Wednesday, March 18, 2020

Bernanke and Yellen Call On Congress to Allow the Fed to Do Even More Mad Money Printing

Ben Bernanke and Janet Yellen
As I have said before, it is unclear how much of new Federal Reserve Bank operations will just be a paper shuffle and how much will be pumping actual new money into the system but with every new method the Fed adds to "save" the economy, the likelihood of explosive money supply growth increases.

Former Fed chairs Ben Bernanke and Janet Yellen in an op-ed today in the Financial Times are doing their best to make sure the mad money printing goes to new levels.

They are calling on Congress to give the Federal Reserve the ability to but corporate bonds:
[A]s Eric Rosengren, president of the Federal Reserve Bank of Boston recently suggested, the Fed could ask Congress for the authority to buy limited amounts of investment-grade corporate debt. Most central banks already have this power, and the European Central Bank and the Bank of England regularly use it. The Fed’s intervention could help restart that part of the corporate debt market, which is under significant stress. Such a programme would have to be carefully calibrated to minimise the credit risk taken by the Fed while still providing needed liquidity to an essential market.
This promotes yet another way the Fed money pump could result in getting funds into the system. And it is doubtful that these kinds of money pumps will result in the funds remaining at the Federal Reserve as excess reserves outside the economy, which is what occurred at the time of the 2008 financial crisis.

Price inflation on the other side of the current panic is going to be really something.


1 comment:

  1. Why stop at corporate bonds? Why not equities too, to directly keep the stock market up?