What happens when fiscal policy begins to determine the course of the natural state of the nations economy ?
Our federal fiscal policy is overseen by both the legislative and executive branches of the United States government.
What happens when the federal government spends more money than it expects to receive in the same year ?
A big, nasty deficit, more shortage, more shortfall of economic resource and liquidity falls and slams head of the nation.
So, what does the government decide to do when this kind of thing happens ?
The government starts to sell interest bearing securities to investors who fall for the bait.
And what might the hook be baited with you may ask, for goodness sakes ?
Why it's none other than 500 billion dollars of Federal Rerserve Bank acquired mortgage backed securities from (you guessed again) Freddie Mac and Fannie Mae, resources that once belonged to private investors.
So what does this mean ?
It means that now private investors are once again lending money to the government to to cover the governments huge, failed spending catastrophe.
Will this have an effect on interest rates in the future ?
Yes ! They could increase.
The government is borrowing, extracting, removing, withdrawing, absconding and making off with huge amounts of dough that rob the money markets and will in turn increase demand for funds for every aspect of commerce known to mankind.
Hang on to your hat !
That's about the only thing many will have left in a few days.
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