Fed in Bond-Buying Binge to Spur Growth - WSJ.com
the headline for that article should read: US creates a trillion dollars out of thin air.
1. Our debt has been financed by the savings of other countries for the past 25 years.
2. Our need for debt financing has finally surpassed world savings.
3. Now we are just printing money.
I have a question.
The Fed either:
a) has never heard of the weimar republic
b) is actually TRYING to monetarize our debt.
c) actually believes they can keep the "make-believe-wealth" party going by encouraging more spending not backed by savings.
Out of respect for their intelligence, I'm not even going to consider "a".
If the answer is "b", we'd be wiping out debt at the cost of becoming a 3rd world country.
If the answer is "c", they are actively discouraging people from saving (via inflation). While debt can be used to create wealth via new production, only savings can fix a balance sheet irrespective of production. In other words, I don't see what option "c" really does that benefits anyone in the long run.