{"id":49654,"date":"2019-11-16T12:41:47","date_gmt":"2019-11-16T17:41:47","guid":{"rendered":"https:\/\/olduvai.ca\/?p=49654"},"modified":"2019-11-16T12:41:50","modified_gmt":"2019-11-16T17:41:50","slug":"the-federal-reserve-is-directly-monetizing-us-debt","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=49654","title":{"rendered":"The Federal Reserve Is Directly Monetizing US Debt"},"content":{"rendered":"\n

The Federal Reserve Is Directly Monetizing US Debt<\/a><\/h3>\n\n\n\n

In a very real way, MMT is already here<\/strong><\/p>\n\n\n\n

Sure, it\u2019s not admitting to this. And it\u2019s using several technical jinks and jives to offer a pretense that things are otherwise.<\/p>\n\n\n\n

But it\u2019s not terribly difficult to predict what\u2019s going to happen next: the Federal Reserve will drop the secrecy and start buying US debt openly.<\/p>\n\n\n\n

At a time, mind you, when US fiscal deficits are exploding and foreign buyers are heading for the exits.<\/p>\n\n\n\n

How It\u2019s Supposed to Work<\/strong><\/p>\n\n\n\n

Here\u2019s how it\u2019s supposed to work when the US government issues new debt:<\/p>\n\n\n\n

  1. If the US Treasury needs to raise new funds, it announces an upcoming auction of US Treasury bills\/notes\/bonds.<\/li>
  2. A date for the auction is set.<\/li>
  3. Various participants bid for those bills\/notes\/bonds (including \u2018regular folks\u2019 like you and me if we\u2019re using the government\u2019s Treasury Direct program<\/a>).<\/li>
  4. At a later date, the Fed can buy those US Treasury bills\/notes\/bonds. The various holders of that debt submit offers to sell, and the Fed (presumably) selects the best offers on the best terms.<\/li><\/ol>\n\n\n\n

    The Federal Reserve, under no conditions, buys Treasury paper directly.<\/strong>  The Federal Reserve\u2019s own website still maintains that this is the case:<\/p>\n\n\n\n

    \"\"
    (Source<\/a>)<\/figcaption><\/figure>\n\n\n\n

    There are two important claims plus one assertion I\u2019ve highlighted in there, each in a different color:<\/p>\n\n\n\n

    1. Yellow: Treasury securities may \u201conly<\/strong> <\/em>be bought and sold in the open market.\u201d<\/li>
    2. Blue: doing otherwise might compromise the independence of the Fed.<\/li>
    3. Purple: the Fed mostly buys \u201cold\u201d securities.<\/li><\/ol>\n\n\n\n

      So according to the Fed: it\u2019s independent, it follows the rules set forth in the Federal Reserve Act of 1913, and it mostly buys \u201cold\u201d Treasury paper that the market has already properly priced in a free and fair system.<\/p>\n\n\n\n

      But that\u2019s not really what\u2019s going on\u2026<\/p>\n\n\n\n

       \u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"

      The Federal Reserve Is Directly Monetizing US Debt In a very real way, MMT is already here Sure, it\u2019s not admitting to this. And it\u2019s using several technical jinks and jives to offer a pretense that things are otherwise. But it\u2019s not terribly difficult to predict what\u2019s going to happen next: the Federal Reserve will […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[61,63,124,195,305,1866,16888,2267,27559,27345,661,662,6934,18336,27601,18468,2202],"class_list":["post-49654","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banking","tag-banks","tag-central-banks","tag-debt","tag-federal-reserve","tag-federal-reserve-act","tag-jerome-powell","tag-jp-morgan","tag-not-qe","tag-notqe","tag-qe","tag-quantitative-easing","tag-repo-market","tag-treasury","tag-treasury-bill","tag-treasurydirect","tag-us-treasury"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/49654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=49654"}],"version-history":[{"count":2,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/49654\/revisions"}],"predecessor-version":[{"id":49657,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/49654\/revisions\/49657"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=49654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=49654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=49654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}