[alert0]

Right now interest rates are low, they cannot use them as a tool in a crisis, for this reason they are printing money to lower the overall debt obligation of the US. Inflating away our debt. This will eventually lead to inflation at which point the interest rates will rise again (prediction, at the end of the decade). This is the correct play for where we are in the long term debt cycle. In my opinion, this is happening a little earlier than it should, but it might just be a sneak preview provided by the pandemic.

Stock prices are rising because the interest rates are so low. A ton of institutional money that was in bonds is now out seeking yield. This moves a ton of money into stocks and, as we see in the article, real estate.

The labor class has been shafted for years by the US dollar being the global reserve currency, causing us to run persistent trade deficits. This has off-shored manufacturing and gutted our capabilities. If the US weakens the dollar and rebuilds the manufacturing base, which they appear to be trying to do with the investment in semiconductors, I think we will be in a much better position. I am happy with the stimulus because it does both, weaken the dollar and invest in US capabilities. We just need to make sure it flows to the correct places.

[xhrpost]

> for this reason they are printing money to lower the overall debt obligation of the US

Except the way the US does it, the Treasury issues debt and then the Fed prints to buy the debt. So when we print $1T, we also take on $1T in debt. I know you mean lowering through inflation but as long as it's done this way I don't see how it matters. If the dollar looses 50%, we then need to issue $2T in debt and print $2T the next time.

[mattnewton]

The original trillion in debt can be paid back with 50% "cheaper" dollars though, right? That's the "trick" as I understand it.

[xhrpost]

Yea I guess that's true, I feel like it only matters the first time you do it though. Like if year 1 you do $1T of debt, your debt burden after 1 year is $1T. In year 2, you inflate 50%, but need to borrow $2T. Your debt is now, in year 1 dollars, effectively (1 + 2) * .50 = $1.5T. Year 3 you do it again and take $3T in debt. Now effective debt load (in year 1 dollars) is (1.5 + 3) * .50 = $2.25T. So effective debt continues to increase despite the inflation.

[mattnewton]

But each time you take more debt on, you presumably get some value from it, and if that value is greater than the interest on the debt in real terms you come out ahead. It's not money for free, it's money for cheap.

[dragonwriter]

> Right now interest rates are low, they cannot use them as a tool in a

No, interest rate are low because they are using them as a tool in a crisis.

[deelowe]

They were trending low before COVID. Western nations are simply trying to stave off deflation as more people move into retirement and less have kids.

[gowld]

They were already used as a tool, and so can't be used further (due to irrational fears of nominally negative interest rates). Printing money is effectively equivalent to lowering rates.

[dragonwriter]

“Printing money” isn’t a literal description, its a metaphor for a bunch of other “loose money” monetary policy choices which increase the money supply including, not alternative to, maintaining low interest rate targets (in fact, most of the other actions are the means by which actual rates are kept near the target rates, rather than actions in addition to acheiving rate targets), which is an ongoing intervention.

[fb13]

> We just need to make sure it flows to the correct places.

That's the key, and also something that's unsolved. History shows that a lot of the money will be squandered in increasing "clever" ways, and it may take until the end of the decade before the public even realizes that it happened.