Hacker News Reader

Comment by mistermann | Hacker News Reader

> 1. Trump will spend, reduce taxes, increase debt, and therefore US interest rates will have to go up.

Can the FED not just print money and buy all the bonds keeping interest rates low?

They already did that for several years with QE. They de facto reduced the outstanding US debt by several trillion. You could argue for more monetary stimulus but it's hard to get away with it now that they are very close to reaching their inflation target. Obviously the US and other advanced economies have suffered through a very long period of low inflation so they are in a unique position in history where they could print quite a bit of money and not end up like Zimbabwe or Venezuela.

It started lightly, but became appalling during the first Bush administration (into Clinton, second Bush and Obama and soon Trump). It just got called QE when it became a tool to buffer against the inevitable failing industries. The report that was published detailing, the reserve's manipulation, stopped being issued in the 90's. I can't seem to find out if that information is now published somewhere else. I assume so.

> suffered through a very long period of low inflation

Why do you say "suffered?" For my personal finances, low/no inflation seems like a very good thing. My saved money doesn't decrease in value.

The negative effects of low inflation are well documented. You can see Japan as an example. Low inflation has perverse incentives that hamper employment and econmic growth. Essentially low inflation is good for the consumer until they lose their job.

> They de facto reduced the outstanding US debt by several trillion.

How does printing money to buy government bonds reduce the debt?

It does if you give all of the interests paid on that debt back to the government like the Federal Reserve does.

That's the interest payments, what about the debt itself?

They buy the bonds and the money goes where? Somewhere that then spends it. Thereby raising inflation. If you're proposing they print the money and then do nothing with it, I'm curious what the point of that would be.

Isn't that exactly what happened for the most part, the Fed printed a whole bunch of money and gave it to the banks to lend, the banks just sat on it and collected interest? (Not exactly what happened but reasonably correct from what I've read).

Reply on news.ycombinator.com