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> That's not really how the financial system works. Money enters circulation when someone takes out a loan. It leaves circulation when that loan is repaid. It i

> That's not really how the financial system works. Money enters circulation when someone takes out a loan. It leaves circulation when that loan is repaid. It is low interest rates that cause an increase in asset values. But unlike me and my credit lines, the US Gov has no credit limit. It's akin to printing, since it takes out new loans to service its current debts and operational expenses. The FED is mandated to purchase US bonds. I do think you make a good point about Tether artificially inflating the price, but I do see that as Tether's issue. Not that it won't tank crypto prices, just that it's not Doge that's fraudulent.

arcticbull 5y ago
> But unlike me and my credit lines, the US Gov has no credit limit. It's akin to printing, since it takes out new loans to service its current debts and operational expenses. I think that's partially true. For the most part debt isn't held at the Fed, and in steady state the Fed unwinds their balance sheet over time. They hold $4.5T - a lot by any measure - but not out of the $28T total outstanding. The majority of that is held domestically by US entities. The next major holder is Japan. The Fed isn't mandated to purchase bonds, per se, they have the ability to should circumstances necessitate. Their mandate is to maximize employment in the United States and to maintain a low, predictable rate of inflation. They have this tool in their chest to achieve these goals. The US government has "no credit limit" in the same way your Amex charge card has "no credit limit." It's limited in how much it can borrow by its ability to service debt and also its ability to find new holders of its debt. That's not limited per se, but it's certainly not unlimited either. After all a loss in confidence would lead to buyers demanding higher interest rates which could be catastrophic.
ac29 5y ago
The US government does have a credit limit (one that can be changed by congress, though): https://en.wikipedia.org/wiki/United_States_debt_ceiling https://en.wikipedia.org/wiki/United_States_debt_ceiling And, it has nearly been reached quite a few times causing fun things like furloughs and government shutdowns of various degrees.
- reedjosh 5y ago
  This is a self imposed limit. The debt ceiling is a tool for political brinksmanship and whatnot, but it's not imposed by the US's creditors.

arcticbull 5y ago

> But unlike me and my credit lines, the US Gov has no credit limit. It's akin to printing, since it takes out new loans to service its current debts and operational expenses. I think that's partially true. For the most part debt isn't held at the Fed, and in steady state the Fed unwinds their balance sheet over time. They hold $4.5T - a lot by any measure - but not out of the $28T total outstanding. The majority of that is held domestically by US entities. The next major holder is Japan. The Fed isn't mandated to purchase bonds, per se, they have the ability to should circumstances necessitate. Their mandate is to maximize employment in the United States and to maintain a low, predictable rate of inflation. They have this tool in their chest to achieve these goals. The US government has "no credit limit" in the same way your Amex charge card has "no credit limit." It's limited in how much it can borrow by its ability to service debt and also its ability to find new holders of its debt. That's not limited per se, but it's certainly not unlimited either. After all a loss in confidence would lead to buyers demanding higher interest rates which could be catastrophic.

ac29 5y ago

The US government does have a credit limit (one that can be changed by congress, though): https://en.wikipedia.org/wiki/United_States_debt_ceiling https://en.wikipedia.org/wiki/United_States_debt_ceiling And, it has nearly been reached quite a few times causing fun things like furloughs and government shutdowns of various degrees.

reedjosh 5y ago
This is a self imposed limit. The debt ceiling is a tool for political brinksmanship and whatnot, but it's not imposed by the US's creditors.