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MMT 101. The federal government is a net payer of Interest to the private sector. Thus, when interest rates are increased, Interest income to the private sector
by bubbleRefuge 5y ago
MMT 101. The federal government is a net payer of Interest to the private sector. Thus, when interest rates are increased, Interest income to the private sector increases. Interest paid by the US treasury to the private sector is kind of printing money. When interest rates go down, interest income to the private sector decreases.
- missedthecue 5y agoThe total amount of interest paid by the government to all parties, domestic, foreign, private, and public sector was about $400 billion in 2021. Meanwhile, America borrowed $1 trillion in new debt in the same year. Lower rates contribute to a higher money supply far more than raising interest rates adds to the interest income paid to the private sector.
- bubbleRefuge 5y agoWhen considering non-government sector burrowing due to lower interest rates, these transactions net to zero for the private sector, because an asset and a liability is created to the private sector. In the case of government paying interest to the private sector, the private sector balance sheet nets positive.
- bubbleRefuge 5y agoPlease consider what your $400B number would be if the FFR were 5%. Here we are talking about perhaps 3 billion. Thats the point. Fed is trying to hit the brakes but actually is hitting the accelerator. MMT 101.
- missedthecue 5y agoWe are a long way from 5%. Fed is looking at raising rates a total of 0.75% over the next 12 months.