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FRED A. KINGERY: THE FEDERAL RESERVE’S HISTORIC ANNOUNCEMENT |
The real inflationary (or hyperinflationary) risk that the financial markets will calculate very carefully going forward is that the central bank, with this announcement, has now opened itself to being fully co-opted by the political process in Washington. Consider, why make hard political decisions on taxes and spending when the central bank has, in effect, just announced that it stands at the ready to print the money to finance any deficit of any size in order to underwrite any amount of future debt accumulation? A central bank that is willing to simply print money out of thin air to finance unlimited amounts of debt will eventually undermine the confidence in the currency being managed as lenders eventually seize on the realization that they will never be paid back in anything other than worthless paper.
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