This is probably a dumb question, but could the Fed “forgive” the US Treasury debt it holds on its balance sheet? In other words, could the Fed just say, “that’s ok, you don’t have to continue to pay us interest on our treasuries and ignore those future principal repayments, u good.” Anyone know if #[0] has addressed this anywhere?? 🙏🙏
Discussion
The Mandibles
I guess practically it would be a default, but what if they only defaulted on the treasuries held by the Fed? Like the Fed just decides to write off all of their treasury holdings. Maybe the whole confidence game just crumbles at that point, then. #[4] have you ever covered this topic?
Yeah, the erosion of trust would compromise the Fed as an institution. I don’t think the counterparty matters, a Fed default on its holdings is a default on the promises made to future generations of Americans and would result in a reboot.
Funny thing is that the reboot might be happening now just because the default is inevitable … and bitcoin is the forced accountability they’ve been able to avoid up until now.
I asked ChatGPT:
“No, the Federal Reserve cannot forgive the U.S. Treasury debt it holds on its balance sheet. The Federal Reserve is an independent government agency responsible for implementing monetary policy, which includes controlling the money supply and interest rates. The U.S. Treasury Department is responsible for managing the government's finances and issuing debt to finance its operations.
When the U.S. Treasury issues debt, the Federal Reserve may purchase some of that debt through its open market operations. The Federal Reserve holds these securities as assets on its balance sheet, and the interest paid on those securities is returned to the Treasury.
However, forgiving the debt held by the Federal Reserve would effectively mean canceling a portion of the government's own debt. This would undermine the credibility of the U.S. Treasury and damage the country's creditworthiness. Therefore, debt forgiveness is not a feasible option for the Federal Reserve.”
If a central bank forgives debt, then it deletes its assets while still having all its liabilities.
At that point, it would lose any shred of independence.
How do you see the student loan situation playing out? Considering an assumption of AI tech for education rising and college campuses depreciating in value
Always considered that for the most part the government wants everyone at university to keep the unemployment numbers down. Let’s face it a degree in basket weaving is not that useful
It is certainly a major source for employment. Basket weaving classes can have value, but not for $50k a year
😂😂😂
US central banks own around 8100 tonnes of gold. I think the simplest resolution would be to reprice gold to cover the debt.