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It's not like $30 trillion is a perpetual bond. Bonds have a date and the government will need access to the bond market to finance stuff. If the inflation is

It's not like $30 trillion is a perpetual bond. Bonds have a date and the government will need access to the bond market to finance stuff. If the inflation is higher than the nominal rate on the bond, there would be fewer and fewer takers.

missedthecue 5y ago
Except the fed can and does buy trillions of dollars worth of Treasury issuance. (Guess where they get the money to do so)
- credit_guy 5y ago
  The Fed creates money out of thin air. Still, it does not mean the bonds bought by the Fed are foregone. The US Treasury still has to pay all the interest and principal on them.
  - sjg007 5y ago
    >has to pay all the interest and principal on them. With the money they create out of thin air.
  - missedthecue 5y ago
    For a while now, the Treasury has been borrowing to pay the interest it owes, and everyone knows that we don't actually pay down the federal debt, we just roll it over into new debt.
- mohanmcgeek 5y ago
  Oh please let's keep the MMT and End the Fed theories to reddit. If you think Fed is creating money out of thin air, it's too far from reality and too politically coloured for me to convince you otherwise.
  - dragonwriter 5y ago
    > If you think Fed is creating money out of thin air, it's too far from reality and too politically coloured for me to convince you otherwise. The Fed is creating money out of thin air (well, strictly speaking, it's managing, through target interest rates and other levers, the ability of member banks and other actors to do so, but that's the same thing, ultimately.) That is the objective reality. And it's just conventional understanding of monetary policy, not MMT or End the Fed. (MMT points out the further fact that the Congress, by net taxing/spending decisions, also creates money out of thin air, or destroys it, and furthermore that that and it's money supply effects, not the mythical constraints of fiscal balance which are entirely applying concepts that only make sense in terms of a commodity currency whose underlying commodity supply is not ultimately controlled by the government at issue to a fiat currency to which they do not apply—which, really, is all basically conventional economics, but also conventionally ignored in a policy evaluation context because conventional economists don't like the policy conclusions it leads to; End the Fed I won't touch, because I’ve yet to see a clear, coherent, consistent argument in it beyond “Fed bad”.)
  - missedthecue 5y ago
    What? This isn't MMT or conspiracy. Where do you think the Fed gets its money when it grows its balance sheet by $4 trillion in two years? I'm honestly curious, where do you think that money comes from? https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
    - mohanmcgeek 5y ago
      So when you go to the bank and borrow money with either your personal credit or with your house as collateral, is the bank creating money "out of thin air"?
      - missedthecue 5y ago
        They take money from depositors to originate the loan. But I'm not talking about the money multiplier effect of fractional reserve banking. I'm talking about when the US Treasury needs to quickly sell several trillion dollars worth of bonds to fund things like stimulus checks, covid tests, etc..., and the Fed buys most of it (in order to keep interest rates from skyrocketing) they are doing so by creating new money. The fed doesn't have $4 trillion in cash deposits to loan out to the treasury, especially while they are cutting reserve requirements. They do not take that money from someone else. They do not sell a product to get revenue. They mark up the accounts at the Fed and spend trillions of dollars that didn't previously exist on government bonds. The Treasury takes that money and spends it on govt programs. Again, where do you think the Fed gets new cash to buy bonds with?
mimikatz 5y ago
Inflation is currently much higher than treasury bond rates and they are selling fine. Your claim is obviously false. Inflation was 7% the stated goal inflation rate is 2%. The 5 year t bill is 1.7%.
- idontwantthis 5y ago
  US Bonds are considered basically the safest investment in the world, so in a condition where they lose you money, they are still better than either not investing (losing even more to inflation) or risking on something with higher returns.
  - nybble41 5y ago
    > US Bonds are considered basically the safest investment in the world… Unless you're a U.S. (net) taxpayer, in which case you're paying yourself back and any interest you might get from the bond is purely illusory. It's a good deal if you're not a U.S. taxpayer, though.
  - lumost 5y ago
    Alternately, on average all investors lose money in real terms. There is no guarantee that investments yield a positive return.
  - onionisafruit 5y ago
    At some point the second safest investment in the world will have 2x the return and nobody will be interested in the safest.
    - heavyset_go 5y ago
      Even in that scenario, it'll still serve as a hedge.
    - chii 5y ago
      some institutions need to hold the safest investment, since they might have sudden need to use it as cash - places like insurance companies, or companies that are holding on to liabilities that have a future date, but need to have assets today on hand (for paying in the future date). You cannot hold equities, or bonds which could lose value for such purposes.

