A $10 trillion Fed balance sheet is coming

Bloomberg/Bill Dudley

graphic image of a wheelbarrow full of green bags of money“So what should we make of this rapid growth? Do the Fed’s asset purchases represent monetization of the federal debt? Will runaway inflation be the inevitable consequence?”

USAGOLD note:  Of course, the answer to the inflation question, according to Dudley, is “No.”  The Fed, he says, can raise rates and encourage banks to keep money in excess reserves at the central bank – policy options which would put a cap on inflation. If it were all that simple, we counter, no country would ever experience runaway inflation. In every modern example, runaway inflation – including the most destructive hyperinflations – occurred under the watchful eye of a central bank that believed it would get lucky. Bill Dudley is the former president of the New York Federal Reserve and what he is forecasting is what happened post-2008.  A good many believe that the Fed might not be so lucky the next time around.

Repost from 6-22-2020

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