Not that our politicians are making very good use of that tool anyway. Obviously, this would lead to some significant inflation, but as you mentioned, there are other mechanisms to contract the monetary supply, thus, curtailing inflation. If inflation jacks up, that reduces your effective debt. That is, if the United States goes off the rails by printing too much money--President Trump decides for example to go off and buy Mexico by printing money--we get "inflation": it takes more USD to exchange for the same basket of goods. This guy is a really big fan of the years we had 10%+ inflation. For economy growth reasons, it's generally accepted that a little bit of inflation is a good thing. If another crash were to come, what would be the strategy? They literally explained why overspending would be bad so I'm not sure who this is arguing with? Stuff you can potentially purchase is not the same as the amount of stuff produced in the country. [â]VassiliMikailovich 7 points8 points9 points 2 years ago (5 children). It's taxes, which can only be paid in USD, which gives the dollar its inherent value. [â]WikiTextBot 10 points11 points12 points 2 years ago (0 children). [â]Ciderglove 10 points11 points12 points 2 years ago (5 children). Government debt is a tool for managing deflation and private credit bubbles that are far more scary and dangerous than big numbers. I've always found it frustrating when people demonize failure or want to make something like bankruptcy more difficult. But your second assumption is also incorrect. This is why the rich get richer, when youâre immune to short term headwinds, you can afford to buy low. If anyone is writing an article based on a Bank/investment group news release/white paper post the actual paper and not journalism surrounding it. Goddamn what an interesting thread this has been! It would remove an incredibly powerful and important tool to regulate economic activity. Sorry if I am late to the party on this issue but I stumbled on a story today about how the Federal Reserve is struggling to unwind their bond portfolio that was purchased after the housing crisis. Japan has well over 200% debt to GDP and their bonds trade at rates even lower than ours. 2Do you think it would be a smart decision to reattach at some point? Government debt is still subject to interest payments right? This is by far a record, with the last balance sheet high being $4.516 trillion in January 2015. Strictly no self-promotional threads. If the debt gets too big to pay off, other countries won't use USD as the reserve currency any more and will loan money to countries other than the US. Government debt is a responsible and stable way for new money to enter the economy. Which would you rather lose? Venezuela, Weimar Germany, Zimbabwe, Hungary and the United States after the Revolutionary War all experienced hyperinflation. It's the oil. [â]RetardedSquirrel 3 points4 points5 points 2 years ago (6 children). It's also why I'd advocate for a robust safety net (universal healthcare, UBI, free education, etc), so as to not allow a failure to haunt anyone. This isn't controversial outside of kids on reddit who think they understand the world because they learned econ on YouTube. You're certainly right - there is a limit to the debt at which faith in the USD wavers, but we've never come close to that limit. They just hit 1,000,000% inflation. [â]Mar-Lana 1 point2 points3 points 2 years ago (0 children), Your comment is extremely needed common sense. That's the most incredibly detailed explanation of the logic of Reganomics I've ever seen. Debt is not just an account artifact, itâs a very real thing, because you have to pay back the bonds that itâs composed of so that people buy your bonds in the future. [â]SBInCB 6 points7 points8 points 2 years ago (3 children). You're correct. Federal Reserve policymakers are coalescing around a plan to stop trimming their $4 trillion balance sheet later this year, remarks from three U.S. central bankers showed on Friday. The Federal Reserve is buying up assets and its balance sheet is growing rapidly, especially in the last two months. [â]Heol-DaePark 2 points3 points4 points 2 years ago (0 children). How is the interest payment not considered an overall negative? The idea is to motivate people to spend now, rather than later, because generally their money will not be able to buy them as much in the future as it can now. This is why economists believe that mild inflation in line with GDP growth is a good thing, [â]PM_ME_YOUR_GITHUBS 10 points11 points12 points 2 years ago (0 children), [â]ChaosRevealed 124 points125 points126 points 2 years ago (46 children). That would also mean that the government would need to rely on it's tax revenue to fund its spending, because the US government isnt the sole issuer of gold, ethereum, or sticks. Inflate currency until it pops. It was a jump to conclusions mat! As to why it's not a bigger deal ask yourself why it should be a big deal? And the US has the authority to say that because of its authority to tax. Along those same veins what seemed like a lot of debt then is pennies now. Any task the government needed to accomplish could be artificially incentivize through the creation of money. 