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)


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

  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?

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