Hacker News Reader

Comment by tunesmith | Hacker News Reader

I don't see how that works. If the US Government has to sell bonds to borrow money to finance the deficit, and buyers start disappearing, they have to raise interest rates to make the bonds more attractive to the remaining buyers, don't they?

View on HN

Nope because the Federal Reserve can issue new Federal Reserve notes (aka money) to the US Government to buy their bonds at any price point. As the other commenter pointed out this would cause inflation (as it increases the money supply)

I see. Printing money to buy new financial assets would also cause greater wealth inequality and populism, although maybe those are seen as benefits to the current administration.

I could be wrong but I don't think buying US treasuries would directly increase wealth inequality, since the money is being used to fund the US government. If the Fed bought other more private assets off the market (which I believe it does) then yes it could increase wealth inequality

Possibly, I may be confused between simply buying treasuries, and quantitative easing. Still learning!

To broadly simplify:

Buying treasuries = the Fed giving money to the US government

Quantitative easing = the Fed giving money to banks

In the case of the US, the entire game is also complicated by the fact that the US dollar has insinuated itself into the global economy. Most critically in oil markets.

Because of this, there are some things the Fed can do (mostly) without the consequences other countries would face.

This would increase wealth inequality because it’s mostly well-off Americans that own financial assets.

Look at the wealth inequality increase since 2008. It can mostly be attributed to federal reserve QE policy.

Reply on news.ycombinator.com