Whether You Call It QE or Not the Fed Is Monetizing US Debt

Its hoard of treasuries it has taken off the market with newly-created currency just keeps growing and growing

Last October, the Federal Reserve relaunched quantitative easing. Of course, Fed Chairman Jerome Powell insists it’s not quantitative easing. But as Peter Schiff pointed out in a recent tweet, that debate is really just semantics.

The argument over whether the current Fed balance sheet expansion constitutes QE is pointless. QE was always just a euphemism for debt monetization. The Fed monetized debt in the past, its monetizing more debt in the present, and it will monetize even more debt in the future!”

A close look at what is going on at the Treasury Department and the Fed makes it pretty clear the central bank is, in fact, monetizing the debt.

Last month, the Treasury Department announced it will begin issuing 20-year Treasury bonds in order to help fund the ever-growing deficits. The last time the Treasury issued 20-year bonds was 1986.

Daniel Amerman is a CFA who closely follows on Treasury and Fed operations. In an article by economist Doug French at the Mises Wire, Amerman points out the link between the Fed and the Treasury crystal clear.

In just the last four months, the US government has spent $457 billion—almost half a trillion dollars—more than it has taken in. In that same time and using monetary creation, the Federal Reserve has created and put $457 billion in new cash into the financial system, either buying US Treasuries or funding the ownership of those Treasuries by others.

This looks a whole lot like debt monetization.

Here’s a little historical perspective.

In the early days of the Great Recession, Ben Bernanke assured Congress that the Fed was not monetizing debt. He said the difference between debt monetization and the Fed’s policy was that the central bank was not providing a permanent source of financing. He said the Treasurys would only remain on the Fed’s balance sheet temporarily. He assured Congress that once the crisis was over, the Federal Reserve would sell the bonds it bought during the emergency.

Of course, it never happened. It quickly aborted the hiking cycle and cute rates three times last year. Balance sheet reduction was on “autopilot” in 2018, but that reversed in 2019 as well.

At the time Bernanke promised the Fed policy would unwind, Peter said it wasn’t true.

Now, whether Ben Bernanke knew it wasn’t true and was lying, or if he was just mistaken, nobody but Ben Bernanke knows. But at the time, I said, ‘That’s not true.’ I said there is no way the Fed is going to be able to sell off these securities — that this is indeed debt monetization. Well, now we know for a fact.”

And now it looks like debt monetization has become a permanent fixture of the US economic system. Amerman summed it up.

The Federal Reserve is doing what no responsible central bank is supposed to do, and effectively funding the growth in the debt at well below free-market interest rates via monetary creation on a massive scale—without admitting that it is doing so … This is all about funding the fast growing national debt at lower rates than what rational investors would accept in a free market, and the repo crisis was a symptom of that problem, not the cause.”

Amerman said that, in effect, the Fed is doing the same thing it did in 2008 — it’s backstopping the financial system and the US economy by effectively printing money out of thin air.

After almost 11 years of comparative calm and without repo market interventions, the Federal Reserve stopped the crisis in 2019 much as it had stopped the last major crisis in 2008, by creating new money on a massive scale and lending it to the banks and other financial entities that were at risk. In the process—the Federal Reserve effectively funded the growth in the United States national debt that week.”

French pointed out that a lot of Americans “believe this economy is rockin’ and rollin’. Look at the stock market. Look at the real estate market. Interest rates are low; unemployment is low. What’s not to like?”

Wall Street and Washington, DC, want to be happy, so the economists at the Eccles Building, while decreasing total repo loans, have doubled the total funding of the national debt. ‘It is the Fed’s purchase of Treasury obligations that is now that dominant source of cumulative deficit financing,’ writes Amerman. Retirees, receiving scant interest on their savings, are banking on living off the proceeds of selling financial assets. Amerman concludes, ‘The rapid growth of the national debt is also likely to become one of the biggest future threats to standards of living in retirement.’”

