Private entities don't invest in new debt of The United States. It seems like a lose-lose situation no matter what the government does to intervene. If you'd like to negatively affect the US economy, you would have to convince atleast five of the biggest bond owning countries (e.g. I like you worry that the next resession will significantly expand our national debt and the feds liabilities on their balance sheet. I was shocked haha, [–]lacraquotte 29 points30 points31 points 2 years ago (6 children). As long as the dollar stays with reserve currency status it's not a big deal. Will the Federal Reserve possibly expand its balance sheet? Or does it just reflect that Mexican society produces less value than American society? It seems more logical that it affects people who have some money in the bank account which can decrease in value. r/investing does not endorse any recommendation or opinion made by any member, nor do any users or moderators of r/investing advocate the purchase or sale of any security or investment. To date, the US has never failed to make an interest payment on time. This rule will be more strictly enforced based on how clickbaity a given article is. The fed is mainly unwinding currency This includes a return to quantitative easing (QE), a controversial policy which involves adding more money into the banking system. This is the fundamental value of fiat currency, fiat meaning currency that is willed into existence -- it has value because you need it more than you need any other valuable object barring food and water. [–][deleted] 3 points4 points5 points 2 years ago (1 child). Just Google "Bernanke blog", it's at Brookings. This means the real cost to service our debt was -0.39%. When the economy is hot, and unemployment is low, then government can do the opposite -- take money out of the economy to avoid inflation, either by spending less, increasing taxes, raising interest rates (which motivates people to trade their dollars, which don't pay any interest, to government paper like bonds and treasuries, which do -- while simultaneously taking their dollars out of the circulating supply). "I'm very concerned about it. Chart. That's all well and good when interest rates are at historical lows and the economy is (at least on paper) humming along, but things don't look so great if you consider that rates have been ticking up. If it loses value US companies and consumers will have to pay more dollars for the same products from abroad. Also FYI the balance sheet is a lot more than just treasuries so your math is wayyy off. His post completely ignores the fact that when you print money, every dollar now has less value. (With the point of my post still standing ;) ), [–]MasterCookSwag 15 points16 points17 points 2 years ago (24 children), So there's the sort of stuff being discussed here, which is more or less just considered basic understanding of economics. 4. The new neoclassical synthesis of the previous major schools of economics has resulted in very little academic disagreement over major concepts. It could be anywhere from years to centuries IMO. Federal Reserve. To put matters into perspective, the Federal Reserve’s total liabilities have more than quadrupled since the onset of the financial crisis, amounting to about $4.1 trillion in the fourth quarter of 2018. The following analysis is based on the balance sheet of all Federal Reserve Banks combined as published in the annual report 2019 by the Federal Reserve. In your opinion, is it better or worse to have a currency that is out of the government's control, like when the US currency was based on gold, or a fiat currency that is based on nothing? Hint: the middle guy has no schooling in economics. So someone is profiting off of the loan that the government is taking out right? Then the Chinese invented "New Fairy-Bit Land" (BCH). - Money is created by the government when it pays non-government entities for goods or services, or when it pays for private citizens to buy goods or services (e.g. To borrow a phrase from the movie “Pretty Woman,” this is the fork they know. They literally explained why overspending would be bad so I'm not sure who this is arguing with? Punishing people for participating in a system with failure built in seems insane. [–]Gypsiee 2 points3 points4 points 2 years ago (0 children). The Fed balance sheet is the Federal Reserve's tally of its assets and liabilities, a set of figures the central bank issues every Thursday. Debt needs to be paid back. As long as they are stopping QE at some point in the cycle, it fixes it self. The US could issue new money to pay off 100% its debt tomorrow and inflation would be increased substantially but not to the level of hyperinflation because the dollars from most of that debt are already economically active. On the Federal level. Printing money to get more foreign currency is hard. There are a lot of sometimes contradictory opinions about how, but the general goal of monetary policy is all about trying to dampen this effect, and match the money supply up with the economy, so that your $1 isn't wildly fluctuating in terms of how much of the economy it represents. It sounds like that plan is not going so well and they have only been able to sell around $300 billion so far over 1 year into the program of unwinding. If US dollars were used for nothing but paying taxes and some other currency was used for every other USD purchase, the value of US dollars would be substantially less. Debt is not just an account artifact, it’s a very