About 80 percent of this year’s deficit was provided (a bit indirectly) by newly printed money. The other 20 percent came from the sale of bonds to the public.
This WILL result in inflation. (Consider moving money from fixed income to equities, also consider equity REITs and the CPI-indexed bond.)
Following the financial crisis of 2008, the Fed engaged in “quantitative easing,” alternately “expanding the balance sheet.” This referred to buying “non-traditional securities” (non-traditional, that is, for the Fed). These were mostly mortgage-backed securities. Those mortgage-backed securities eventually recovered their value, and the Fed was able to sell them at a tidy profit. The money it created never left the banks and, so, never got inflation started, and then was dissappeared.
Trust me, this time it’s old-fashioned conversion of government debt into cash. We can get away with this for a time, because the economy is down the toilet, and - as pathetic as we are - our government bonds look better than a lot of the rest of the world. But, the inflation is coming. There’s a psychology to this. It’s like the Road Runner cartoon. Wile E. Coyote has run off the cliff, but won’t start falling until he looks down and realizes it.
Biden will rule during a time of inflation and unemployment, war, worldwide hunger, contagious disease, religious persecution, corruption, perversion, and idiocy.
Joking will be banned. Hamburgers will be made of tofu. There will be football games that both teams lose. California will put up a wall to keep taxpayers from fleeing. The voting machines will say Biden wins elections from Mayor to state representative in which he isn’t even a candidate. Chaz Bono will be named Miss America. Gravity will be cut off for two or more hours a day. Cans of fresh air will cost more than bottled water.
Don’t say I didn’t warn you.
Weimar Republic, here we come.
Frankly, I think it’s going to be world-wide.
Here’s the thing though. If you’re right (and I don’t think you are) that 80% of the money is purely printed and not a result of borrowing from the Fed then that means that Trump has finally broken the back of the Fed. Their power is the power to print money based on bonds for which we owe interest, and to create cash as a result. If Trump has been bold enough to straight print money from the Treasury, which he should be doing, then that emasculates them and robs them of their interest payments. Let’s hope you’re right, because that’s the only way out of this mess.
Closer to 54%. The Fed held about $2.3 trillion in Treasuries on 1/2/2020 and about $4.6 trillion on 12/17/2020.
The debt held by the public went from $17.16 trillion to $21.45 trillion on the same dates.
2.3/4.29 = 53.6%