> Sounds a bit "free lunchy" to me. So nothing can stop the tidal wave of more government freshly printed money?
Of course it's not a free lunch long-term. The cost will come due in the form of eventual sharper currency debasement, after the earlier stage process of traditional debt monetization by QE or similar (I'd expect some Fed experiments on that front). You could try to run higher inflation on an annual basis to chip away at the debt, or do larger sharper events more rarely. I think the Fed will strongly prefer sharper one-off events of big QEs (for a year or such in a recession context). In recessions, often people pile into such perceived safe investments, which is an opportunity for the Fed to take advantage of.
The US still has plenty of room to play with more traditional QE yet, before it gets to the later stages of the Japan scenario. As do the Eurozone and China. The US can likely hold at least 1.5x its GDP in national debt, probably more like 2x to 2.5x, before it starts to see more serious problems. Japan doesn't have the global reserve currency, and we've seen what they've been able to handle.
Eventually the debt - if it continues to pile up - gets so extreme there is no other option than to do sharper debasement. The recent QE (in both the US and Eurozone in their respective forms) was kicking the can down the road. China is similarly doing a lot of can kicking right now. Eventually no matter what the central banks do the debt problems and interest payments get too large, they suck up too much of a nation's free capital, and they're forced into a more serious currency event.
The Fed has to keep pushing the interest cost per dollar of debt down. That has gradually diminishing potential though, as realistically you can only go so far down. Japan, for the most prominent recent example, found the lower limits of what's possible there. They're a forecast for what the US, Eurozone and China may face.
The Fed is an enabler of bad behavior and I expect they'll continue doing it (some of it is intentional as a prop, some of it is a side effect). They enable the US Govt to borrow money at artificially cheap rates, which increases over-spending by Congress. They enable the military industrial complex and its spending levels (they temporarily keep the US from having to make a choice between social welfare and present high military spending levels). They enable Congress to kick the can down the road on spending, avoiding political-career decision risks. They enable artificially low tax rates (eventually you have to pay for the budget deficits & debt, one way or another), for pretty much everyone. They enable artificially low mortgage rates and other borrowing rates, which pumps up consumer behavior and inflates housing prices.
Of course it's not a free lunch long-term. The cost will come due in the form of eventual sharper currency debasement, after the earlier stage process of traditional debt monetization by QE or similar (I'd expect some Fed experiments on that front). You could try to run higher inflation on an annual basis to chip away at the debt, or do larger sharper events more rarely. I think the Fed will strongly prefer sharper one-off events of big QEs (for a year or such in a recession context). In recessions, often people pile into such perceived safe investments, which is an opportunity for the Fed to take advantage of.
The US still has plenty of room to play with more traditional QE yet, before it gets to the later stages of the Japan scenario. As do the Eurozone and China. The US can likely hold at least 1.5x its GDP in national debt, probably more like 2x to 2.5x, before it starts to see more serious problems. Japan doesn't have the global reserve currency, and we've seen what they've been able to handle.
Eventually the debt - if it continues to pile up - gets so extreme there is no other option than to do sharper debasement. The recent QE (in both the US and Eurozone in their respective forms) was kicking the can down the road. China is similarly doing a lot of can kicking right now. Eventually no matter what the central banks do the debt problems and interest payments get too large, they suck up too much of a nation's free capital, and they're forced into a more serious currency event.
The Fed has to keep pushing the interest cost per dollar of debt down. That has gradually diminishing potential though, as realistically you can only go so far down. Japan, for the most prominent recent example, found the lower limits of what's possible there. They're a forecast for what the US, Eurozone and China may face.
The Fed is an enabler of bad behavior and I expect they'll continue doing it (some of it is intentional as a prop, some of it is a side effect). They enable the US Govt to borrow money at artificially cheap rates, which increases over-spending by Congress. They enable the military industrial complex and its spending levels (they temporarily keep the US from having to make a choice between social welfare and present high military spending levels). They enable Congress to kick the can down the road on spending, avoiding political-career decision risks. They enable artificially low tax rates (eventually you have to pay for the budget deficits & debt, one way or another), for pretty much everyone. They enable artificially low mortgage rates and other borrowing rates, which pumps up consumer behavior and inflates housing prices.