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Daniel Amerman: Fed is monetizing 90% of U.S. deficit to keep interest rates from rising and crashing markets

Section: Daily Dispatches

11:50a ET Sunday,December 15, 2019

Dear Friend of GATA and Gold:

Financial analyst Daniel Amerman calculates this week that in the last three months the Federal Reserve has been monetizing 90 percent of the U.S. government's exploding budget deficit in the hope of preventing interest rates from rising and thereby crashing the stock, bond, and housing markets.

Amerman writes: "The Fed is creating new money and using it to buy massive amounts of government obligations at very low interest rates so that the U.S. government does not need to raise the money from private parties (as it is supposed to) who might require higher interest rates. ...

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"... the Federal Reserve has begun emergency maneuvers to make sure that the federal government can get the vast sums of cash it is currently taking out of the financial system -- sucking $422 billion in new cash out of the system in just the last 12 weeks -- without triggering the increase in interest rates that could bring the system crashing down. For lack of alternatives, that has in practice meant just creating the money, even if the Federal Reserve and Treasury Department are very careful to never actually admit that. ...

"If interest rates were to merely return to average, and stock, bond, and home valuations were to return to long-term (inflation-adjusted) averages, the loss in net worth for the average person could be staggering -- and it could be immediate. Yes, there are very much long-term dangers from the national debt when it comes to inflation and the like -- but the immediate and near-term dangers could instead involve staggering stock and housing losses."

Your secretary/treasurer construes this as more evidence that, as he told the New Orleans Investment Conference last month, the success of a policy of infinite money depends on infinite commodity price suppression:

Amerman's analysis is headlined "Funding Of U.S. Deficits By Monetary Creation Reaches 90% In Late 2019" and it's posted at his internet site here:

CHRIS POWELL, Secretary/Treasurer
Goldl Anti-Trust Action Committee Inc.

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