[ExI] Deficit spending and never admitting you were wrong

[John Clark]

On Wed, May 27, 2020 at 12:25 AM Dylan Distasio via extropy-chat <
extropy-chat at lists.extropy.org> wrote:

> *However, when they wind down the balance sheet,*
>

If by that you mean reduce the amount of debt I doubt that will ever happen
and see no reason why it should ever happen; and the worst time imaginable
to even consider doing such a thing would be in the middle of a global
economic depression caused by a global biological pandemic.


> > *they are constrained by the current price of a security they are
> selling. *
>

We have a lot of economic problems today but that is not one of them. If
nobody is buying a bond then the solution is to reduce its price, but today
bonds have never been more expensive and yields have never been lower yet
people still buy them so there is no need to reduce their price.


> > *They don't have the ability to create bonds out of thin air like they
> can do for dollars. *
>

Of course they do, even companies can create bonds out of thin air.


> * > 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.  *
>

A distinction without a difference.

*>The risk is that demand isn't there due to vastness of supply / loss of
> confidence causing interest rates to climb, leading to inflation. *
>

If demand isn't there then increase interest rates, but demand is there
even though interest rates are currently low. Ridiculously low! The yield
on a 2 year treasury bill is only 0.19%, the lowest in history. And the
average 30 year fixed rate mortgage is 3.23%, also the lowest in history.
The deficit hawks are like a doctor refusing to feed a 70 pound starving
man because he's worried about the dangers of obesity.

John K Clark
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