What bonds do you think the Fed is selling?
(and accumulating so much debt) would be very inflationary
If the Fed sells bonds, they are reducing the money supply. That would be deflationary, not inflationary.
“If the Fed sells bonds, they are reducing the money supply. That would be deflationary, not inflationary.”
When the U.S. sells treasury securities (bonds) to China for instance, the U.S. is essentially borrowing money from China. A bond is a formal contract to repay borrowed money with interest. The money that is borrowed from China should then add to the money supply I would think, so I don’t see how this is deflationary. When the U.S. wants to borrow a lot of money by selling lots of bonds (as is now the case), if there’s not enough buyers for the bonds, raising the interest rate can attract more buyers, and it seems to me that this should also create some inflationary pressure. On the other hand, there’s a strong incentive to keep the interest rates as low as possible so that repayment of debt is at lower interest. But if you have high inflation, repayment of debt becomes much easier, even if interest rates are somewhat elevated. This is why high inflation (not necessarily hyperinflation) seems to me like a realistic possibility in the not-too-distant future.