The deflation argument simply does not hold water and monetization will mean the destruction of the purchasing power of the USD. As the Fed prints money to purchase debts foreign holders of treasuries will refuse to roll them over and will look to a way to hedge their reserves. No matter how it is done, the long term play is to dump fiat money and move to the real stuff.

If its such are great idea why don’t you print some money give every member of congress 1BN to spend as they choose fit.

If you are lucky you might get employment as a gardener or maid for someone in congress.

Spot on. The loanable funds theory ignores the reality of credit creation by credit intermediaries. Money created as interest-bearing debt/credit is instantaneously the subject of a matching deposit somewhere in the system as an accounting identity.

The ‘loanable fund’ theory is consistent with the belief of 99.999% of the population that banks take in deposits and lend them out again. If that were the case then there could not BE any new money other than (interest-free) cash created ex nihilo by Central Banks or (possibly) Treasuries.

The belief is also consistent (and equally misconceived) with the ’savings glut’ canard. US etc credit = money created as debt and used for consumption came first – Chinese deposits/savings and purchases of T Bills followed – and was a consequence, not a cause.

Dirk Bezemer and Steve Keen, among others, are getting to grips with the disconnections between economic assumptions based on debt/equity finance capital as distinct from the real world.

Very well explained. I would just add that if the target rate is set equal to the rate paid on reserve balances (as now), then the Fed can still raise/lower the target rate as desired whether bonds are sold or not.

Best,
Scott