MMT is based on an UNbacked money supply, it's highly unlikely to find itself even remotely consistent with the workings of the US monetary system, or any other nation's "modern" monetary system, and therefore inappropriate to apply it's conclusions to the US monetary system which has a backed money supply. The prescriptions advocated are prone to disaster because history and logic say so. Yes, I say this in full knowledge that Mosler has made donations to the University of Kentucky in exchange for their academic support of his highly flawed MMT. My heart goes out to all those students who are led down the dead-end path which it represents. However, so have legions of Keynesians, Marxists, etc, so I guess "caveat emptor" is still an important latin phrase to learn.

    (2) Finally, speaking of "modern", I should note that since MMT is based on an UNbacked money supply, and "unbacked money" literally harks back to the Dark Ages of Medieval Europe, (which I'm guessing is before we discovered the benefits of a backed monetary system as well as the realization that bonds were more beneficial than gold as backing for money), it seems altogether fitting and proper to refer to MMT instead as the "Medieval Monetary Conjecture" or MMC.

    Just sayin'
    May 10 08:36 PM | 1 Like Like |Link to Comment
  • Is Inflation Next? [View article]
    To Asbyec

    "The money supply is managed by the Fed's buying and selling assets."
    << Not completely. Fiscal revenue, either taxation or borrowing, is monetary in nature - not fiscal funding due to a lack of money.>>

    No, taxation and borrowing is fiscal in nature. I have no idea what distinction you are trying to make, but it doesn't get very far when you start by saying that the Treasury's functions are monetary in nature. That's vague at best.

    So, fiscal revenue is monetary in nature and not fiscal funding due to a lack of money. This is babble.

    << The government neither has nor does not have any money and it does not need ours to spend for fiscal funding reasons anymore than a bowling alley needs to tax it's players to "fund" points to other teams. >>

    This is more babble based on Mosler's "NFL Score-Board" economy, which is based on an unbacked money supply. Your statement is completely true in that narrow context, since no such economy really exists.

    I better just stop trying to convince you of anything, since you and I never seem able to address an issue head-on.

    << If [Uncle Sam] did [spend] without taxation or borrowing, excess reserves would accumulate in the banking system. There is a reserve effect of government spending, the Fed manages it. >>

    No, as we discussed many times before, if the Treasury did not tax or sell bonds, it would soon run out of money. The only way the Treasury would not run outta money is if we assume Uncle Sam is issuing unbacked money. If Uncle Sam is issuing money by buying provisions instead of assets, there's no need for the Fed to exist, or need to manage the vaguely referenced "reserve effect"

    << "QE creates money the instant the newly printed dollars are put into circulation as the Fed purchases a bond." The Fed does not buy a bond by putting cash into circulation, it buys it by crediting the holder's account in the commercial banking system. >>

    Ok, if you think it's more beneficial to talk about "credits to a holder's account" rather than "newly-printed dollars" please try to explain what is to be gained. I say there's no difference between the two alternatives and it's clearer to talk about newly printed dollars that newly created eletronic debits.

    The whole accounting scheme of debts and credits and bank reserves is supposed to be transparent. So, you really shouldn't have to refer to the elements of the accounting system at all. When you talk about reserves, just keep in mind that commercial bank reserves are assets, not liabilities, and therefore not money.

    << I really recommend, again, to sketch the process of monetary and fiscal policy on a blank sheet of paper using balance sheets and the payments system to see how all of this works. When you do, you will understand why Mosler talks about the IRS shredding the very paper notes some people think the government needs to tax or borrow to spend. It does not happen that way, it does not need our money. The IRS does not collect a bunch of checks or cash to deposit them at the Fed on behalf of the Treasury...so the government can "fund" itself and spend. >>

    No, please, just for once believe me on this: I already understand Mosler better than you do. I can understand eveything he has said and understand all the diagrams and why he believes they work, even though I know they are flawed. I'm just failing to explain to you where and why Mosler falls short.

    Yes, anyone who can run a printing press (or the computers that create pairs of debits and credits in the Fed's computer system) can run off a few million dollars of money. And these can be utilized to buy provisions, or to buy assets. The problem that Mosler et al are blind to is the disaster than such action would lead to. And I have been doing nothing but wasting your time, which I'll endeavor to avoid from now on.
    May 9 02:44 PM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    To JasonC

    Banks don't create "money" at all?

