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The Fed bought up 1 trillion in mortgage debt and no one blinked -- that is why mortgage rates are 4%. If China started dumping their T bills the Fed would jus
by asmithmd1 16y ago
The Fed bought up 1 trillion in mortgage debt and no one blinked -- that is why mortgage rates are 4%. If China started dumping their T bills the Fed would just buy them up. It wouldn't hit like a train -- more like a tricycle.
- devmonk 16y agoBut the U.S. can't do that forever without inflation, because they either have to cut spending (which wouldn't happen due to fears it might affect unemployment and the economy), raise taxes (same deal, and is even more of a political mess), or print money. Printing money in bulk over and over leads to inflation. Inflation causes people to slow spending.
- artsrc 16y agoThey are printing money to directly manage interest rates and indirectly manage inflation. If the Chinese liquidate the debt they own, the Fed printed money to buy the debt, and Chinese spent the money employing americans eventually that might cause wage inflation. That process seems slow enough that inflation would be no big deal to manage.