Fed vs Treasury – Hillary vs Obama

COMMENT: A friend watched your interview on USAWatchdog, and his response was that you were wrong that the FED doesn’t need anyone to buy the debt. The FED can print as much money as Congress cares to spend. I was stunned that he did not comprehend that the FED is not the issuer of the debt—that’s the Treasury. I think some people do not understand the fiscal vs. monetary system. It might help the novices if you elaborated on that.

He said he never heard about that January 6th coup. I told him that you informed paying clients within a few weeks of January 6th about what went down. I’m glad you finally put that out for the general public. I know it was risky back then.

Is the computer able to forecast Michelle Obama vs. Hillary being drafted?

BTW. Great interview.

WL

REPLY: I think you have a point. Many people have been confused by the constant pretense that the FED runs everything. I suppose that emerged because of the Quantitative Easing (QE). When you hear there is a deficit of $7 trillion or whatever, that is the FISCAL side that has nothing to do with the FED. They do not issue the debt; that is the Treasury. The Federal Reserve can ONLY set the short-term interest rate. Long-term rates, such as mortgages, are set by the private sector based on supply/demand.

When there is a financial panic, people run for cash – short-term as assets and long-term debt declines. You will see an INVERTED yield curve at times when the short-term rates go above the long-term. We saw a rash of bank failures when rates went up because the short-term was virtually zero, and they were buying the long-term. However, when short-term rates rose, bonds took a nose-dive because you then must compensate for that increase in the interest rate for the full duration of the bond.

Now, the question that the government CANNOT default because it can print the money is the typical lack of understanding, mainly because that was a sales pitch to sell gold. Here is an old advertisement to sell gold from the early 1980s. The problem was gold declined for 19 years while the deficits continued to rise. The inflation scenario did not work!

Look, the war and default go hand-in-hand. The Treasury will default on foreign holders who they deem to be adversaries – this is why China is starting to sell. The notion that the Fed would simply print all the money to redeem the outstanding debt is absurd. That would ruin the economy and they will have no part of that besides it would bailout the enemy. This is why last December Powell came out and warned that this debt is “UNSUSTAINABLE.” They might monetize some portion that is domestic to prevent a panic, but they have no intention of monetizing the nation’s debt as a whole.

Much of the debt is held inter-agency. They can play games with that bunch. They will not simply default on ALL the debt without war. Then you have a NEW government form that will not honor the debt of the previous.

As far as Hillary vs Obama, this is NOT my opinion. The computer cannot forecast Hillary vs Obama without putting in their personal life ECMs. All I can say is that the Neocons are behind Hillary, for they KNOW she will nuke Russia. Some are talking about Hillary with Obama as VP, so they think they will get the Black Vote.