The Prime Minister says that the US is funding its deficit by printing more money. This is not true in any economic sense. The US simply has to issue more US treasuries bills in order to fund its government deficit. The bills are useless until there are demand for it. For quite a number of years, China has been providing the demand for the bills with the US dollars they earned from the huge trade deficit.
A few months ago, the US announced that it will print more money to purchase its long term treasury bills. In effect, what it will do is to reduce the amount of treasury bills in the market and thus potentially temporary increasing its price. This has nothing to do with financing its deficit but to instill confidence in the owners treasure bills. The increase of price of the issued bills will not go into funding future deficit, but it will only make the owners of the bills richer.
Making bold statements that are true takes courage. Making bold statements that are not true just shows that you are a courageous ignorant.
No comments:
Post a Comment