Right. Borrow $5 trillion for infrastructure and pay <$50 billion / year. That's a positive ROI for sure. Only issue is you would flood the markets and raise those rates, so you wouldn't get all of it, but still a lot. I have always though that the government should act strategically and take advantage of low rates like other market participants.
This administration has a single minded project that has been a struggle to get financed. It would be a huge coup for them to use this downturn to get it financed without borrowing from Peter to pay Paul. Then again, this is all probably just fake news.
Only if restricted to the relatively arms length levers like interest rates. There's still plenty of room for more drastic measures like buying stock directly in companies like Japan has done or huge prop ups like a new WPA.
It is not a problem with correction or even recession. Without one you cannot eliminate those weak and continue the rich as rich. You need some cycle. Desperately need it.
The Fed has as much ammo as there is wealth held in dollars. Which is to say, a lot.
First, there is negative rates. Punishing people for holding cash. The ECB and Bank of Japan have done a lot of pioneering work there, the Fed will have already extensively studied what they did, what worked, what didn't work.
Second, they have QE, monetizing debt & debasing dollar wealth, which is exactly what they'll unleash for the next recession. Inflation isn't much of a concern right now, so they'll feel free to 'print' rather wildly.
Annual budget deficits will blowout, probably up to $2 trillion or more, with the next recession, so the Fed will have to print dramatically to fund that regardless.
==First, there is negative rates. Punishing people for holding cash. The ECB and Bank of Japan have done a lot of pioneering work there, the Fed will have already extensively studied what they did, what worked, what didn't work.
Second, they have QE, monetizing debt & debasing dollar wealth, which is exactly what they'll unleash for the next recession. Inflation isn't much of a concern right now, so they'll feel free to 'print' rather wildly.==
I'm not sure I see where either of these options has worked. Can you share the successes of either of these measures?
In option 1, you have a stagnant Japan with a lost generation.
Option 2, is what we have been doing for 12 years and has led us to this point. The inflation seems to be hiding in asset prices (housing, stocks) not household items.
Since 2007, there has been one year with GDP growth [1] above the annual deficit as % of GDP [2]. That was 2015, with 2.4% deficit and 2.9% GDP growth. 2018 saw the US spending 3.8% of GDP in deficits to generate 2.9% GDP growth. Does that sound like a "strong" economy?
The purpose of Fed easing would be precisely to generate/maintain target levels of inflation. The idea that the "Fed is out of ammunition" is that its conventional policy tool (rate changes) is seen as near a limit, such that the Fed can't generate further inflation if it wants to.
But here, you "smell the inflation," so by definition the contemplated actions are in fact ammunition.
