A weekly thread to discuss financial matters - from personal all the way up to global.
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Notes -
Like I said, just an offered suggestion. If you don't actually feel any cognitive dissonance with any outcomes or past predictions, then fully ignorable, my mistake. I can then instead just offer my own prediction for the next few years, of no austerity, no demand-pull inflation (could get cost-push from oil prices, certainly up in the air right now), and no loss of control of interest rates (indeed at some point the Fed will likely do their job and exercise more yield curve control instead of having the treasury attempting to do it alone).
Well the chosen interest rate isn't constrained. What's constrained by inflation is the stimulative effect of increased deficit spending, but note that raising the interest rate directly increases government deficit spending. So as an economic tool, whether you're moving the rate up or down with monetary policy, you're pressing both the gas & brake pedal at the same time, and just hoping to correctly predict which channels will have a stronger effect. Currently most central bankers still use a rough reaction function where they hope the net effect of raising rates cools the economy on balance, fighting inflation, and lowering rates stimulates the economy / causes inflation, but the evidence is just getting murkier for that hope (so they're thankfully getting away from anything close to a rigid taylor-rule style). There's no evidence that leaving the rate at 0% causes inflation, and a mountain of evidence to the contrary. So personally I do think they should set it to 0-1% and leave it alone. As for solving all problems, surely not, but maybe a lot of the problems you were bringing up.
They could, via the core accounting and economic logic, as well as having access to the reserve banking system with a permanently available lender of last resort. But indeed you noted the real restraint, government regulation, with current rules requiring those commercial bank members to stay profitable and thus well capitalized, or else face reprimand & closure. So sure, Charter can't walk up and get another $90B tomorrow. But if we accidentally just 'shiv' a super productive & profitable economy by having over-tight regulation that prevents lending to credit-worthy borrowers, that would be a failure of policy & imagination, not any kind of inevitable 'crowded out by tech' story.
Fair, I don't know enough about the appetite of retail & institutional investors for corporate bonds. I would have guessed it was effectively limitless at the right price, with the market being tens of trillions in size, where a company's finances & fundamentals would dwarf any effect from competition between issuers.
Either way, the federal government is definitely not playing in that same game as a competitor that could crowd anyone out. Their 'borrowing' consists of mopping up the exact reserves that they just injected into the system with the prior deficit spending. As for the chosen monetary policy risk-free rate being the starting point for all other interest rates, which get priced at some spread above it, I wouldn't find it very illuminating to use 'competition' terminology for that. That's just always how it works, regardless of the level of government spending. It's more aptly seen as a subsidy: the government chooses to give out money to those who have money, which obviously sets a base opportunity cost. As for long-term treasury price floating, that's still a choice of monetary policy to allow some market participation in setting the price, based on predictions about future inflation and rate-changes. I don't know how valuable they really find that information gathering from the market, and they could definitely choose to control the yield curve with any durations having any prices they want.
Looking into it briefly, it seems like a pretty interesting and extraordinary case study, rather than some joe schmoe typical avatar of the non-AI 'regular economy'. I'm paying them every month myself, but never knew about their prior bankruptcy & recent debt shenanigans with the mergers.
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