Will the Federal Reserve Monetize U.S. Government Debt?
Posted: 19 Dec 2009
Date Written: December 15, 2009
Purchases of U.S. Treasury securities by the U.S. Federal Reserve in 2009 have prompted concerns that the Fed may monetize debt issued by the federal government, an act with potentially inflationary consequences. Whether such concerns are warranted depends in large part on the amount of Treasury securities the Fed purchases. So long as the Fed’s total ownership of Treasury securities does not exceed the amount of currency in circulation, the Federal Reserve will not be monetizing the federal government’s debt.
Keywords: Economics, Macroeconomics
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