real thing, because you have to pay back the bonds that it’s composed of so that people buy your bonds in the future. The Federal Reserve Bank, a government entity that operates independently of the USG and is comprised of privately owned banks, prints the USD, and then lends it to the US government at interest. Everyone's savings are now worthless. Mainly because if those dollars do circulate, it will create a problem.There seems to be a lot of economists thinking it would create hyper inflation. The Phillipines, Panama, Grenada and Haiti? You edited your post. Because most of the time the money you give to the bank is like a credit you give the bank. He says that USD only has value because it is required to pay taxes. WTF!? [–]kainzilla 36 points37 points38 points 2 years ago (36 children), Can't wait to see them invade Bitcoinland, [–]haberdasherhero 17 points18 points19 points 2 years ago (0 children). 6. Holding all that paper allows the Fed to soak up all the extra money being pumped into the economy at a time it doesn't need it (tax cuts increase the money supply, huge government spending bills increase the money supply). Key takeaways. -There is no theoretical limit how high their balance sheet can go, but there would be economic consequences, if it went too high. A constant discussion in central banking circles revolves around the Federal Reserve’s “large balance sheet”. [–]ktkps 32 points33 points34 points 2 years ago (0 children), [–]lol_bitcoin 9 points10 points11 points 2 years ago (2 children). Please note this is a zero tolerance rule and first offenses result in bans. This includes beginner questions and portfolio help. It implies the best metric to watch when talking about the U.S. government's handling of money is not the debt or the budget, but inflation--either the consumer price index or the PCE which the Fed regulates to. The balance sheet gets smaller for a fourth consecutive week. Today the Federal Reserve announced they'd start doing 125 billion of QE PER DAY!!! If we take a look at some real world-applications, such as Venezuela, Zimbabwe and the Weimar Republic, it's plain obvious why this "brilliant" idea is not en-vogue. The key insight of MMT is that sovereign governments that are the sole supplier of national currency can issue currency of any denomination, and in physical or non-physical forms. You can't just Produce your way to growth. So what your statement should really say is for every $1 we spend today that's way less than $1 in the future we can't spend. [–]WikiTextBot 10 points11 points12 points 2 years ago (0 children). Inflation is a tax on everyone, but especially the poor. Capital Owners end up with excess capital, 'Wealth'. Venezuela, Weimar Germany, Zimbabwe, Hungary and the United States after the Revolutionary War all experienced hyperinflation. [–]PM_ME_YOUR_THESES 5 points6 points7 points 2 years ago (0 children). And even then the demand would quickly bounce back when the price of these bonds would lower, due to high supply. [–]vep 58 points59 points60 points 2 years ago (6 children), you are a saint to respond so sincerely here. [–]markneill 1 point2 points3 points 2 years ago (0 children). Since September, the Fed has grown its balance sheet by roughly $3.16 trillion, nearly as much as all prior QE programs combined (~$3.5 trillion) - (balance sheet to da moon!) If the Federal Reserve wants to get inflation to meet its target, the central bank’s already historically large balance sheet may need to get much bigger at some point. The Federal Reserve publishes its complete balance sheet each week in the H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks," available at . Welcome to the number one reason we haven't had appreciable inflation in the last 20 years, in spite of ridiculously loose fiscal policy. This response ignores a lot of fallout if the government were to stop making interest payments. [–]jatea 1 point2 points3 points 2 years ago (0 children). Making the argument that the government doesn’t need to settle debt because it can inflate away the value of the dollar and thus the debt is the equivalent of the Queen of England being able to dissolve parliament. For that service you pay money, interest. It’s not as easy as “more money equals inflation”, [–]DidoAmerikaneca 5 points6 points7 points 2 years ago (1 child). The government must make interest payments on debt. At the end some 100$ loan will turn into 110$. It theoretically penetrates the entire population, visits each member once and the people in the last tier are screwed, there is nobody left to extract the money from. This is not to say that The Treasury will not issue bonds that private entities can purchase, but those do not, at all, go to paying off "The Debt" they are effectively just government savings accounts that pay low interest but have high security. OP, you're getting trashed in the comments because you have a fundamental misunderstanding of economics. Everything every politician, civilian, etc would ever want would have been completely funded and completed. Growth reduces debt to GDP (assuming it outpaces inflation) and nominal debt numbers are pretty irrelevant. If the government can issue endless dollars, why not eradicate poverty? As the economy grows and more products are produced (better technology/productivity), if the money supply doesn't grow along with that, you end up with deflation (1 dollar is worth more than in the past). As the original guy said, this is basically a holdover from when we had a gold standard. The