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

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tapatio
tapatio
3 months ago

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

Bob avlon
Bob avlon
3 months ago

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.

tapatio
tapatio
3 months ago
Reply to  Bob avlon

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.

Bob avlon
Bob avlon
3 months ago
Reply to  tapatio

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???

tapatio
tapatio
3 months ago
Reply to  Bob avlon

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.

Cowa Bunga
Cowa Bunga
3 months ago

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.

tapatio
tapatio
3 months ago
Reply to  Cowa Bunga

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.

Cowa Bunga
Cowa Bunga
3 months ago
Reply to  tapatio

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.

tapatio
tapatio
3 months ago
Reply to  Cowa Bunga

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.

Garry Compton
Garry Compton
3 months ago

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.

Anti-Empire