The government is not printing money, even though this is what you'll might hear in gold bug blogs, faux news, or the internet. It is issuing debt, and people are buying it
By definition the Fed is monetizing debt which for all intents and purposes is printing money. However the important question would be how much are they monetizing and how much is this offset by asset deflation.
en.wikipedia.org
"Debt monetization occurs when a nation's central bank (for example, the Federal Reserve in the United States) "buys" government bonds. [1] If a government's expenses exceed its tax revenue and nothing is done, the government will draw resources (capital) out of the private market. Since there is a limited amount of capital available in the market, there will be less available to fund business growth if the government takes out a substantial portion. If the debt is monetized, the capital is thereby returned to the private market."
washingtonpost.com
"The decision by the Fed to buy government bonds and mortgage-related securities is designed to lower borrowing costs for home mortgages and other types of loans, thereby stimulating economic activity. The central bank, effectively, will print more money to pay for the purchases."
ft.com
"The Federal Reserve on Wednesday stunned investors by announcing plans to buy $300bn of US government debt, triggering a plunge in bond yields and the dollar.
In a further display of aggression, the US central bank also said it was more than doubling its purchases of securities issued by housing giants Fannie Mae and Freddie Mac to $1,450bn. It said it now expected to keep interest rates near zero for an “extended period” of time"
The rise in asset classes due to montezition, whether is it commodities, stocks, houses, etc. is classic economic behavior. |