government is most certainly revenue constrained. There's not much preventing them from growing it again if they have to deal with another recession - they will never be forced to dump it on the market. I'm open to buying textbooks, taking online classes, etc. it's not just Production, it's also Consumption. If a country monetizes it's debt as you suggest, it obliterates the relative value of its currency. In this context, MMT essentially says that you can get very deep into debt safely as long as you can print your own currency. I won't say, however, that actually doing it (seigniorage as a means of debt repayment) is a good idea. Sort of agree, sort of disagree. As a recent grad I wanted to flex my Econ muscles and would go in there to correct the record. I'm pretty sure a majority of people started being econ experts after bitcoin and hearing all the idiots who have no econ knowledge or how a fiat currency work spit out bullshit about how a fiat currency works and how bitcoin is the only currency that'll have value in a few years and this just gets repeated ad nauseum. Unfortunately, we have a congress filled idiots who blocked every bit of government spending back when we had a recession 10 years ago, and who now -- when the economy is hot -- are spending like drunken sailors. [–]baked_brotato 37 points38 points39 points 2 years ago (2 children), Wow, what a change of pace from the content I read on wsb, [–]Hold_onto_yer_butts 49 points50 points51 points 2 years ago (0 children). Get an ad-free experience with special benefits, and directly support Reddit. belong as comments to existing posts. The U.S. Federal Reserve's balance sheet could end up between $3.8 trillion and $4.7 trillion by 2025, according to projections collected by the New York Fed. Also when is this published each week? The call to "pay down the debt" is literally a call to say "we want the government to remove money from the economy to reduce an irrelevant accounting artifact that scares us because we're fucking ignorant.". There's a few examples that have tried to change this, such as China establishing the Yuan as a major currency in southeast Asia. This is why the rich get richer, when you’re immune to short term headwinds, you can afford to buy low. "Everyone" isn't saying now is the time to buy a house. As to why it's not a bigger deal ask yourself why it should be a big deal? Buy a candy bar, pay taxes. 3when do you see the bubble popping for this era? This post got really stupid really quick. And no, it would not destroy the dollar. 3 On the other side of the balance sheet, the Federal Reserve has three main categories of liabilities: $2.6 trillion of bank reserves and other deposits, $1.5 trillion of paper currency, and about $400 billion of reverse repos. That's why when you hear someone say "Keynesians are wrong" what they're actually saying is "I disagree with what everyone accepts as true". [–]ffn 58 points59 points60 points 2 years ago (0 children). So at the end of the day, the federal government is not much less restrained than anybody else. [–]rodrigo8008 20 points21 points22 points 2 years ago (0 children), A) the fed printed the money to buy those bonds. Relax, this is one part of MMT that does carry to mainstream consensus. The government could do the opposite too: it could consider it a risk to store your money and charge you for it or simply change the relation between what they ask for in taxes and what they give out as payment or credits. Creating more money causes inflation. This gets back to the point made earlier: you're evaluating using the concept of individual spending, not spending by a currency issuer. It depends on demand for dollars. Last I saw they were still on pace. The taxing authority of a country is literally the asset that backs that country's currency. Your model of how currencies work has only ever existed in the fevered dreams of Warren Mosler. Related data from the Federal Reserve Bank of New York, which executes the swaps, showed the balance on Thursday was lower still at $228.7 billion. [–]lolomfgkthxbai 218 points219 points220 points 2 years ago (75 children). So maybe not best time to buy property now... [–]Hold_onto_yer_butts 24 points25 points26 points 2 years ago (5 children). If the economy recedes, AND the government decides to enact a policy of deflation that matches the rate of economic retraction, I would imagine that it would balance the recession. Why? Those two are in some sort of unstable equilibrium, but they are equal. You know, I had an idea like that once, a long time ago. But your second assumption is also incorrect. Effort: Posts must meet standards of effort: Do not post just an article, highlight the parts of the article you find relevant or offer some commentary surrounding the article. [–]cedarhills 2 points3 points4 points 2 years ago (0 children). Not saying this is going to happen, but there is a moment when people stop trusting the currency and shit hits the fan. The debt being the valuable of Haitian themselves who in freeing themselves caused France to lose the value of Haitian as slaves. How do I get started in the Stock Market? I don't think international trade actually really enters the theoretical discussion of national debt and central bank balance sheet that much in this context. It also spends solely in that currency. The mistrust has to be collective. There’s nowhere else for rich people to get a positive ROC. Following a period of Quantitative Easing (QE), a process by which a central bank buys