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He might mean debt monetization. When the Fed buys treasuries. I think the video didn't touch on that. M2 money supply changes nicely correlate with S&P500 perf
by hydroreadsstuff 6y ago
He might mean debt monetization. When the Fed buys treasuries. I think the video didn't touch on that.
M2 money supply changes nicely correlate with S&P500 performance. So there is truth to his statement.
I'd also throw out the assumption that the Fed will reduce the balance sheet eventually.
They tried and failed in 2019.
It's not going to happen.
They are in fact "spending" (through the Treasury and their bond-buying programs), even though Powell likes to say that the Fed doesn't have spending power, but has lending powers.
- throw0101a 6y ago> They tried and failed in 2019. That's because COVID-19 happened. :) The Fed is buying up bonds: at some point they will mature and the US government will have to either (a) increases taxes to come up with the money to repay them (thus taking money out of circulation via the IRS), or (b) roll the debt forward by issuing new debt to pay the old debt. Given that a few years ago the UK rolled forward some debt from the South Sea Bubble, Napoleonic Wars, WW1, etc, rolling forward debt is not as big a deal as most people think: * https://www.theguardian.com/business/blog/2014/oct/31/paying-the-price-of-war-britain-makes-good-on-historic-debts https://www.theguardian.com/business/blog/2014/oct/31/paying... * https://www.nytimes.com/2014/12/28/world/that-debt-from-1720-britains-payment-is-coming.html https://www.nytimes.com/2014/12/28/world/that-debt-from-1720...
- hydroreadsstuff 6y agoThey lowered the rates for corona, but they expanded the balance sheet for that overnight lending rate spike before that.
- imtringued 6y agoThe balance sheet can only be reduced during times of inflation. I think everyone can agree that we are far away from that.