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EDITORIAL/JAMES K. GALBRAITH FOR THE NATION The debt deal is now law. far-right republicans were unhappy, because it doesn't cut spending by enough. Without violating the debt ceiling, the Fed could have given the Treasury a no-interest, unsecured line of credit. It's likely that unless the Fed reacted by raising rates to the rafters, the dollar would fall as investors bought some other government's bonds. [Extracted from the article]

The trillion-dollar platinum coin would solve the problem - with no additional borrowing and no breach of the debt limit. Otherwise, would the Federal Reserve honor US Treasury checks if no securities were issued and there were insufficient funds in the Treasury General Account? But suppose the bankers, perhaps following some regulation, did refuse to credit Treasury checks that, because of the debt ceiling, were temporarily failing to clear. [Extracted from the article]

SVB might have protected itself for a time by hedging, but basically, once Fed Chair Jerome Powell and his colleagues raised short-term rates above long-term rates, the bank was doomed. But since there are vast unrealized losses on bonds in the US banking system as a whole - estimated at $620 billion as of year-end 2022 - the Fed has since announced a new facility to provide cash to needy banks at the par value of their high-quality bonds. High short-term interest rates depressed the value of SVB's bonds - and motivated big depositors to withdraw their money and put it directly into high-yielding funds and Treasury bills. [Extracted from the article]

IN STATING RECENTLY THAT "INFLATION IS THE FED'S JOB", PRESIDENT BIDEN gave compact expression to three radically false and politically suicidal propositions: 1. Because to keep to any given inflation target - 2 percent per year, say, as the Fed would prefer - when some prices are rising by much more than that, means that some other prices must rise much less, or even fall. [Extracted from the article]