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Very true and no one should be surprised that the Fed is stepping in as buyer of last resort. It is one of their roles. I'd argue that the more important part
by snarf21 6y ago
Very true and no one should be surprised that the Fed is stepping in as buyer of last resort. It is one of their roles.
I'd argue that the more important part of monetary policy is the rate setting and I think that is quite different than fiscal policy. In my opinion, fiscal policy should be employed if we can get a greater percentage of return on GDP than the yield on the treasury note. In this case, the government is getting free money.
- thephyber 6y ago> if we can get a greater percentage of return on GDP than the yield on the treasury note. In this case, the government is getting free money. Can you explain this? GDP is the total aggregate of all receipts in the economy. The government typically only gets a percentage of this in revenues.
- snarf21 6y agoThere are smarter economists than can probably explain it better than me. Keep in mind that if we spend $500B on notes, the increase on GDP is much larger than on just this new spend. The hope is that we are spending this on projects that are economy enablers that have a compounding effect. Meaning that we just need to recover the say 3% of the $500B over a 10 year period. This spending is best spent on infrastructure and technology. Even if we don't get the full return, keep in mind that most notes get spent on non-GDP increasing projects making break even a good deal. (Sorry, I still don't have the best ways to explain this, I need to find some writing that is clearer.)