Is the Fed Monetizing the Debt??!! Potential Inflation?!?
Ah yes, not JUST in China (previous post) but also in the U.S. the question is: are the Central Banks pushing too much money into the economy which will lead to future inflation?!? Theory says so and we are seeing some evidence as well as getting economists' views:
From the New York Times article (right at the end) on "Stocks Fall Along with Confidence" today:
And yet, many questions abound about how deep in the recession the U.S. is and how much has the stimulus taken hold!
We shall see!
From the New York Times article (right at the end) on "Stocks Fall Along with Confidence" today:
An increase in the money supply to buy debt, U.S. Treasury Bonds, Bills and Notes, is what economists call "Monetizing the Debt." An increase in the money supply today can lead to an increase in future prices (about six months down the road), other things being equal.Yields on the benchmark 10-year Treasury note fell to 3.21 percent, from recent highs of 3.34 percent, as the Federal Reserve announced that it had bought $3.5 billion in Treasury debt, sopping up some of the growing supply of government debt.
As bond investors get more worried about huge new government spending plans, prices of Treasury notes have dropped, pushing interest rates higher and raising the cost of borrowing for the government. More and more, the Treasury market is beginning to look like “the Hindenburg of bubbles,” said Peter Schiff, president of Euro Pacific Capital.
“The problem is the more Treasuries the Fed buys, the more Treasuries they’re going to have to buy,” Mr. Schiff said. “That’s when they get into that death spiral of inflation.”
And yet, many questions abound about how deep in the recession the U.S. is and how much has the stimulus taken hold!
We shall see!
Comments