Comment by vkou | Hacker News Reader

Comment by vkou | Hacker News Reader

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No, that $1,200 didn't come out of the Fed printing press. It came out of the general budget, so taxpayers are going to be on the hook for paying it back, in the future.

The trillions the Fed is printing aren't being sent out as stimulus cheques. They are being used to provide short-term liquidity (Which does not cause inflation), and to buy junk bonds, (Which does cause inflation, and also happens to prop up the stock market.) Some of that money is also being lent to the government - if those loans are paid back, they will cause net zero inflation. (Because once the money is paid back to the Fed, it is destroyed.)

This is precisely why we have central banks that are independent of government budgets. It creates checks and balances against a government choosing to print its way out of budget troubles.

In the very short term, that's true. In the medium-to-long term, they're kind of the same thing. Fiscal and monetary policy are handled by independent bodies, but they're not entirely uncoordinated. They're both different hands of the same overarching body too: the US government.

> No, that $1,200 didn't come out of the Fed printing press. It came out of the general budget, so taxpayers are going to be on the hook for paying it back, in the future.

Government debt does not really get payed. Old debts are payed off with new ones.

As it should be.

Public debt is just a number that express the accumulated of pass deficits. In order to reduce that number you need a government that, instead of a deficit, have a surplus.

If the government has a surplus, less money is spend in the economy.

If that reduction in spending is not compensated somehow, necessarily, the GDP has to fall.

The only things that can reduce that fall in government spending are a positive balance commerce or an increase in private debt.

Now, an increase in private debt, instead of public debt, that's a real problem.

> if those loans are paid back, they will cause net zero inflation.

Assuming you can get the fed to make that money disappear, which it doesn't have a good track record of doing so far.

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