Source: SchiffGold

12 Comments
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  3. tapatio says

    Rothschild-Owned Central Banks of the World
    Afghanistan: Bank of Afghanistan
    Albania: Bank of Albania
    Algeria: Bank of Algeria
    Argentina: Central Bank of Argentina
    Armenia: Central Bank of Armenia
    Aruba: Central Bank of Aruba
    Australia: Reserve Bank of Australia
    Austria: Austrian National Bank
    Azerbaijan: Central Bank of Azerbaijan Republic
    Bahamas: Central Bank of The Bahamas
    Bahrain: Central Bank of Bahrain
    Bangladesh: Bangladesh Bank
    Barbados: Central Bank of Barbados
    Belarus: National Bank of the Republic of Belarus
    Belgium: National Bank of Belgium
    Belize: Central Bank of Belize
    Benin: Central Bank of West African States (BCEAO)
    Bermuda: Bermuda Monetary Authority
    Bhutan: Royal Monetary Authority of Bhutan
    Bolivia: Central Bank of Bolivia
    Bosnia: Central Bank of Bosnia and Herzegovina
    Botswana: Bank of Botswana
    Brazil: Central Bank of Brazil
    Bulgaria: Bulgarian National Bank
    Burkina Faso: Central Bank of West African States (BCEAO)
    Burundi: Bank of the Republic of Burundi
    Cambodia: National Bank of Cambodia
    Cameroon: Bank of Central African States
    Canada: Bank of Canada – Banque du Canada
    Cayman Islands: Cayman Islands Monetary Authority
    Central African Republic: Bank of Central African States
    Chad: Bank of Central African States
    Chile: Central Bank of Chile
    China: The People’s Bank of China
    Colombia: Bank of the Republic
    Comoros: Central Bank of Comoros
    Congo: Bank of Central African States
    Costa Rica: Central Bank of Costa Rica
    Côte d’Ivoire: Central Bank of West African States (BCEAO)
    Croatia: Croatian National Bank
    Cuba: Central Bank of Cuba
    Cyprus: Central Bank of Cyprus
    Czech Republic: Czech National Bank
    Denmark: National Bank of Denmark
    Dominican Republic: Central Bank of the Dominican Republic
    East Caribbean area: Eastern Caribbean Central Bank
    Ecuador: Central Bank of Ecuador
    Egypt: Central Bank of Egypt
    El Salvador: Central Reserve Bank of El Salvador
    Equatorial Guinea: Bank of Central African States
    Estonia: Bank of Estonia
    Ethiopia: National Bank of Ethiopia
    European Union: European Central Bank
    Fiji: Reserve Bank of Fiji
    Finland: Bank of Finland
    France: Bank of France
    Gabon: Bank of Central African States
    The Gambia: Central Bank of The Gambia
    Georgia: National Bank of Georgia
    Germany: Deutsche Bundesbank
    Ghana: Bank of Ghana
    Greece: Bank of Greece
    Guatemala: Bank of Guatemala
    Guinea Bissau: Central Bank of West African States (BCEAO)
    Guyana: Bank of Guyana
    Haiti: Central Bank of Haiti
    Honduras: Central Bank of Honduras
    Hong Kong: Hong Kong Monetary Authority
    Hungary: Magyar Nemzeti Bank
    Iceland: Central Bank of Iceland
    India: Reserve Bank of India
    Indonesia: Bank Indonesia
    Iran: The Central Bank of the Islamic Republic of Iran
    Iraq: Central Bank of Iraq
    Ireland: Central Bank and Financial Services Authority of Ireland
    Israel: Bank of Israel
    Italy: Bank of Italy
    Jamaica: Bank of Jamaica
    Japan: Bank of Japan
    Jordan: Central Bank of Jordan
    Kazakhstan: National Bank of Kazakhstan
    Kenya: Central Bank of Kenya
    Korea: Bank of Korea
    Kuwait: Central Bank of Kuwait
    Kyrgyzstan: National Bank of the Kyrgyz Republic
    Latvia: Bank of Latvia
    Lebanon: Central Bank of Lebanon
    Lesotho: Central Bank of Lesotho
    Libya: Central Bank of Libya
    Lithuania: Bank of Lithuania
    Luxembourg: Central Bank of Luxembourg
    Macao: Monetary Authority of Macao
    Macedonia: National Bank of the Republic of Macedonia
    Madagascar: Central Bank of Madagascar
    Malawi: Reserve Bank of Malawi
    Malaysia: Central Bank of Malaysia
    Mali: Central Bank of West African States (BCEAO)
    Malta: Central Bank of Malta
    Mauritius: Bank of Mauritius
    Mexico: Bank of Mexico
    Moldova: National Bank of Moldova
    Mongolia: Bank of Mongolia
    Montenegro: Central Bank of Montenegro
    Morocco: Bank of Morocco
    Mozambique: Bank of Mozambique
    Namibia: Bank of Namibia
    Nepal: Central Bank of Nepal
    Netherlands: Netherlands Bank
    Netherlands Antilles: Bank of the Netherlands Antilles
    New Zealand: Reserve Bank of New Zealand
    Nicaragua: Central Bank of Nicaragua
    Niger: Central Bank of West African States (BCEAO)
    Nigeria: Central Bank of Nigeria
    Norway: Central Bank of Norway
    Oman: Central Bank of Oman
    Pakistan: State Bank of Pakistan
    Papua New Guinea: Bank of Papua New Guinea
    Paraguay: Central Bank of Paraguay
    Peru: Central Reserve Bank of Peru
    Philippines: Bangko Sentral ng Pilipinas
    Poland: National Bank of Poland
    Portugal: Bank of Portugal
    Qatar: Qatar Central Bank
    Romania: National Bank of Romania
    Russia: Central Bank of Russia
    Rwanda: National Bank of Rwanda
    San Marino: Central Bank of the Republic of San Marino
    Samoa: Central Bank of Samoa
    Saudi Arabia: Saudi Arabian Monetary Agency
    Senegal: Central Bank of West African States (BCEAO)
    Serbia: National Bank of Serbia
    Seychelles: Central Bank of Seychelles
    Sierra Leone: Bank of Sierra Leone
    Singapore: Monetary Authority of Singapore
    Slovakia: National Bank of Slovakia
    Slovenia: Bank of Slovenia
    Solomon Islands: Central Bank of Solomon Islands
    South Africa: South African Reserve Bank
    Spain: Bank of Spain
    Sri Lanka: Central Bank of Sri Lanka
    Sudan: Bank of Sudan
    Surinam: Central Bank of Suriname
    Swaziland: The Central Bank of Swaziland
    Sweden: Sveriges Riksbank
    Switzerland: Swiss National Bank
    Tajikistan: National Bank of Tajikistan
    Tanzania: Bank of Tanzania
    Thailand: Bank of Thailand
    Togo: Central Bank of West African States (BCEAO)
    Tonga: National Reserve Bank of Tonga
    Trinidad and Tobago: Central Bank of Trinidad and Tobago
    Tunisia: Central Bank of Tunisia
    Turkey: Central Bank of the Republic of Turkey
    Uganda: Bank of Uganda
    Ukraine: National Bank of Ukraine
    United Arab Emirates: Central Bank of United Arab Emirates
    United Kingdom: Bank of England
    United States: The Dirty Nasty Stinky Fed, Federal Reserve Bank of New York
    Uruguay: Central Bank of Uruguay
    Vanuatu: Reserve Bank of Vanuatu
    Venezuela: Central Bank of Venezuela
    Vietnam: The State Bank of Vietnam
    Yemen: Central Bank of Yemen
    Zambia: Bank of Zambia
    Zimbabwe: Reserve Bank of Zimbabwe

