Recent comments in /f/wallstreetbets

I_Fux_Hard t1_jdy7cii wrote

The government caused this situation. The banks are required by law to buy safe things like bonds. The government destroyed the value of their bonds by jacking up interest rates. So the government is going to fix it by infinite money glitch. What could go wrong?

However, I don't think the government can have really high interest rates. The government has to pay that rate on all of it's debt. I think at current rates all of the taxes collected would go to finance the debt. How do we buy more bombs?

Especially if this triggers a big recession and all the poor's can no longer contribute to the bomb fund.

1

Great-Ad-4416 t1_jdy6v5f wrote

you opinion is based on an assumption that money is finite. so to sell bounds, the bond interest must be high enough to cover the inflation and be attractive to the cash that's available.

when in actuality, it is a bit more complicated. for one... the Fed can always decide to screw the inflation and start QE again, turn on the printer and flooding market with 100 trillion dollars over night (by buying the bond), and set the overnight rate back to zero. and bank would be able to once again borrow short term money for next to nothing, and stay solvent, and none of the situation you describe would come true. The US can keep doing this for as long as dollar is accepted world wide, as the inflation / devaluation of Dollar will be aborted by the entire world, but US will reap all the benefits as long as we got military might that can uproot any government dare to say otherwise.

1

VisualMod t1_jdy2a9s wrote

>This is an extremely difficult situation that the Fed is facing. They need to be careful not to set rates too high, which could hurt those who have borrowed money, but at the same time they need to provide enough of a return net of inflation to encourage investors to hold government bonds. It's a delicate balancing act and one that could have serious consequences if it's not handled correctly.

1