Minneapolis Fed President Kocherlakota Warns Massive Debt Load Can Only Be Paid By Tax Collections Or Debt Monetization

Maybe someday we will get an FOMC that actually understands reserve accounting and monetary operations, and maybe even recognizes the currency for the simple public monopoly that it is and moves away from ‘expectations theory’ as the reason for ‘inflation.’

But for now that seems to be only a very remote possibility.

“Why might households expect an increase in inflation? The amount of federal government debt held by the private sector has gone up by over 30 percent since the beginning of 2008. This debt can only be paid by tax collections or by the Federal Reserve’s debt monetization (that is, by printing dollars to pay off the obligations incurred by Congress). If households begin to expect that the latter will be true—even if it is not—their inflationary expectations will rise as well.”

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