This image of the Fed Chair in front of the "debt clock" speaks volumes about the economic illiteracy rampant in our politics.
The primary concern for the Fed(& our elected reps if they knew their role in managing the economy) is employment and inflation. The Fed manages this to the extent it can incentivize banks to productively lend into the economy. The government does this with its spending/investment and taxation. Neither are limited in their ability to create funds to manage economic activity apart from when resource scarcity pushes up inflation. Though this is also manageable in the same way-reducing investment/increasing taxes.
Unlike the government, the Fed creates money free of charge(or bond issuance) so no one questions the sustainability of the Fed's balance sheet or ability to continue asset purchases. With public debt equal to private savings as a matter of fact efforts to reduce the debt require less public spending into the private sector(lowering incomes or earnings) or increased taxation taking money out of circulation. Similarly, the majority of bond payments are made to citizens providing income as interest!
When the public and our democratic representatives understand the governments role in managing economic activity issues like full employment and inequality become less reliant on bank lending and central bank hysteria that currently plagues us.
The primary concern for the Fed(& our elected reps if they knew their role in managing the economy) is employment and inflation. The Fed manages this to the extent it can incentivize banks to productively lend into the economy. The government does this with its spending/investment and taxation. Neither are limited in their ability to create funds to manage economic activity apart from when resource scarcity pushes up inflation. Though this is also manageable in the same way-reducing investment/increasing taxes.
Unlike the government, the Fed creates money free of charge(or bond issuance) so no one questions the sustainability of the Fed's balance sheet or ability to continue asset purchases. With public debt equal to private savings as a matter of fact efforts to reduce the debt require less public spending into the private sector(lowering incomes or earnings) or increased taxation taking money out of circulation. Similarly, the majority of bond payments are made to citizens providing income as interest!
When the public and our democratic representatives understand the governments role in managing economic activity issues like full employment and inequality become less reliant on bank lending and central bank hysteria that currently plagues us.
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