2009 was a great time. The government has never, will never, and should never completely pay down the debt. The top rated and gilded post with ALL the words is just someone convincing themselves everything is fine. If the US were to reduce it's debt it would be more likely to default on it's debt than use a scheme with the Federal Reserve to "print money"because they would position to issue new debt after the hair cuts are given. [â]Federer2020hype 484 points485 points486 points 2 years ago (161 children). ), [â]Ashmedai 7 points8 points9 points 2 years ago (1 child). Then the west invaded and took things off-chain to spite the land-holding Chinese. dollars)." [â]Gypsiee 2 points3 points4 points 2 years ago (0 children). There's rioting in the streets. Just to recap, a pyramid scheme is when someone convinces you to give them your money now with the promise you earning a lot more back later, by the same method, finding people, taking their money and sending them to find the next tier of the pyramid. Investors pull money from the US economy (stocks and bonds) and invest it in US-government issues! It looks like they've tapered about 200B so far not 300B. The interest rate that the Federal government pays on its debt is the bench mark for the risk free rate, basically the compensation investors are rewarded with for committing capital (add in the compensation you get for bearing risk and you have your total return). Monetary Policy Implementation: Making Better and More Consistent Use of the Federal Reserve's Balance Sheet. So all in all, these things can cause distortions in your economy, but overall, it's hard to say what happens to inflation, and thus IMHO doesn't directly enter the theoretical discussion of national debt and central bank balance sheet. Obviously MMT alone is somewhat obsolete. OP, you're getting trashed in the comments because you have a fundamental misunderstanding of economics. 4. The Federal Reserve’s balance sheet topped $5 trillion for the first time amid the U.S. central bank’s aggressive efforts to cushion debt markets against … I think it's just being pointed out that the rules are different. [â][deleted] 25 points26 points27 points 2 years ago (45 children), [â]DownYourRabbitHole 126 points127 points128 points 2 years ago (44 children). That need outweighs some losses that the country has a whole takes via tariffs. While those first two goals overlap with the goal of federal government (secure reelection), they are seperate. As the economy started to improve the Fed decided to unwind the portfolio. But the US government can. This is the key concept that everyone in this thread needs to grasp. uhhhhhh what? Thats literally how US, and all developed countries have reduced debt since the beginning of deficits.. What you just said was impossible has been happening for centuries. Do not make posts looking for advice about your personal situation. The distribution is even worse, the top 0.1% of people still own around 20% of the wealth in the U.S. That's around 360,000 households, or around 928 thousand people, controlling a fifth of all of the wealth in the country. You know, I had an idea like that once, a long time ago. [â]w3woody 29 points30 points31 points 2 years ago (2 children). I can see your writings easily manage their way to the front of r/shitamericanssay, [â]hammurabi1337 10 points11 points12 points 2 years ago (0 children). Because youâre going to be underwater on your home when values go down and if youâre paying such a small down payment, you probably canât afford the home anyway. [â]meteoraln 6 points7 points8 points 2 years ago* (10 children). These government also have an unlimited ability to provide funds to other sectors. No, it wouldn't. There may come a time that if debt is never reduced then the demanded yield from the bond purchasers becomes untenable for the bond seller. Because people don't anticipate 1 shell to be worth 2 or 3 coconuts in the future with mild inflation, they won't hang onto shells, so you avoid deflation. balance sheet that accounts for increases in currency and growth in Federal Reserve bank capital.6 The dollar amount of each asset pur-chase program and the maturity structure of the purchases and sales of securities also aﬀect Consolidated Statement of Condition of All Federal Reserve Banks Key takeaways The new asset change was +$37.8B week over week. Can you pay down your debts? [â]mod_critical 10 points11 points12 points 2 years ago (2 children). Sociologically, it's a bit muddier considering not everyone is poor for the same reason. In real terms it is of course limited. Most people (and certainly most people on Reddit in general) really can't even conceive just how much of our country is owned by so very few people, of just how much money these people have. In theory it's the same, in practice it's not. They can tax you as much money as theyâre giving you. Jesus this post is bad. [â]MasterCookSwag 7 points8 points9 points 2 years ago (1 child), [â]suicide_nooch 3 points4 points5 points 2 years ago (0 children). The actual debt we still owe from 1945 is still in 1945 dollars - meaning it's a relatively small number now. This is because of the fact that they can print money. The Federal Reserve balance sheet could be heading to $40-50 trillion or higher as the central bank continues to monetize US debt. Abstract: Over the past few years, the Federal Reserve's use of unconventional monetary policy tools has led it to hold a large portfolio of securities. [â]slo1111 6 points7 points8 points 2 years ago (0 children). Mild inflation keeps away this deflation so that people don't "hang onto" money. Decreasing spending by citizens, income and profit of companies etc.. That's why that's not done. I don't see anywhere where they did this. Downvote to remove | v0.28, [â]XecutionerNJ 21 points22 points23 points 2 years ago (2 children). Everything every politician, civilian, etc would ever want would have been completely funded and completed. Interest rates are going to go through the fucking roof, so buy a house now if you want one in the next 10 years. One shell used to buy one coconut on average, but now can buy two coconuts. At the small scale, the debtor is dependent on the creditor, for reasons most people are familiar with. How do I get started in the Stock Market? Effort: Posts must meet standards of effort: Do not post just an article, highlight the parts of the