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0 pointsadventured6y ago0 comments

There's no question it's a bizarre choice given the epic funding requirements of the US Government now and for the foreseeable future ($12t in new debt minimum over the next ten years).

The Fed should be attempting to smash the cost of US Government debt to the floor so the treasury can issue 50 year paper at 1.x% while there may be a window to do so.

It would be very unpopular with the wealthy and the private US financial system. I believe it's the sole reason they're not working aggressively to minimize what the US is paying for its debt vs other more risky nations. The Fed views the private financial system as a critical partner. To an extent by intentionally leaving borrowing costs higher than they have to be, they're performing a middle ground compromise with those partners vs the government's fiscal condition.

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amluto6y ago

The Fed explicitly does not involve itself in fiscal policy like this. This is a good part of the reason that people trust US currency.

dragonwriter6y ago

> The Fed should be attempting to smash the cost of US Government debt to the floor

We have an “indepedent” central bank with a limited set of policy concerns which do not include this type of thing specifically so that “fiscal” concerns [0] like this are not factors in setting monetary policy.

[0] MMT correctly points out that the category is based on a fiction, but even MMT advocates (while they want Congress to consider monetary impacts of what has historically been considered fiscal policy instead of the fiscal myth) don't generally want the central bank doing the kinds of things that have been considered “fiscal”.