The best of economic times, and the worst

This is a tale of two printing presses.

It is the best of times, the worst of times. The U.S. government will continue spending more money than it is taking in from taxes, despite a warning from the president’s budget commission that the situation is unsustainable and risks a blow-out in the market for U.S. IOUs. The worst of times. So the first printing press well be put to work printing Treasury bonds, or IOUs, promises to repay the loans at some future date, and interest until then.

Meanwhile, the Federal Reserve Board’s monetary policy committee will activate the second press, and not for the first time. It will print $600 billion with which to buy the next eight-months’ output of the Treasury’s presses, and that doesn’t count the $300 billion from expiring mortgages that it will reinvest in additional Treasury securities. That will keep the price the Treasury has to pay investors — the interest rate — low, and drag down other interest rates as well.

Which makes investors look for a better return on their money. Buy shares. Not much of a risk since the chairman of the Fed, Ben Bernanke, has announced that since share prices add to wealth, added wealth results in added spending, and added spending creates jobs, he will support share prices — the so-called Bernanke “put.” The best of times….

Read more at The Weekly Standard.

Beltway ConfidentialbondsfedUS

If you find our journalism valuable and relevant, please consider joining our Examiner membership program.
Find out more at www.sfexaminer.com/join/

Just Posted

City officials closed San Francisco County Jail No. 4 on the top floor of the Hall of Justice at 850 Bryant St. in September, reducing the number of beds in the jail system by about 400. 
Kevin N. Hume/
S.F. Examiner
SF jail closure prompts doctor to call for release of more inmates

Reduced space increases risk of COVID-19 spreading among those in custody

Cyclists have flocked to Market Street since private vehicles were largely banned from a long stretch of it in January. (Amanda Peterson/Special to the S.F. Examiner)
Plans for sidewalk-level bikeway on Market Street dropped due to costs, increased cyclist volume

Advocates say revisions to Better Market Street fail to meet safety goals of project

Prop. 21 would allow San Francisco city officials to expand rent control to cover thousands more units. (Kevin N. Hume/S.F. Examiner)
Tenant advocates take another try at expanding rent control with Prop. 21

Measure would allow city to impose new protections on properties 15 years or older

Tenderloin residents are finding benefits to having roads closed in the neighborhood. <ins>(Kevin N. Hume/S.F. Examiner)</ins>
Should there be fewer cars in the Tenderloin’s future?

The pandemic has opened San Franciscans’ eyes to new uses of urban streets

Singer-songwriter Cam is finding musicmaking to be healing during 2020’s world health crisis. 
Courtesy 
Dennis Leupold
Cam challenges country music tropes

Bay Area-bred songwriter releases ‘The Otherside’

Most Read