Atlanta Fed president Lockhart says there is absolutely no appetite at the Fed to monetize the debt. Monetizing debt is when a nation’s central bank buys the debt issued by the country’s Treasury.
Some while argue that the Fed has partially monetized via QE, but in reality its portfolio its Treasury holdings are not that much bigger now than at the beginning of the crisis. The vast majority of the debt bought via quantitative ease was in mortgage-backed securities.
Anyway, it is good news for bond holders that the US won’t be both a big issuer and buyer of its own debt. It will just be a big issuer!
