Yes, the government cannot die in theory so the government debt can keep going up forever... Which is what seems to be happening. In order to pay back its old debts, the government takes out new, bigger debts (from the Fed mostly) and uses the new debt to pay off the old debts (again, to the Fed mostly; via open market operations).
This activity inflates the money supply. Because big government susidies, policies and overall spending tend to go to big corporations; much of that new government bond money ends up going into speculative investments like the stock markets, financial corporations and cryptocurrencies.
> government takes out new, bigger debts (from the Fed mostly)
via open market operations
This activity inflates the money supply
This sounds like conspiracy theory bullshit that confuses the quantitative easing that happened after the financial collapse with what's happening today.
Open market operations is one way that the Fed injects money into the economy; the government creates bonds/debt out of thin air and sells them to the Fed on the open market:
^ That's more than $10 trillion of new money 'borrowed' from the Fed by the government and then injected into the system in just 10 years. $1 trillion per year equates to 10% of the US GDP.
Quantitative easing is different because the Fed went beyond the regular open market operations of just buying government bonds; they also started buying other kinds of assets. After the 2008 crisis, the Fed purchased toxic assets from troubled banks; the same toxic assets which caused the financial crisis. See https://www.csmonitor.com/Business/The-Circle-Bastiat/2010/0...
When the Fed buys securities, they essentially create new money out of thin air. So that's $3.6T of new money.
But that program ended four years ago. Since then the Fed's balance sheet has been gradually shrinking.
Since the program ended, the Fed has sold $0.4T of those securities.
Just like the Fed creates new money when they buy securities, they destroy money when they sell securities.
So for the last four years, the Fed has been destroying money, not creating it.
This has nothing to do with the national debt, or the government selling bonds to finance the budget deficit.
With the exception of the Fed's crisis response (which ended four years ago), the bonds that fund the national debt are held by the general public and as foreign reserves by nations around the world -- not by the Fed creating money.
Comments
Yes, the government cannot die in theory so the government debt can keep going up forever... Which is what seems to be happening. In order to pay back its old debts, the government takes out new, bigger debts (from the Fed mostly) and uses the new debt to pay off the old debts (again, to the Fed mostly; via open market operations).
This activity inflates the money supply. Because big government susidies, policies and overall spending tend to go to big corporations; much of that new government bond money ends up going into speculative investments like the stock markets, financial corporations and cryptocurrencies.
> government takes out new, bigger debts (from the Fed mostly)
This sounds like conspiracy theory bullshit that confuses the quantitative easing that happened after the financial collapse with what's happening today.
Citation needed.
Open market operations is one way that the Fed injects money into the economy; the government creates bonds/debt out of thin air and sells them to the Fed on the open market:
https://www.investopedia.com/terms/o/openmarketoperations.as...
National debt over time chart (from Wikipedia): https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
^ That's more than $10 trillion of new money 'borrowed' from the Fed by the government and then injected into the system in just 10 years. $1 trillion per year equates to 10% of the US GDP.
Quantitative easing is different because the Fed went beyond the regular open market operations of just buying government bonds; they also started buying other kinds of assets. After the 2008 crisis, the Fed purchased toxic assets from troubled banks; the same toxic assets which caused the financial crisis. See https://www.csmonitor.com/Business/The-Circle-Bastiat/2010/0...
> the Fed injects money into the economy
It's deceptive to conflate the Fed's response to the 2008 financial crisis with normal non-crisis operations.
It's true that the Fed purchased a lot of securities in response to the crisis.
You can see their balance sheet ballooning from $0.9T to $4.5T here --> https://imgur.com/a/PGthKNj
When the Fed buys securities, they essentially create new money out of thin air. So that's $3.6T of new money.
But that program ended four years ago. Since then the Fed's balance sheet has been gradually shrinking.
Since the program ended, the Fed has sold $0.4T of those securities.
Just like the Fed creates new money when they buy securities, they destroy money when they sell securities.
So for the last four years, the Fed has been destroying money, not creating it.
This has nothing to do with the national debt, or the government selling bonds to finance the budget deficit.
With the exception of the Fed's crisis response (which ended four years ago), the bonds that fund the national debt are held by the general public and as foreign reserves by nations around the world -- not by the Fed creating money.