What are the repercussions of unlimited printing?

https://www.marketwatch.com/story/u...m-debt-in-2020-to-finance-stimulus-2020-04-01

Investors are awaiting a flood of short-term debt issuance from the U.S. government after President Donald Trump signed off on a $2.2 trillion rescue stimulus package to soften the blow from the COVID-19 pandemic.

Much of the borrowing used to finance the stimulus measures is expected to come from the market for Treasurys bills, or debt with maturities of a year or less, with some analysts anticipating more than $2 trillion of bill issuance in 2020.
 
eastern_warrior said:
https://www.marketwatch.com/story/u...m-debt-in-2020-to-finance-stimulus-2020-04-01

Investors are awaiting a flood of short-term debt issuance from the U.S. government after President Donald Trump signed off on a $2.2 trillion rescue stimulus package to soften the blow from the COVID-19 pandemic.

Much of the borrowing used to finance the stimulus measures is expected to come from the market for Treasurys bills, or debt with maturities of a year or less, with some analysts anticipating more than $2 trillion of bill issuance in 2020.
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Ah, so they will sell those bonds during this year.(?)

Hmnnn.

Printing out of the thin air
or
the debt , that most likely, will never be paid back.

Looks like BETA of 1.0
 
Nobert said:
Ah, so they will sell those bonds during this year.(?)

Hmnnn.

Printing out of the thin air
or
the debt , that most likely, will never be paid back.

Looks like BETA of 1.0
More...

It is debt. The trouble starts if the markets believe it won't be paid back. From what I read and hear from those much smarter than me on this subject is that it is manageable and there is little choice but to believe this because if not it will get very very ugly.
 
eastern_warrior said:
if not it will get very very ugly.
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Maybe* it will...

WARREN.PNG


But then, FED buys the index(if im correct), and the same index is being bought , by funds like 1T Norway's reserve(pensions?) fund,
so the ,,index is becoming the bonds'', if one could put in this way.
 
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eastern_warrior said:
It is debt. The trouble starts if the markets believe it won't be paid back. From what I read and hear from those much smarter than me on this subject is that it is manageable and there is little choice but to believe this because if not it will get very very ugly.
More...

Debt to GDP is a reliable measure and as I noted many times on this site the US has similar numbers to what Canada had decades ago before this crisis. The eventual solution was higher personal taxes for 15+ years.
 
Money printing is another name for deficit spending, QE, and debt monetization.

The end game is debt saturation, asset bubbles, and a complete dependence on credit for all economic activity. The sovereign becomes indebted. If you keep doing it long enough, then there is a buildup of non-performing and underperforming loans. This can be called debt overhang. Banks love it when debt markets grow.

Debt levels get heavy and the system becomes overleveraged. Mal-investment occurs and is protected, and allowed to continually refinance. All the printing works to suppress interest rates so that the refinancing can keep going. Debts don't get paid off, ever. We've been doing it for so long that the debt deflationary pressure is limiting inflation, so we end up monetizing a lot of debt and getting only a small amount of real GDP.

In theory, this should put pressure on the domestic currency and create local inflation, and it has (Fed likes 2%). But, in the case of the US, we have managed exchange rates and the reserve currency. This is called a managed float regime, or 'dirty' float. It works to prevent currency depreciation.

Because of the dirty float (Fed, BOJ, BOE, ECB, RBA, BOC, etc.) the central banks can print all they want and just fix the exchange rates. There is very little risk of runaway inflation. But, there is serious risk of deflation in any significant slow down in demand. This is due to the amount of leverage in the system (overhang, malinvestment, low margin businesses).

That's what SARS-COV2 is doing. It's causing a collapse in demand when debt levels are at all time highs. Revenues are evaporating which is creating a need for exposed firms to source cash and cut expenses, else they may go out of business. Problem is, for some of the affected industries, they might actually be better off just exiting the industry they were in prior to COVID.

The Fed wants everything to go back to the way it was before COVID, but we're not there yet.
 
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Nobert said:
Thoughts on how long will it take and how much more effort, has to be put in, for that to happen ?
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I don't think we can go back to the way it was before COVID. There was decades of expansionary policy and totally unfettered spending for a long time. That kept GDP growing. This is a serious slow down. It will affect long term growth significantly. The Fed is trying to limit that, because they know it's bad for the economy.

Americans are going to be spending less after the virus slows. Maybe for a long time. If the virus comes back and the outbreaks keep recurring, every body will be spending less. When businesses fail and they are wiped out, or have to downsize and layoff, that also reduces spending. The uncertainty is causing a reduction in investment as well, that hurts growth.

The economy may actually be trying to go through a structural change. It can be a good thing for businesses to fail. If an industry becomes less profitable, then it shouldn't pull as much capital investment to it.

This is the question: Are we trying to protect businesses that are not going to do well in a post COVID economy? Sometimes businesses should go bankrupt. It can rapidly reallocate capital to industries with more potential for growth.

The entire idea of a service based economy, which naturally allocates toward the largest margin businesses (luxury events, travel, hospitality, fine dining, etc.) is under attack.
 
We got some apocalypticists (correct?) here in Germany, that come from the financial industry.

One says, that there might be 15% zombie companies in Germany, that exist because of the zero interest rate here.

Once a big crisis escalates (like today?), and banks get problems with their credit holders, this whole construction will collapse.

Let's see.

Same people say there are 30% zombie companies in Japan, but the economy there is still running... ; )

Btw, the US is now heading the same way.
 
This is why the bed wetters advocating for long/longer shut downs over a bad flu season should take a pause and realize there are significant consequences for those actions.

You either have a Great Depression wave of defaults and extreme unemployment, or you have tax payer funded bailouts.

Either way, it’s not a pretty picture.
 
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