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The article has the following sentence: "Imagine the Fed printed dollars and bought all the T-bills in the world at market prices. Would this cause inflation?
by tanseydavid 8y ago
The article has the following sentence:
"Imagine the Fed printed dollars and bought all the T-bills in the world at market prices. Would this cause inflation? No. No one’s balance sheet has changed a bit (since the t-bills were bought at market prices)."
This ignores the fact that the printed money traded for the T-Bills will be spent by the government into the general economy.
To claim that no one's balance sheet has changed is either ignorant or intentionally misleading.
- tfehring 8y agoThe cash traded for the T-Bills will be spent in the general economy, but the T-Bills themselves, which are equivalent to cash from institutions' perspective, will no longer be spent. There's no inflation because these impacts offset each other. The Treasury's balance sheet would nominally change, because it accounts for cash different than outstanding T-Bills. Non-government institutions' balance sheets wouldn't change at all, because T-Bills are cash equivalents [0] from an accounting perspective, which reflects their usage in practice. [0] https://www.investopedia.com/terms/c/cashequivalents.asp https://www.investopedia.com/terms/c/cashequivalents.asp