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Got it on my blog yesterday and added it to the attached draft in progress as well.
I cut his response a bit short to save the point that he missed the point ‘fundamentally’ even though he got this operational point right.
While in the operational sense ‘taxpayer money’ is never spent per se, in the macro sense tax liabilities function to reduce demand which is the real tax, and allows
government to buy the unsold output and move those goods and services to the public domain.
So in that sense, any government spending that buys goods and services is ‘spending taxpayer money’.
So the ‘right’ answer is that when the Fed buys financial assets, and not goods and services, it is not ‘spending tax payer money’ but merely exchanging one financial asset- balances in a fed bank account- for another- the financial asset it purchases. And the further economic effect of purchasing financial assets is that of lower interest rates than otherwise.
It’s about price, not quantity!
> On Tue, Mar 17, 2009 at 2:50 AM, Felipe wrote:
> Hi Warren,
> I am sending the link of the “60 Minutes” interview of Bernanke
> by journalist Scott Pelley. In particular, pay attention to his interview
> Part I around 8:00 min. Bernanke explains how the Fed buys assets.
> He admits that it is not taxpayer’s money; but it is just numbers on
> Fed’s balance sheet.
> Felipe Rezende