The US Federal Reserve is openly
buying crap (junk bonds!) and
wildly overpaying for it without pretending otherwise.
Its balance sheet will have grown by as much as an order of magnitude by the end of the month, far above any levels seen during the global financial crisis of 2008. (If you don't know what this means, think of the Fed's liabilities as "all forms of money issuance.") It's issuing fresh money to buy crap from the people who are stuck holding it. The sellers will come out whole, the buyer -- i.e., the US government -- will suffer the losses.[a]
Meanwhile, the US Treasury is borrowing and trying to spend on the order of an additional 10% of GDP as quickly as possible, increasing the US federal deficit and borrowings by that much as quickly as possible.[b]
And all of this is urgently necessary to prevent economic collapse in the US. Urgently necessary.
We are in uncharted waters.
[a] You'll see it here: https://fred.stlouisfed.org/series/WALCL
[b] You'll see it here: https://fred.stlouisfed.org/series/GFDEGDQ188S
Its balance sheet will have grown by as much as an order of magnitude by the end of the month, far above any levels seen during the global financial crisis of 2008. (If you don't know what this means, think of the Fed's liabilities as "all forms of money issuance.") It's issuing fresh money to buy crap from the people who are stuck holding it. The sellers will come out whole, the buyer -- i.e., the US government -- will suffer the losses.[a]
Meanwhile, the US Treasury is borrowing and trying to spend on the order of an additional 10% of GDP as quickly as possible, increasing the US federal deficit and borrowings by that much as quickly as possible.[b]
And all of this is urgently necessary to prevent economic collapse in the US. Urgently necessary.
We are in uncharted waters.
[a] You'll see it here: https://fred.stlouisfed.org/series/WALCL
[b] You'll see it here: https://fred.stlouisfed.org/series/GFDEGDQ188S