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Reply #46: By exercising unlimited liquidity, the Fed DOES create a liability for the taxpayer - ultimately, [View All]

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leveymg Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Nov-29-11 06:18 AM
Response to Reply #25
46. By exercising unlimited liquidity, the Fed DOES create a liability for the taxpayer - ultimately,
someone has to back up that creation of liquidity (of which creation of specie currency is a small part), or it's deemed worthless. That someone is the taxpayer and the instrument of backing up the Fed's ability to stimulate the markets is the unlimited power to tax and borrow given Congress to pay off public (and increasingly private) debt on terms favorable to the banks, which in turn funds the Fed.

Yes, I am fully aware that the Fed's QEs operate in other ways than inflating the money supply, such as pumping up the Repo Market. But, that creates systemic risks as well.
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