Daily GBNews Mega - 06 04 2022

Not directly financing government spending via QE

It isn't that simple.

In the late 60s, there was no QE but "coincidentally" the Fed would inject money through OMO (a simpler time) whenever the govt was auctioning securities. Result: inflation.

Very little of the QE in the 2010s leaked into the money supply. A lot of the QE today is leaking into the money supply because govt spending is increasing rapidly (and because of cash handouts). When QE started, the Fed was explicit that it would never be used to support govt spending. I don't think anyone would deny that the Rubicon has been crossed, and QE is being used to indirectly support govt spending.

So you don't need to do direct monetary financing to end up in the same place. Central bank independence isn't a purely legal concept either, independence has clearly been compromised in more subtle ways short of demanding that the Fed directly finance the govt.

/r/badunitedkingdom Thread Parent