As we've noted previously, Mr. Bassman knows stuff.
From Harley Bassman, The Convexity Maven, December 2:
The lack of (Consumer Price Index –CPI) inflation should not distract anyone from recognizing that our financial economy is presently overwhelmed by too much debt,both public and private; and it is beneath the cloak of systemic risk management that the Federal Reserve (FED) flipped on their printing press to support an alphabet soup of asset purchase programs
And while I do not begrudge most of the FEDs actions to offer relief from both the Great Financial Crisis (GFC) and the COVID pandemic, what we all must recognize is that the financial remediation of these two crises have pulled forward the day of reckoning for how to fund the promise of Social Security and Medicare for the retiring Baby Boomer demographic.
The political game of “kick the can” for managing the two largest strands of our social safety net has reached an end; about a decade sooner than hoped. We are at a crossroads where one path is well trodden by financial history, and the other newly paved by an economic Pied Piper.But her siren song has been too sweet, and we are turning to the perfidy of Modern Monetary Theory (MMT).
Here we consider the reason and consequence of this dangerous road.
Only Congress can legally “spend” money (Fiscal Policy), and since they would not offer sufficient support in response to the GFC, the FED stepped in with(Monetary Policy) Large Scale Asset Purchases (LSAP), also known as Quantitative Easing (QE),as their most potent tool.These assets landed on the FED’s -genetian line-balance sheet.*****
While indeed much has changed over the past decade, sometimes to the point where facts do not exist, what has remained constant are the rules for double entry bookkeeping, where every asset must be paired with a liability....
....MUCH MORE (9 page PDF)
