[quote=FlyerInHi][quote=CA renter]
It’s okay to print money, but if the printing occurs in the way it does in the video, it does not reduce the overall debt burden because the Fed is buying new government debt, so for every dollar that the Fed is printing to buy govt debt, the govt increases its debt burden by one dollar (plus interest!). IMHO, this money printing must be offset by higher taxes on those who are most able to afford it; otherwise, the debt will increase at a faster rate. Of course, there are multipliers and fractional reserve lending; but for every dollar additional lent, there is less and less “real” money to back it up.[/quote]
Another thing. Can you please clarify here?
My understanding is that the Federal Reserve cannot buy directly from the Treasury.
The Fed buys bonds in the open market from holders who have invested their savings into bonds. The Fed pays a little bit of a premium so savers are willing to trade their bonds for cash. That results in more cash into the economy.[/quote]
Correct, the Federal Reserve uses the primary dealers as middlemen. It is still creating a market for Treasuries so that the government can issue more (new) Treasuries. The process is indirect, but the Fed is buying Treasuries and “printing” money. Ray Dalio was simplifying things in this video, and I was going along with his simplified explanation.
