The Fed as fiscal authority

We sometimes describe fiscal policy as determining the overall level of the public debt, while monetary policy determines the composition of that debt between money and interest-bearing federal obligations. By that definition, the Fed has clearly now entered the realm of implementing fiscal policy, by issuing debt directly in the form of interest-bearing reserves, reverse repos, and now term deposits.

That's from James Hamilton.  His upshot?:

I fear that as this marriage between fiscal and monetary policy becomes consummated, an amicable divorce is not the most likely outcome.

My advice would be the sooner the Fed can return to plain vanilla central banking, the better.


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