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Turtles All the Way Down


Apparently, Treasury is now bailing out the Fed

It always seemed inevitable that something this would happen, as the Fed has been making huge committments, and has a finite balance sheet. But to see it actually occur is quite sobering.

The reason this is so important is that, in effect, it materially undermines the independence of the US central bank, while central bank independence is a widely-accepted predicate for anti-inflationary policies over time in a modern democracy. If the Fed becomes just a part of the Treasury Department (though this announcement is only a move in that direction), we could have real problems. 


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