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Comment by wallflower | Hacker News Reader

In the US, almost every of the 50 states must balance their budgets. They can't spend what they don't have without selling debt (municipal bonds that pay interest). They can't manufacture money as that is handled at the Federal level.

https://www.ncsl.org/research/fiscal-policy/state-balanced-b...

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Sure, but the FED money is going somewhere in the USA. Either to banks or other companies. Those companies are located in states. So eventually the FED money flows to those 50 states.

But it apparently doesn't reach local companies and people, or maybe it does but then it quickly leaks away again. I wonder why that is.

A lot of it is going into prop-ing up corporate debt. I remember that they even bought junk rated bonds.

Looking at the most recent balance sheet [0], corporate bonds look to be under the other securities section which has 86 billion in assets or about 1.2% of the asset sheet. Most of the balance sheet is taken up by U.S. Treasury securities and Mortgage-backed securities.

[0]: https://www.federalreserve.gov/releases/h41/current/h41.htm

I don't think they ended up having to buy them as the mere promise to buy them was enough to get private investors to boost junk bond prices.

FED money goes into banks and stocks. Cities do not get any of that FED QE money.

Fed has been buying munis

I haven't been paying close attention and I'm wondering if you know: Are they buying newly issued munis or buying them on the open market?

It's both. Here is some information on the Municipal Lending Facility:

https://www.federalreserve.gov/monetarypolicy/muni.htm

My understanding is that the FED is printing money for international demand.

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