What are some of many problems this stimulus printing pose ? Well it all goes back to basic economics , the more they print the more they flood the money supply therefore causing inflation , causing a devaluation of the currency as I stated before, which leads to threats of a currency crisis. I hear the argument that why haven’t we had a currency crisis already if they’ve printed soo much over the past few years ? Well let’s look at the facts the US is the reserve currency which means other countries need US dollars to participate in global trade , so while to US prints all this currency they are able to off shore it in other countries which essentially allows them to not experience run away inflation…or at least not yet that is. The more they print the faster we move towards these dangers.
The government is in a tight spot here , they know they can’t raise rates without causing a collapse, they know they can’t just keep up the trillions of dollar printed without causing a currency collapse and or run away inflation so they’re getting desperate , and desperate times call for desperate measures. Former central bank officials Simon Potter , who led the Federal Reserve Bank of New York’s markets group, and Julia Coronado who spent eight years as an economist for the Fed’s Board of Governors came up with a idea that there needs to be a new monetary tool that they call “recession insurance bonds†in order to get money out to individuals faster utilizing this new digital era of payments. This is one step close to getting everyone comfortable with the idea of digital dollars or should we say fed coin. These recession bonds will grant the fed an additional tool for providing “supportâ€. How they propose it’ll work is that they take a percentage of GDP in and divide it up equally and distribute to households in recessions. These bonds will be a zero coupon security , which would just be a contingent asset of a household. These bonds would then be activated by the Fed when needed and deposit the funds digitally in the households app. Arguments were made that the last system was to clunky and old so they highly emphasize on the idea of this digital idea , slowly but surely pushing us away from cash and it’s old infrastructure. These bonds will appear on the asset side of the feds balance sheet meanwhile the digital dollars will appear on the liabilities side for the individuals.
Each time there’s a crisis they implement a new call to action, that they will use whenever for anything. In fact this whole money printing and lowering of rate combined with asset purchasing by the fed wasn’t really a reality till we had the crash of 08, now this is normal behavior for them.