Writes veteran bank analyst Richard X. Bove at Ladenberg Thalmann & Co.: "The Federal Reserve is considering issuing debt. This is no good... The Federal Reserve can print money whenever it chooses... The only reason that the Fed would stop using the printing press to fund its activities is if the organization believed that it was printing too much money... This may be the case. M-1 (the money supply) may have jumped by 41% quarter-over-quarter.
"By issuing debt, the Fed avoids the risk of hyper-inflation. However, it creates other problems. Fed debt would take precedence over the Treasury debt in the markets. The Treasury can call on its taxing powers to fund its debt, but at the moment the Treasury is issuing debt to pay its debt. At some point this Ponzi scheme must end.