missedthecue 5y ago

Except the fed can and does buy trillions of dollars worth of Treasury issuance. (Guess where they get the money to do so)

credit_guy 5y ago
The Fed creates money out of thin air. Still, it does not mean the bonds bought by the Fed are foregone. The US Treasury still has to pay all the interest and principal on them.
- sjg007 5y ago
  >has to pay all the interest and principal on them. With the money they create out of thin air.
- missedthecue 5y ago
  For a while now, the Treasury has been borrowing to pay the interest it owes, and everyone knows that we don't actually pay down the federal debt, we just roll it over into new debt.
mohanmcgeek 5y ago
Oh please let's keep the MMT and End the Fed theories to reddit. If you think Fed is creating money out of thin air, it's too far from reality and too politically coloured for me to convince you otherwise.
- dragonwriter 5y ago
  > If you think Fed is creating money out of thin air, it's too far from reality and too politically coloured for me to convince you otherwise. The Fed is creating money out of thin air (well, strictly speaking, it's managing, through target interest rates and other levers, the ability of member banks and other actors to do so, but that's the same thing, ultimately.) That is the objective reality. And it's just conventional understanding of monetary policy, not MMT or End the Fed. (MMT points out the further fact that the Congress, by net taxing/spending decisions, also creates money out of thin air, or destroys it, and furthermore that that and it's money supply effects, not the mythical constraints of fiscal balance which are entirely applying concepts that only make sense in terms of a commodity currency whose underlying commodity supply is not ultimately controlled by the government at issue to a fiat currency to which they do not apply—which, really, is all basically conventional economics, but also conventionally ignored in a policy evaluation context because conventional economists don't like the policy conclusions it leads to; End the Fed I won't touch, because I’ve yet to see a clear, coherent, consistent argument in it beyond “Fed bad”.)
- missedthecue 5y ago
  What? This isn't MMT or conspiracy. Where do you think the Fed gets its money when it grows its balance sheet by $4 trillion in two years? I'm honestly curious, where do you think that money comes from? https://fred.stlouisfed.org/series/WALCL https://fred.stlouisfed.org/series/WALCL
  - mohanmcgeek 5y ago
    So when you go to the bank and borrow money with either your personal credit or with your house as collateral, is the bank creating money "out of thin air"?
    - missedthecue 5y ago
      They take money from depositors to originate the loan. But I'm not talking about the money multiplier effect of fractional reserve banking. I'm talking about when the US Treasury needs to quickly sell several trillion dollars worth of bonds to fund things like stimulus checks, covid tests, etc..., and the Fed buys most of it (in order to keep interest rates from skyrocketing) they are doing so by creating new money. The fed doesn't have $4 trillion in cash deposits to loan out to the treasury, especially while they are cutting reserve requirements. They do not take that money from someone else. They do not sell a product to get revenue. They mark up the accounts at the Fed and spend trillions of dollars that didn't previously exist on government bonds. The Treasury takes that money and spends it on govt programs. Again, where do you think the Fed gets new cash to buy bonds with?

mimikatz 5y ago

Inflation is currently much higher than treasury bond rates and they are selling fine. Your claim is obviously false. Inflation was 7% the stated goal inflation rate is 2%. The 5 year t bill is 1.7%.

idontwantthis 5y ago
US Bonds are considered basically the safest investment in the world, so in a condition where they lose you money, they are still better than either not investing (losing even more to inflation) or risking on something with higher returns.
- nybble41 5y ago
  > US Bonds are considered basically the safest investment in the world… Unless you're a U.S. (net) taxpayer, in which case you're paying yourself back and any interest you might get from the bond is purely illusory. It's a good deal if you're not a U.S. taxpayer, though.
- lumost 5y ago
  Alternately, on average all investors lose money in real terms. There is no guarantee that investments yield a positive return.
- onionisafruit 5y ago
  At some point the second safest investment in the world will have 2x the return and nobody will be interested in the safest.
  - heavyset_go 5y ago
    Even in that scenario, it'll still serve as a hedge.
  - chii 5y ago
    some institutions need to hold the safest investment, since they might have sudden need to use it as cash - places like insurance companies, or companies that are holding on to liabilities that have a future date, but need to have assets today on hand (for paying in the future date). You cannot hold equities, or bonds which could lose value for such purposes.