BTC #27: The end game is close for fiat............

Nighttime rumination about the Federal Reserve:  They say our experiences, stories, and lessons in life are not for us but for others.   What might I do to serve others and not just myself?   I don't believe we are here to serve or engage ourselves but to serve others and engage them with the purpose of accomplishing a higher purpose greater than ourselves.  It clear our leaders feel differently because of the way they support Fed monetary policy.  

To execute quantitative easing, central banks increase the supply of money by buying government bonds and other securities. Increasing the supply of money lowers interest rates. When interest rates are lower, banks can lend with easier terms.

In theory QE, in turn, spurs economic growth.  Today the debt to GDP ratio is so high that growth is now impossible.  

A high debt-to-GDP ratio is undesirable for a country, as a higher ratio indicates a higher risk of default. In a study conducted by the World Bank, a ratio that exceeds 77% for an extended period of time may result in an adverse impact on economic growth.

Government Debt to GDP in the United States is now 120 percent in 2021.  At curent QE rates the national debt will approach $89 trillion by 2029 according to USDebtClock.org. This would put the country's debt-to-GDP ratio at 277%.  This is unsustainable.

Above 90 percent of GDP, median growth plummets further, and average growth actually turned negative. The maturity of the debt also plays a factor, with nations heavily reliant on short-term borrowings most vulnerable to sudden crises.  The USA is now way over the 90% threshold.  This is why foreign governments stopped by US T Bills at US Treasury auctions in 2015.  

CBO projects a federal budget deficit of $2.3 trillion in 2021, nearly $900 billion less than the shortfall recorded in 2020. At 10.3 percent of gross domestic product (GDP), the deficit in 2021 would be the second largest since 1945, exceeded only by the 14.9 percent shortfall recorded last year. Those deficits, which were already projected to be large by historical standards before the onset of the 2020–2021 coronavirus pandemic, have widened significantly as a result of the economic disruption caused by the lockdowns by government decree during the pandemic and the enactment of legislation in response.

Quantitative easing stimulates the economy in three other ways.

QE Keeps Bond Yields Low

The federal government auctions off large quantities of Treasuries to pay for expansionary fiscal policy. It increases demand as the Fed buys Treasuries, keeping Treasury yields low. (There's an inverse relationship between yields and prices with bonds.)

Treasuries are the basis for all long-term interest rates. Quantitative easing through buying Treasuries therefore also keeps auto, furniture, and other consumer debt rates affordable. The same is true for long-term, fixed-interest debt. It supports the housing market when mortgage rates are kept low, and low rates on corporate bonds make it affordable for businesses to expand.

QE Attracts Foreign Investment and Increases Exports

Increasing the money supply also keeps the value of the country's currency low. U.S. stocks are more attractive to foreign investors when the dollar is weaker, because they can get more for their money. A cheaper dollar also makes exports less expensive abroad.

QE Could Lead to Inflation

The only downside is that QE increases the Fed's holdings of Treasuries and other securities. For example, the Fed's balance sheet held less than $1 trillion before the 2008 financial crisis. That number had increased to almost $4.5 trillion by July 2014.  Today in 2021, it is now 30 Trillion dollars.

The more dollars the Fed creates, the less valuable existing dollars are. This lowers the value of all dollars over time, which then buys less. The result is inflation.

Why did the Federal Reserve go from emergency lending in 2008 to quantitative easing?

The Fed launched four rounds of QE to fight the financial crisis in 2008. They lasted from December 2008 to October 2014. The Fed resorted to QE because its other expansionary monetary policy tools had reached their limits. The fed funds rate and the discount rate were zero. The Fed even began paying interest to banks for their reserve requirements. Quantitative easing became the central bank's primary tool to stop the crisis.

CITES

https://www.fitchratings.com/research/sovereigns/us-stimulus-will-boost-growth-at-cost-of-higher-deficits-debt-09-03-2021

CLUBHOUSE THESIS:  https://forum.jackkruse.com/index.php?threads/my-clubhouse-thesis-hyperinflation-is-close.25623/