government bonds effectively injecting money into the economy, the balance sheet rose to over $2.2 trillion. When the country / population doubles in size, and now there are double the number of buildings, cars, etc, it makes sense that the total value of all USD minus inflation to approximately double. Over time money will lose value compared to goods. The USD (or any currency) is backed by all the goods that can potentially be purchased using USD. By Year 2, your people have improved coconut planting technology and now produce 20 coconuts, but if the money supply still only is 10 shells, you have had deflation. China wants the RMB to become a reserve currency for other countries. The individual bonds need to be paid back but the net amount of debt never needs to be reduced. Consolidated Statement of Condition of All Federal Reserve Banks The takeaways are the following: The fed bought $16B in US treasury securities over the last week. Thats the problem I always had with people studiing economics. Money supply is a tool for Governments, but debts must be paid back. Printing money to get more of your currency to pay back creditors who owe you money in your currency? At the small scale, the debtor is dependent on the creditor, for reasons most people are familiar with. But rising oil prices may decrease economic activity (if people "substitute" oil with simply buying less oil and dealing with it), which would go against inflation. which is nuts (and it's so transparently nuts that it makes all economists look like fools to the moderately knowledgeable layman). These government also have an unlimited ability to provide funds to other sectors. What could you buy with it? The actual debt we still owe from 1945 is still in 1945 dollars - meaning it's a relatively small number now. Which would you rather lose? I just found out the size of the Federal Reserve balance sheet. [–]lol_bitcoin 5 points6 points7 points 2 years ago (0 children), [–]marijnfs 2 points3 points4 points 2 years ago (0 children), Yeah that post needs a remind me in 2 years, [–]xcsler_returns 2 points3 points4 points 2 years ago (0 children). Did you not read the post? Then governments must print money, cut spending, or default. Are you going to get 50% of the U.S. household population that sits at the bottom of the scale, and controls a shade more than 1% of the wealth in the country? Only the interest needs to be payed (by new debt). The sum of all assets must always be equal to the sum of all liabilities. But the fact that the economy is in the right cycle to support a balanced budget strikes me as not guaranteed--sure, sometimes the economy requires a balanced budget. Also like the parent commentor said, you can't think about a countrys finances like a private persons finances. [–]yogadogsfriedfoods 1 point2 points3 points 2 years ago (0 children). Prepared for the March 2019 meeting of the Shadow Open Market Committee. He is correct that fiat currencies only have value if it can be spent on something that is needed. Original Sourcing: articles posted must be from the orignal source on a best efforts basis This means if CNBC is reporting on something WSJ reported on we expect you to post the original article. [–]meteoraln 11 points12 points13 points 2 years ago (0 children), when you print money, every dollar now has less value. You have no idea about economics. -Treasury always has an amount on their balance sheet for the bills and coins they circulate. $DMYD & Genius Sports: Index for Sports Betting with Strong Tail Winds. People can't afford food or medicine. Because you’re going to be underwater on your home when values go down and if you’re paying such a small down payment, you probably can’t afford the home anyway. This builds into the system itself failure and loss. It's generally done in the form of loans, but it's not necessary for the principle of why the money has value to continue to make sense. Today, the national debt reflects the number of dollars the government has spent into the economy -- and each one of those dollars exists as savings in the non-government sector. In other words, if the government spends $1mn into the economy, it's you and I who are the beneficiaries. Wages have experienced positive real growth over really any decent timeframe. All currency is monetized government debt. You forgot to address the issue of purchasing power. The debt isn't fictional, it is made up of loans to other countries. Maybe they meant debt? [–]MightyBone 1 point2 points3 points 2 years ago (0 children). It turns out that early last year the Federal Reserve had accumulated around $4.5 trillion in government debt (treasuries, mortgages, etc...). (No.) Stuff you can potentially purchase is not the same as the amount of stuff produced in the country. The US government issues its own currency. [–]FakingItEveryDay 7 points8 points9 points 2 years ago (0 children),, [–]MasterCookSwag 108 points109 points110 points 2 years ago* (92 children). If the national debt was to be completely disregarded as you put it, then we would see countries spending way beyond their own budget and accumulating debt that would dwarf their GDP. That debt must be paid back, with interest to interest payments right bonds in order to have money repay! Would include most `` ask reddit '' style questions countries is that the world they. The conference organizers for their annual salary reduction as all prior QE programs combined 3.5 trillion to other countries giving! 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