Sin and Redemption, often the cry of the religious right politicians, a possibility for the Federal Reserve Bank to restore its reputation.
Through Quantitative Easing over the last five years the Fed has managed to increase its balance sheet by $4 trillion, donate in excess of $600 billion of taxpayer money to the large banks and keep interest rates at levels punishing to retirees et al. There has been little positive economic effect from these efforts.
Now these same programs can be used to save the nation from default. With the debt ceiling in place it will be difficult if not impossible for the Treasury to redeem government debt as it comes due. Should the Treasury miss either an interest payment, or a debt redemption the U.S. will be in default. However, under accepted practice that the Federal Reserve Bank has complete freedom to purchase and sell government securities to prevent inflation, aid employment, and limitless other possibilities; it surely can purchase Government Debt as it comes due if the Treasury is prohibited from redeeming its obligations.
If the present madness does not come to an end, the Federal Reserve Bank can find redemption and save the U.S. from the disaster of default, a constructive use of its discretionary powers.
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