Sunday, December 23, 2012

A Fine Merry Christmas Greeting from Bob Murphy

Bob Murphy warns that the Federal Reserve is likely to monetize the entire deficit in 2013, which will be around a trillion dollars. Got that? The Fed is going to create a trillion dollars out of thin air. Here's Murphy:




(ht Travis Holte)

4 comments:

  1. But remember: it's not monetizing debt because the Fed intends to sell the bonds back! Ha.

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    1. Indeed, we just owe it to ourselves!

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  2. The 2012 deficit is 1.1T. The money printing announced by the Fed is 40B for mortgages and 45B for treasury bonds. 45B times 12 is 540B. Assuming 2013 has a similar deficit, 540/1100 is 49% of USG debt being monetized by the Fed. Monetization of mortgages doesn't fund government spending. Am I missing something?

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    Replies
    1. Yes, the money multiplier, which will result in a multiple of the monetary base that the Fed puts out.

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