> Congress has approved trillions of dollars in stimulus to help U.S. households and businesses get through the pandemic, and another package is now being negot

> Congress has approved trillions of dollars in stimulus to help U.S. households and businesses get through the pandemic, and another package is now being negotiated on Capitol Hill. One key component—an extra $600 in weekly jobless benefits—is due to expire at the end of July, but lawmakers are still discussing whether and how to extend the aid. This is the part that isn't getting enough attention. That "stimulus" came in the form of treasury bonds. Those bonds need to be bought by... someone. Foreign central banks stopped net buying US treasuries a few years ago. At the same time, gold holdings by central banks have climbed. The world outside the US is thumbing its nose at US federal debt as a reserve asset. Without deep-pocket buyers, the interest rate on US debt will rise, and continue rising until a suitably-high interest rate can be found to justify the risk of loss. So the Fed has stepped into the void and bought the treasuries in unprecedented quantities: https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL It turns out even this isn't enough to soak up all the debt being issued. Regulations have been relaxed so that banks can claim treasury holdings as reserves. The Fed has deputized banks as holders of US debt. https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200515a.htm https://www.federalreserve.gov/newsevents/pressreleases/bcre... This sets up a situation in which US treasury yields simply can't be allowed to spike because if that happened: 1. banks would suffer capital losses 2. the US government would become unable to sustain interest payments on new debt. That means forced cuts to entitlements and even the military. Clearly, this would spell disaster. So it's not going to happen. The Fed will keep buying and buying and buying. If need be, regulations will be changed to allow the Fed to buy things it has never been able to buy before. Like US stocks. The party can never, ever end. The balance sheet expansion will continue until some factor emerges that causes more pain as the balance sheet expands. I'm not sure what that factor could be, but it would come as a very big shock. For clues regarding the limit of Fed money printing, look to the enormous asset bubble that's developing in US stocks. The more the balance sheet expands, the bigger this bubble gets. And for the foreseeable future, the Fed can't stop printing. What breaks first?