Kevin Warsh, the Administration’s choice to Chair the Federal Reserve Board, has proposed that the Fed and Treasury establish a new Accord, hopefully modeled after their 1951 Accord.
I had wondered if the Fed had to finance the debt. Perhaps the Fed could fund 95% of the debt in the first year then drop by 5% each year thereafter. That seems like a soft landing while showing markets a path to eliminate the deficit.
Considering this administration used its powers over the GSEs to scale the consolidated government balance sheet up by the legal maximum of $200bn, I doubt the Fed chair nominee the President spent a year considering will actually more than undo that stimulus in a midterm election year by significantly shrinking the Fed’s balance sheet
Spot on Tom. The independence of the Fed from Treasury and separation of fiscal and monetary policy cannot be emphasized enough. So glad you put this out there!
I had wondered if the Fed had to finance the debt. Perhaps the Fed could fund 95% of the debt in the first year then drop by 5% each year thereafter. That seems like a soft landing while showing markets a path to eliminate the deficit.
Considering this administration used its powers over the GSEs to scale the consolidated government balance sheet up by the legal maximum of $200bn, I doubt the Fed chair nominee the President spent a year considering will actually more than undo that stimulus in a midterm election year by significantly shrinking the Fed’s balance sheet
Spot on Tom. The independence of the Fed from Treasury and separation of fiscal and monetary policy cannot be emphasized enough. So glad you put this out there!