Yglesias suggests double spending by the Fed

Matthew Yglesias@mattyglesias

· 12h Don't know if Chair Powell still follows this account, but in case he does I believe the Fed can do direct financial transfers to individual households by accepting bad collateral (old socks) and pretending to believe it's good. At a minimum nobody can actually stop you. Matthew Yglesias @mattyglesias · 12h The downside is the Fed would incur financial losses. But that would simply reduce the amount of Fed profit that's transferred to the Treasury, i.e. it would be fiscal policy which is what you say the economy needs. Matthew Yglesias @mattyglesias · 12h As an institutional matter this is a very dumb way to run macroeconomic stabilization. That said, FDR invoking the World War I "trading with the enemy act" to go off the Gold Standard was also dumb but it halted the Depression and improved the lives of millions, so....

I see his thrust, but the Fed needs to equally spread out these losses over 300 million people, and that means a sudden discharge of 300 billion in debt if each person got $1,000.   It would be overnight, as these people are not on account with the Fed.  And the regulated banking market would see a sudden stop for some time.

Treasury would suddenly be short on interest payments and have to go to extreme borrowing, driving rates up suddenly.  Yglesias is suggesting a repeat of the Nixon shock. He even recognizes that sudden gold repricing causes sudden stops.

Devaluation need not be an overnight affair which is what FDR and Nixon both did.   And, it is government, the Swamp, which is struggling with debt. If any institution needs to be assigned double spending rights it is Treasury, and they are assigned double spending rights by Law.  Treasury needs help getting interest payment out the door before the Fed  crashes the entire banking system with taxes. 

Yglesis needs to default suddenly because his elites all promised 'This time is different', and Yglesias is not supposed to remember the regular devaluations. If Treasury simply acknowledged its losses and went to MMT meet up we could design a devaluation plan that rolls out undet contract with double spending tor Treasury. That would get the fe completely out of the taxation function rxcept when it acknowledges more losses at contract renewal. The Fed tax being replaces with Treasury inflation tax.

Unfortunately, this compromises the elites in Yglesdias' camp. He will have to get new gurus.