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It's not pretty impressive that it hasn't caused inflation. It's exactly what we would expect based on the predictions of mainstream economic theory in our curr
by Amezarak 13y ago
It's not pretty impressive that it hasn't caused inflation. It's exactly what we would expect based on the predictions of mainstream economic theory in our current situation. Indeed, if the Fed had to print an additional $1 trillion to cover these dumped bonds I am doubtful the inflation would tick up more than half a percent at best.
The whole thing is kind of moot since China would be committing economic suicide by doing this.
- wintersFright 13y agoYes, the Fed will quickly buy up all the bonds necessary to feed the USGovt appetite, allowing the USGovt to outbid any citizen for goods and services. This situation does not lead to a nice and cool inflation of 2%. Meanwhile will the rest of the world be willing to ship real goods and services in return for promises of ever more paper IOUs from the USG, and when those paper IOUs are due, the promise of even more paper IOUs? If this all sounds sustainable, I have a deal for you. I want to borrow $100 off you and I'll pay you $105 next year. Don't worry, I'm good for it. I'm also lending myself $200 and will pay myself back $210 next year. So how about it? Clearly the 5% interest rate is what has been set by the market (me) so you are getting a good deal. Next year comes around and I hand you some paper IOUs for $110 the next year. Meanwhile, I'll borrow another $100 off you. I've been living it large and need a bit more sugar. Don't worry, I'm good for it - I'll lend myself another $200 too!