Monster of the Jekyll Island Team X Fed can only loan team?

davidtheraven

Hi Mish,

This question has been bothering me for a while and I believe your perspective can put an end to my confusiom
Some economists say the Fed prints money and argue that the debt will lead to hyperinflation, stagflation, currency collapse etc...
While others believe the dollars will strengthen from all of this as the whole world chases dollars because most of everything finance out there is dollar-denominated while only going down during QE rounds like we had after the last peak. They also argue that the fed doesn't print money, rather they buy bonds issued by the treasury from primary dealers and that this money doesn't leave the higher echelons of the finance world, and so the Fed is a deflationary institution.

So, according to your perspective, can the Fed print money? or only loan?

Thank you in advance.

David

Comments (1)
No. 1-1
Eddie_T
Eddie_T

It's a great question and I hope Mish will comment.

But my own POV is that the US Treasury and the Fed tend to work hand-in-glove, especially in times of great crisis.....the Fed has never printed money, but they are talking about it now. The Treasury CAN print money......and the recent bailouts are an example.....but it hasn't been something that the Treasury has done traditionally...it's very much a last resort.....the pandemic is the first time I can remember it happening.

In order for the Treasury to print money outright, the Congress has to pass legislation that spells it out.

The truth is that when the chips are down...and it looks like the entire credit system of the world is about to come crashing down....like 2008....the Congress tends to do what the Fed and the Treasury tells them to do. Because they're pretty dumb, when it comes to money.

Once the immediate crisis ends, they go back to BAU...which is doing what Wall Street wants and stroking their billionaire donors.

There is also this shadowy group of advisors to the President which does exist...sometimes called the Plunge Protection Team...made up of a hand-picked group of Wall Street insiders...who have some power to manipulate markets when equities or bonds get out of control and markets are truly crashing. Mostly Goldman and Treasury alums....like Larry Summers.... they don't print money, but they can sure somehow create enough money out of nothing to buy enough derivatives to move markets. This is never admitted in public.