An excerpt from Robery Arnott's take on the latest round of QE. The whole article is worth the time to read it and can be found here.
The
Federal Reserve Board will now be “printing” $85 billion a month in new U.S.
dollars in order to buy $85 billion a month in bonds, up from $40 billion a
month previously. Doing the math, that’s $1,020 billion—just over $1 trillion—a
year. The Fed’s balance sheet had $800 billion in assets before the Global Financial
Crisis started in 2008; it’s now over $3 trillion, set to rise $1 trillion a
year.
If
we’re spending $1 trillion a year more than we produce as a nation (the
national deficit) and are financing it by printing $1 trillion a year of crisp
newly printed bills (actually, bits in a computer), we’re on a dangerous path. Printing
our own money to buy our own debt works fine… until it doesn’t.
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