  4. Bob avlon says

    However, as long as they can freely print money instead of earning it their economy will never crash. Everyone watches it. No one can do anything.

    1. tapatio says

      Oh, yeah, people can do something…………they can stop taking dollars. Not American consumers of course. Trading partners can stop accepting dollars for their products. At that point the dollar crashes and your six-pack of beer costs $50.

      1. Bob avlon says

        Good point. Any country that prints and prints and prints money ends up with a devalued currency. Not the US. It spends 450 billion it never earned. criminally just prints 450 billion. The dollar should by now be worth 5cents???

        1. tapatio says

          I would guess between 2 and 5 cents. It’s value is artificially high because of the US military and the fear of a global crash.

  5. Cowa Bunga says

    The Federal Reserve was born a criminal enterprise, and at the ripe old age of 107, it is still one of the biggest criminal enterprises on the planet. Americans have no future as long as the Fed exists.

    1. tapatio says

      At the end of the 17th Century the Rothschilds took control of the Bank of England. After that, they gobbled up economies in Europe.
      When the US was founded, Alexander Hamilton was a factor employed by the Rothschild cartel. He founded the United States Bank. Jackson, Lincoln and Kennedy have tried to abolish the Rothschild’s hold on our currency and two of them died for their efforts.

      1. Cowa Bunga says

        Ya, I know about the Rothschilds and their devious control of the money system. They tried to assassinate Jackson as well. Sociopaths are like that — they live for the pursuit of greater power and control over everyone and everything. They are morally retarded and should never be allowed into any positions of power and control. Unfortunately, it’s way too late for that now, as their control over the global money system pretty much gives them absolute power, as long as we allow them to buy our cooperation.

        1. tapatio says

          IF Russia and China can bring down the dollar and Euro all of those lovely Rothschild assets will be garbage. Unfortunately for us Americans, the inflationary recession that will result will be catastrophic – karma for allowing our culture to be taken over by the Jewish disease.

  6. Garry Compton says

    Every country with a Central Bank tied to the Fed needs to Nationalize them – just like it was their natural resources. Just take 52% of it – got an army – then just do it. Imagine if 50 countries got together and had some balls.

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