That doesn't mean there isn't an opportunity cost to providing liquidity through buying up bonds versus other socially productive forms of spending. Just because we have a magic money tree, why does that mean Walmart should be the beneficiary?
There isn't an opportunity cost. It's not the feds job to perform "socially productive forms of spending", it's the elected governments job to do that. The feds job is financial stability and low inflation.
Buying bonds is not spending. Those bonds will either mature and the funds paid back to the Fed or the Fed will sell the bonds on the open market. Either way, this is very different from handouts to the public or "socially productive spending" in that the money will get paid back.
Finally, it's not the Federal Reserve's role to be socially helpful except as to fulfill their dual mandates to 1) minimize inflation and 2) maximize employment.
So if they call in the bonds tomorrow then Walmart will cancel dividends, etc., to pay them?
Pretending there's no limit and no deleterious effect seems wrong. If that were true then the Federal Reserve could just by boobs for all debts and every citizen would be debt free and there would be nothing wrong.
If every time a company struggles the gov step in, because instead of maintaining reserves the companies pay out profit, bonuses and dividends, then large companies will engineer in the need for gov assistance and their ability to self maintain will be lost.
Very few bonds are callable. And why would the Fed need to call the bond, it's not like they are short of cash. lol.
Either way, I wasn't "pretending there's no limit and no deleterious effect". As you stated, that would be wrong. There are obvious and not-so obvious problems with central banks engaging in QE (i.e. buying financial assets as a means of injecting money into the system). But this thread was about QE via corp bonds vs the Fed handing out gifts to the public so I didn't go into that.
> So if they call in the bonds tomorrow then Walmart will cancel dividends, etc., to pay them?
They can't, not how bonds work.
> Pretending there's no limit and no deleterious effect seems wrong.
Nobody is pretending. There are many potentially deleterious effects, but amazingly the set of problems people have with this have almost no intersection with the potentially deleterious effects.
> If every time a company struggles the gov step in
This is a pandemic. The government engineered a scenario which destroyed the economy to save lives. Walmart engineered nothing here.
The federal reserve is not spending money, they are buying bonds, when they buy a bond it is like adding a number in a spreadsheet, when the money is paid back (or even not) they just add the number back. The federal reserve is not allowed under law to go pay people UBI or something. What exactly do you expect them to do instead? And why should it be instead? You get the federal reserve has no inherent limit to the amount of bonds they could buy, so even if there was some other "socially productive forms of spending" they could undertake this is in no way mutually exclusive to buying bonds from Walmart.
It is astounding how little people understand of what is going on here.
The fed does plenty of things that are outside of the scope of it's charter. Further, we can just change the law, this isn't some immutable truth of central banks. Even within the scope of the fed's mandate we could invent ways to invest in infrastructure instead of Walmart.
> It is astounding how little people understand of what is going on here.
> The fed does plenty of things that are outside of the scope of it's charter.
Name one.
> Further, we can just change the law, this isn't some immutable truth of central banks.
Well then go change the the law instead of saying that with the law being what it currently is the fed should instead engage in other "socially productive forms of spending".
> Even within the scope of the fed's mandate we could invent ways to invest in infrastructure instead of Walmart.
Invent them then and tell us. The fed can buy bonds, they buy bonds, they can set the interest rate, they set the interest rate. If there is a company building infrastructure that issues bonds then presumably the Fed can buy them, and I'm sure they will because the Fed is trying to flood the system with money, and for the most part indiscriminately with maybe just an eye on credit ratings.
That doesn't mean there isn't an opportunity cost to providing liquidity through buying up bonds versus other socially productive forms of spending. Just because we have a magic money tree, why does that mean Walmart should be the beneficiary?