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| The Fed can be a buyer of treasuries through intermediaries but they cannot buy bonds directly from the Treasury department. When politicians want to run deficit spending, they authorize the Treasury Dept. to issue debt, which is sold at auction. Anyone can end up owning the bonds including nearly all bond retirement and non-retirement funds, other nations, insurance companies, banks, individuals, the Fed via QE, etc.
Lately the Fed has not been a buyer, they have been letting their portfolio of bonds roll-off (QT). This has lowered the money supply. So fiscal deficit is not the same as money creation. I don't know if you intended your sentences to be as linear as I read them to be, but I wanted to clarify. You can and we currently are experiencing a reduction in money supply while simultaneously running deficits. | |
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Interest rates
