[ExI] Deficit spending and never admitting you were wrong

Dylan Distasio interzone at gmail.com
Wed May 27 04:22:27 UTC 2020

Increasing and decreasing the balance sheet are not symmetrical

They can print as much money as they want to buy assets and increase money

However, when they wind down the balance sheet, they are constrained by the
current price of a security they are selling.  They don't have the ability
to create bonds out of thin air like they can do for dollars.

There are other things to worry about beyond inflation.  Continuous large
scale Central Bank interventions distort underlying financial markets and
do not let proper signalling occur.

All that said about the Fed, I don't think people are really talking about
them directly here in the context of expanding US deficits.  That doesn't
really involve "printing money."  The Treasury finances deficits by
conducting auctions of Federal debt.

The risk is that demand isn't there due to vastness of supply / loss of
confidence causing interest rates to climb, leading to inflation.  This has
the potential to quickly turn into an unvirtuous cycle.

Of course, the Fed in theory could be a buyer of last resort of said US
Treasuries, but the dollar would likely suffer as a currency if that
happened on a very large scale.

On Tue, May 26, 2020, 11:54 PM Brent Allsop via extropy-chat <
extropy-chat at lists.extropy.org> wrote:

> "Printing Money" is only bad, because you can't remove printed money from
> the supply, when needed, resulting in inflation.
> But aren't they just lending money into the supply, creating a huge
> "balance sheet" which can be recalled and removed from the supply, should
> such actions be needed, to prevent inflation?
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