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Again, not true. The Federal Reserve can step in and buy bonds at any point, giving Treasury the ability to pay. >revenue sources with which to pay them Can y

• dragonwriter 11y ago
  > The Federal Reserve can step in and buy bonds at any point It may be the case that it theoretically is authorized to do so (though it does not in practice), but if so it would do so in support of the goals its employment/inflation related goals, not to finance the debt. In fact, the whole reason for having an independent (of the entities setting and executing fiscal policy) central bank is to reassure users of currency and investors in government debt that fiscal concerns will not drive monetary policy. > Can you show me where Treasury says fiscal outlays are funded by tax receipts, or solely through payments from primary dealers? I can show you where the Fed says that they don't purchase directly from the Treasury, and that their purchases are tied directly to their mandates regarding employment and inflation targets, not supporting Treasury's fiscal needs. [0] > The government doesn't work like a business in this case. The government may seem not to work like most businesses because its debt is perceived as risk-free, which gives it seemingly limitless ability to borrow money at extremely low rates, which makes it possible to make spending decisions with little short-term regard for balance with revenues; but the perception of lack of risk in government debt is driven by the underlying perception that the government has, and is willing to use to the extent necessary, the power to tax assets and income subject to the jurisdiction of the United States, and the perception of the size of those current assets and expected income. [0] http://www.federalreserve.gov/faqs/how-does-the-federal-reserve-buying-and-selling-of-securities-relate-to-the-borrowing-decisions-of-the-federal-government.htm http://www.federalreserve.gov/faqs/how-does-the-federal-rese...