Submitted by Taps Coogan on the 25th of November 2019 to The Sounding Line.

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Luke Gromen, founder and president of Forest for the Trees, recently spoke with MACRO Voices’ Erik Townstead about how the Fed’s recent balance sheet expansion amounts to a defacto monetization of the national debt and reinforces the idea that fiscal policy is now driving monetary policy.

Some excerpts from Luke Gromen:

“I’ve been fascinated to watch what I would call an ongoing shift in the narrative (of the Fed’s recent balance sheet expansion) from temporary and technical, to not temporary but still technical, to not QE, and in the last couple weeks we’ve had a few more analysts get close to describing the way that I think really speaks to the crux of it… This is why we were calling the dynamic of the Fed effectively financing US deficits ‘Voldemort.’ People were afraid to say its name.”

“When people are being presented the evidence that this has sort of begun, this effective monetization, nobody wants to call (it) by its name, which in this case is the US government is being financed in short term debt markets… by the Fed…”

“Clearly the world needs more dollar liquidity injected… so to me the question becomes a game of how fast is the liquidity provided relative to how fast it is needed… it can be more ‘non-QE.’ It can be more repo. It can be the rolling back of banking regulations… They’ve undone what was ten months of QT in nine weeks in response to what was a very serious crisis in the repo markets…”

There is much more to the interview, so enjoy it above.

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