article you find relevant or offer some commentary surrounding the article. The majority of USD that is created is by the fractional reserve banking system; every loan creates principle USD out of thin air just like the government does (only quite a lot more). So at the end of the day, the federal government is not much less restrained than anybody else. The problem is it becomes increasingly frustrating when you learn what are essentially the ABC's of economics and someone who went to YouTube University comes in here and acts like it's insane to factually state a core tenet of econ. This is the method of default on those debts and it's not a good thing. Inflation should decrease the value of the money in the pool, since more is available overall, but if the economy is able to produce more goods and services, then money isnât devalued, is it? I completely disagree. The new asset change was +$6.1B week over week. Everyone always says now is the right time to buy a home, no matter whatâs going on in the economy. So while details and approaches are always subject to disagreement and evolution the base facts are pretty well accepted. Interestingly enough, it also implies that those who argue the United States government's budget should be balanced is a dangerous idea--because it takes away one way the U.S. can grow and shrink the monetary supply to help smooth recessionary and depressionary cycles. Growth reduces debt to GDP (assuming it outpaces inflation) and nominal debt numbers are pretty irrelevant. Fed Balance Sheet: A breakdown of the assets and liabilities held by the Federal Reserve. [â]KosherNazi 58 points59 points60 points 2 years ago (6 children). That's why there's always a built-in inflation target to monetary policies. It did that, but by printing money through quantitative easing. The balance sheet began to rapidly climb as coronavirus brings the US economy to a grinding halt. Genuinely curious BTW. [â]eM_aRe 8 points9 points10 points 2 years ago (1 child). - IIRC, even during the recession, the US government sold bonds at negative interest rates, reflecting the faith in the currency even at weaker times. (The cause and effect is not quite as clear, however, since recessions also follow massive expansionary cycles in the economy--and massive expansionary cycles tend to create more tax revenue which the government can use to pay off the debt.). More so than anyone else I have ever met and being from the capital area a lot of them were from places like EDA. To borrow a phrase from the movie âPretty Woman,â this is the fork they know. Some how you want that Wealth to move over into the Consumption side, hopefully through competition. During the the Global Financial Crisis in 2008, people were actually paying the US government for the privilege of lending them money, in other words, for every $100 loaned to America, the US government had to pay back $99.99, because interest rates were negative! Can you tell me when we actually made payments to reduce it in that timeframe? At present they are targeting a 2% inflation rate as the core inflation rate, using data gathered by the Bureau of Economic Analysis. [â]xcsler_returns 14 points15 points16 points 2 years ago (8 children), There is no amount of spending that maximizes output. If the world wants country A's products, they will convert money into country A's currency to buy those products, also causing country A's currency to appreciate. The interest is not printed, and therefore, the national debt can never be repaid. On March 27, the balance sheet was at $3.956 trillion, … Japan has been printing money and taking out debt for decades and their bonds still trade at remarkably low yields while they have almost no inflation. If I had a lifespan of hundreds of years, could borrow at risk free rates, and never wanted to move I'd have an interest only mortgage too. Perdue worries the Fed balance sheet could grow to more than $13 trillion and said that he's raised the issue with Federal Reserve Chairman Jerome Powell. what it exports. There are ~400 million people in the world who must, almost every day, for their entire lives (and sometimes beyond), pay taxes in dollars. Ironic, since they're the ones who were complaining about the short road to hyperinflation for the last decade while inflation languished around 1%, and the economy suffered from high unemployment, because none of those stupid fuckers could wrap their heads around the fact that government finances are not analogous to household finances, and that they should allowed the government to step in and bridge the gap between idle labor and idle resources. This includes beginner questions and portfolio help. The 1 million dollar you claim we are all now much richer for is just 1 million dollar less we can spend on credit in the future. Federal Reserve liabilities discusses the key liabilities on the Federal Reserve's balance sheet, including currency and reserve balances. 2012 Monthly Reports; August 2012: HTML | 1.34 MB PDF: July 2012: HTML | 1.29 MB PDF: June 2012: HTML | 1.29 MB PDF: May 2012: HTML | 1.29 MB PDF: April 2012 : HTML | 1.39 MB PDF: March 2012: HTML | 1.39 MB â¦ However, inflation is actually a problem for regular people considering we are in a global economy and people and corporations cannot just print money, and they may have quite a bit of savings that becomes worthless when the dollar is worthless. The government doesnât remove âmoneyâ from the economy by increasing taxes or spending less. [â]sagnessagiel 4 points5 points6 points 2 years ago (1 child). It's the one the Federal Reserve is watching. Why do people go hungry when the government can buy unlimited food with its printing press? Creating more money causes inflation. It is only fiat currency issuing governments. 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