Former Dallas Fed President Bob McTeer Says a Little Monetization Is Not a Problem
pic credit: toothpaste for dinner
I still love former Dallas Fed President Bob McTeer (75% of the time) but think he may have been drunk blogging recently. That's the only way I can explain him readily giving up the Dirty Fed's dirty secrets like this.
Sable [sic] monetary policy does not mean no growth in money; it means slow growth in money. If the Treasury is financing a deficit by issuing securities, it is normal and correct for the Fed to “monetize” enough of the debt to hit it’s [siccup] predetermined money growth targets. More than that–say, in an effort to hold interest rates down–would represent an inflationary monetization of the debt. Thus in today’s world it isn’t appropriate to treat a small amount of Fed purchases (enough to keep its balance sheet from declining) as an inflationary monetizing of the debt.
I like that the reader can feel those quotation marks around "monetize". I did, didn't you?