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Debt Monetization

Debt Monetization is the way in which we can forgive the borrower without defaulting on the lender.   It is the process by which we convert debts in the private market to Public Debt permanently held by the Congress.

The FED bails out the lender and it is the job of Congress to directly bail out the Borrower.   The FED can move swiftly to rescue the lenders.   The speed at which Congress will rescue the borrower moves much slower.   Most of them probably don’t even understand how this game works.   They will take action under some pretense that will be explained to them by some smart people (like Buffett and Paulson) as being temporary.

The next leg of massive Fiscal Stimulus won’t come until the greater population has already defaulted on their student loans, credit cards, and auto loans.

The housing market is no longer the the residence of all the subprime borrowers.   They all now reside in those other 3 places.   I think those areas will be the cause of the next Financial Crisis.   It might already be underway.

Maybe Elizabeth Warren or Bernie can win the election before that tropical storm turns into a hurricane.

Maybe unlike the rest of Congress, these two people are actually smart enough to understand how this perverted game of modern day finance actually works.   And they are masking it behind the guise of doing what is right for students.

Bernie and Warren are just this decade’s version of Buffett and Paulson.




I don't really like the term "debt monetization". All debt is a form of money. You can't "monetize" debt because debt is a form of money. Eg, if the US govt started spending cash bills into the economy instead of issuing bonds the accounting would be EXACTLY the same. It's just that we call the debt  a "treasury bond" and a cash note "currency". But the reality is that both are liabilities of the US govt. Both are assets for the non-govt sector. People have this idea that a cash note is more inflationary than a bond, but is that really true?


"Pragmatic Capitalism is the best website on the Internet. Just trust me. Please?" - Cullen Roche

Here is how the game works:

1- Support consumer demand will all sort of cheap debt

2- Progressively forgive the borrowers while making the lenders whole

3- permanently add $1T in additional national debt

4- permanently add $1T to Fed Balance Sheet


No one can prove that both #3 and #4 are permanent.   The Fed and the Treasury are both acting completely independently of course.    Therefore technically I can never prove that “money has been printed” or that “debt has been monetized” or whatever you want to call this game.


Maybe we can just call it “Modern Day Finance” or better yet “MMT”.

This would be the theory that this game can go on forever in perpetuity as long as we are all ok with it.