Who is not printing money?
- Thread starter ValeryN
- Start date
To my knowledge the Fed has not bought individual mortgages. During the financial crisis of 2007-9 they did buy Securitized mortgages, MBS from Banks that were oterwise solvent. This saved solvent banks when the market for MBS froze and the lack of price discovery in the MBS market meant they could not be marked to market to satisfy the bank's MTM accounting requirements. These MBS were not worthless, but there was temporarily no market for them. The Fed appraised them and made a market to rescue banks by taking them off the banks books as crediting the bank's reserve accounts. In general, the Fed buys neither individual mortgages nor MBS. Those entities that were buying mortgages and securitizing them never did that with the anticipation that the Fed would buy them.
It is called a debt ceiling, I suppose, because what the Treasury does when it auctions bonds looks like it is borrowing. Because the English lexicon has no word that correctly describes the bonds issued by the Treasury, and because most people are convinced we are borrowing, we all refer to Treasury bonds as "debt".
People who correctly understand Treasury- Central-Bank operation, however, realize that bonds are a tool of the central bank and an interest paying store of money. The bonds the U.S. Treasury issues are not debt instruments like the debt instruments issued in the private sector. This crazy debt ceiling business is political extortion so far as I can see. Same reason Gingrich and pals shut down the federal government . Extortion! Republicans are insisting they get their way or they will make a mess of things.
In effect what the Republicans are doing is putting a limit on the aggregate deficit. This could be largely circumvented by raising taxes on the upper middle classes and the wealthy, slightly increasing the contribution rates to Social Security and Medicare, and removing the cap on Social Security. But the Republicans in the house will block any attempt to do any of these things or any other attempt to taxes. If they also block further deficit spending then the only choice left is spending cuts. They are hoping through this extortion to force privatization of Social Security, phase out medicare, starve the IRS and the EPA, gut the welfare system, and in general to roll us back to the 19th Century. They will fail again of course, but in doing so create, once again, a mess. This is what happens when we elect ignorant, conspiracy crackpots, liars, and power hungry persons with unbridled ambition to represent us. These folks are anarchists set upon destroying the Government by making it malfunction. I used to foolishly say the only risk U.S. bonds bear is inflation. I now realize they also bear considerable political risk.
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So since the US Government has no "debt", then if there is no debt ceiling raise, the US government will chug along just fine, because it is all an illusion, based upon a lack in the lexicon of your language.
Got it.
I really would love to see this play out, because there are a lot of people sick and tired hearing about this phantom "debt" you claim does not exist, every year for the past 30ish years. EVERY year, including through the full Dem controlled government of Biden, keeps trying to tackle this "debt ceiling" problem.
Let's just see what happens! Wheeee!
I'm sick and tired of it myself. Reasonable solutions to funding of Social Security and Medicare were proposed years ago, but are routinely blocked by the growing radical, right wing of the Republican party that is ideologically opposed to social programs. For many years now their approach has been to thwart any sound changes proposed for these programs, often by inserting poison pill provisions into Bills. If they can't kill these programs outright, they try to ruin them one step at a time. They actively seek to insert defects into these programs, and then complain that they are defective.
We won't get along fine because what they are actually doing when they call for a "debt" ceiling is to put a limit on deficit spending. But deficits become the only way to keep present government programs funded when the Republicans block all the alternatives to deficit spending that of course involve increasing taxes. They propose instead changes to Social Security, medicare, the EPA, and the IRS that are far out of step with what most Americans want. They have zero chance of getting any of their proposed changes adopted via democratic process . So they are falling back on extortion and violent over turning of election results. In other words, they have become a criminal party bent on doing whatever it takes to get their way, even if it requires criminal activity and extortion. I doubt they will succeed, but who knows? In the meantime they will make quite a mess of things.
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I just cannot fathom how you are effectively saying that you know more about the monetary policy and internal workings of the Federal Reserve, and know it better, than any and every economist over the past 100 years, including Janet Yellen, the secretary of the Treasury, who used to be the Fed chairperson...Better than all the Fed presidents...You know more than everyone.
Yet you keep this secret knowledge to yourself, and refuse to speak to any major news outlet like CNN who keeps taunting the entire US population about how the US Government is about to default on it's debt obligations, and the full faith and credit of the Gubment is going to be trashed if we do not raise the mythical debt ceiling. You could save this country a LOT of teeth-grinding and stressful anguish if you would come forth with your knowledge.
YOU have all the answers, but you refuse to let all the experts with double doctorates in macroeconomics in on your little secret.
You are a very selfish person.
Now wait just a G.D. minute, young man. I'm not "effectively" saying anything of the kind. I certainly am implying however that I know far more about Fed and central bank operation then the majority of folks posting in these fora. I get my information from the writings of Fed bankers and economists such as Greenspan, Bernanke, John C. Williams, etc. and from the pantheon of MMT economists, a sub discipline of economics concerned with money and Treasury/Central Bank operations. This pantheon would include economists such as Wray, Mitchell, Mosler, Kelton, Tankus, etc., all prominent contributors to MMT economics. Of course in my studies it was impossible to not come across the work of Minsky and Lerner who hugely influenced MMT. I started serious study of economics about 12-15 years ago. My mentor is a close personal friend, and a well known Rutgers/Harvard trained, environmental economist. Although I am guided by brilliant thinkers and experts, mistakes I make from time to time in these posts are all my own.
If you don't agree with something, I post tell me why. In the meantime I'll continue making contributions to ET, with the hope that some of it will eventually sink in.
Here is a little question for you. Suppose a pandemic hits and puts millions out of work as businesses shutter there doors. The government quickly decides to send checks to millions of Americans and to businesses to help them cover their fixed expenses. The checks will total a trillion dollars. Do you think that the government will first go to the bond markets and borrow a trillion dollars before they cut the checks and send them out? If they don't first borrow a trillion, how do you suppose they finance the trillion dollars in sudden new Treasury liability?
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Actually, I thought I gave a rather succinct and reasonable answer. I also pointed out that the "debt limit" is actually a limit on deficit spending, as Treasury securities are issued to match, dollar for dollar, the deficit.
The debt limit is purely political. It is an invention of politicians who have rather thoroughly convinced the American public that government finances are just like their personal finances. And if the government spends more than they take in it will go bankrupt!, exactly like you or I will if we spend more than our income.
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