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Friday, March 8, 2013

The Treasury is now the Fed's biggest political constituency...and that frightens the hell out of me.

http://johnhcochrane.blogspot.com/2013/03/monetary-policy-with-large-debts.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+TheGrumpyEconomist+%28The+Grumpy+Economist%29
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1 comment:

Anonymous said...

"The Fed is still buying long-term bonds in an effort to temporarily drive down long-term interest rates by a few basis points. It has concluded it can survive the loss in mark-to-market value of its bond portfolio that higher interest rates will imply, when they come, by suspending its customary interest-rebate payments to the Treasury. If the Treasury was counting on that roughly $80 billion per year, that is Treasury's problem. If higher rates cost the Treasury $900 billion a year, that is Congress's problem."


How wonderful it is that the value of our money to exchange for debt is largely beholden to a handful of bankers (and money experts) unelected by the people.

"Will Congress and the public really agree to spend $900 billion a year for monetary tightening?"

But, why should we? Why would it be rational to do so?

March 8, 2013 at 1:57 PM

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