radii on Nostr: Interesting thought from LynAlden today: In other words, the Fed’s control loop is ...

Interesting thought from LynAlden (npub1a2c…w83a) today:

In other words, the Fed’s control loop is less effective in high public debt environments than it is in low public debt environments, and beyond a certain point can even be counter-effective. This is because their tools don’t address the fiscal side, and in some cases they can even contribute to a federal debt interest spiral, where more debt needs to be issued to fund larger interest expense, which in turn further increases the interest expense and requires more debt issuance. All the meanwhile, the entities on the receiving side of that interest are able to spend much of that interest income into the economy, which depending on their propensity to spend is somewhat stimulating and inflationary for the economy.