Sunday, April 12, 2020
The Fed Reveals How It Plans to Fund the $2.3 Trillion in Stimulus Packages
As the article details, the government plans to fund the $2.3 trillion in stimulus packages by taking out $600 billion in loans and $85 billion that will be backed by the Federal Reserve. What future consequences could you see this causing the U.S. economy? Do you see a potential high rise in inflation or taxes? If so do you believe this is intentional?
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The government’s attempt to maintain the state of the economy through borrowing may seem admirable, but it has long term effects that would be vital for the economy. Financing poses the risk of increased debt interest rates that makes the country pay way more than expected. Consequently, to fund this action, taxes will have to rise, which will exert much pressure on the citizens of the country. Hence, the country becomes an attractive site for private investment due to the fear of inflation, which will impact interest rates. Yair Listokin, in his article “Perspectives,” presents the government with the option of targeted expenditure and administrative involvement to spur the economy while improving the health sector. So yes, I believe the government’s action to borrow to finance stimulus packages is intentional since Listokin has demonstrated the existence of other options.
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