Re:The Fed Is Down
by dragonwriter on Wednesday February 24, 2021 @10:38PM
(#26259420)
> Correct me if I'm wrong, but people constructed a cleavage between the Fed and the US Govt because they thought we shouldn't trust democracy with money creation.
Not exactly.
The government created a cleavage between the Fed (and, therefore, monetary policy) and Congress/Treasury (and, therefore, fiscal policy), because they perceived that faith in the currency would be enhanced and government borrowing would be cheaper if currency users (including potential dollar-denominated debt holders) knew that the entity responsibly for borrowing and repaying the debt had a strong (even if only political, and not strictly binding) barrier to monetization of the debt.
Not exactly.
The government created a cleavage between the Fed (and, therefore, monetary policy) and Congress/Treasury (and, therefore, fiscal policy), because they perceived that faith in the currency would be enhanced and government borrowing would be cheaper if currency users (including potential dollar-denominated debt holders) knew that the entity responsibly for borrowing and repaying the debt had a strong (even if only political, and not strictly binding) barrier to monetization of the debt.