central banks ECB Markets

How Draghi’s ‘QE Infinity’ Actually Paves The Way For Fiscal Policy To ‘Take Over’

"An important stepping stone".

"An important stepping stone".
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3 comments on “How Draghi’s ‘QE Infinity’ Actually Paves The Way For Fiscal Policy To ‘Take Over’

  1. The concept of IOER is somehow a primary factor in this equation ?????? How does that interface in a negative rate environment ??

  2. Harvey Cotton

    In the American context, determining the cost and value of money is so inherently political that it is an Article I enumerated power of Congress. Congress tried to shunt off this responsibility several times, either by trying to create a Central Bank or making itself beholden to gold. Eventually, it passed the Federal Reserve Act, an independent, technocratic public-private concern that was neither market-driven or democratically accountable. That didn’t make money any less political. Savers and debtors, capital and labor, importers and exporters, etc. all still have different and conflicting needs from inflation and currency strength. So there has been, and always will be, a tension between monetary and fiscal policy and Central Bankers will always be roped into the political realm. Now, politicians want the lowered discipline M.M.T. provides, but are still unwilling to anger their Wall Street donors and bypass bond markets all together. So the upshot is you have a garbled mess of governments buying government debt and governments selling government debt with transaction costs on the open market. Government can then explode the public debt and the Fed balance sheet, sell bonds with all of the transaction costs and interest rates, but still not be beholden to the bond markets in any meaningful way. Not democratic, not free market, not technocratic, not really M.M.T.

  3. Really good post after three rereads and a visit to Plans and Clues… Sort of fits into a complex web that can seem to be mysterious at times.
    thanks H…..and Harvey for context… It always puzzles me in how they can retain solvency in the Banks with this cobbled together system.

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