    I'm confused.
    When I borrow money from a bank, the bank has not increased M2?
    When I pay-back the loan, M2 is not reduced?

    Sounds like when you talk about "money" you're referring to M1 or MB or M0, or you're referring to a mortgage loan originated with a nonbank.

    I didn't realize that I had previously denied any distinction between money and credit. If I persist in refusing to acknowledge the distinction bewteen money and total credit it's because of pure ignorance, not fore-thought. Please educate me because I don't see any benefit from the distinction that I'm presently only vaguely aware of.

    Your mortgage note is not money, agreed.
    May 9 01:50 PM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    To Asbytec

    << ... it would play havoc with the funds rate if the government spent by crediting reserves into the banking system without taxing or issuing bonds to manage the level of reserves. >>

    You have this backwards:
    The Fed doesn't spend by crediting reserves,
    The Fed (indirectly) creates reserves by buying assets.

    You have this backwards:
    Taxing and borrowing is not how the money supply is managed. The money supply is managed by the Fed's buying and selling assets.

    You have this backwards:
    Taxing or borrowing is not how one manages "reserves", because "reserves" are not the target being managed. Reserves are "bank assets," not money. Money is a "bank liability." Some money is a Commercial Bank liability, some money is a Fed liability. The money supply is indeed closely related to the system's reserves because the reserves allow money to be created by the banks, but sometimes the banks can't create money because they are capital constrained.

    QE creates money the instant the newly printed dollars are put into circulation as the Fed purchases a bond. The purchase creates money that the seller puts in his bank. The bank takes that money and sends it to the Fed. The Fed credits the bank's account with an asset denominated in dollars (of course) which are called "reserves".

    A lot of people seem to think that the 22 primary dealers sell their bonds to the Fed, and thereby "all" the Fed's newly-printed dollars "avoid" entering the money supply in a real sense because "all" the newly-printed dollars end-up in the 22 banks, who then send the newly-printed (ironically) to the Fed to be credited with bank reserves.

    However, if that were truly the case, the 22 banks would have run out of bonds long, long ago. In fact, the bond holdings of the 22 banks has been rather constant. That's because, as you might guess ...

    The banks buy bonds from the public market and at Treasury Auctions (Treasury Auctions are also open the public) and then resell to the Fed for a nice little profit.

    So, virtually all the newly printed dollars do go into circulation. But people like you and me put our "bond sale proceeds" in our bank, because, well, that's where money is kept. There's no other place to keep money other than in our pockets, under our mattresses or deep within the folds of Doug's couch.

    The reason people seem to get confused is that the money supply hasn't been growing as fast as the Fed's bond purchases might lead one to think it would and should. That under-performance in money supply growth leads people to think much of the newly printed dollars do not really reach the money supply (for the reason erroneously assumed above).

    So, the reason the money supply has grown by amounts substantially smaller than the Fed's monthly purchases is that you and I and Doug are paying back our loans and mortgages. Every time a regular monthly mortgage payment is made, a small part of that is usually principle, and that return of principle does in fact reduce the money supply. Every time a loan is paid-off, the return of principle is a reduction in the money supply.

    When banks aren't lending, old loans and mortgages still get paid off. That's what could be called "natural" deleveraging. Unnatural deleveraging is when loans go bad, and the bank has to book a reduction to its capital (i.e. equity) account.
    May 9 09:52 AM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    To Asbytec

    << Thinking about what Jason was saying above, even if the Fed buys private debt such as MBS, it is still creating "federal" reserves and issuing federal reserve notes that are still, in the end, a liability of the Fed as a privately contracted government agency. As such, one can argue they are still a government liability regardless of the source of debt (or gold) used as an asset. >>

    An agent of the government is not part of that government. If that agent were part of that government, "it" would not be referred to as "an agent" it would be referred to as "a Department."

    Like, the Treasury Department.

    No, it couldn't be that simple. I must be wrong somewhere.
    May 9 08:56 AM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]
    To Asbytec

    Please explain how the Fed could directly fund the Treasury. I guess you mean the Fed could be instructed to print just enough money to buy all the Treasury's bonds directly from the Treasury. But that would mean the money supply would not be under the Fed's control.

    Surely this is not what you advocate as a "reliable" policy since the Fed normally doesn't print nearly as much as the Treasury spends.

    But perhaps you believe (1) the Fed's balance sheet isn't bloated at all or (2) the money supply is unimportant.
    May 9 08:35 AM | 1 Like Like |Link to Comment
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