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Love the blog, but I think you missed the mark describing the Fed's actions in this way. What the Fed does at the most basic level is print money. This decreases the value of money and therefore makes it cheaper to borrow (hence the drop in interest rates for Carnival). You could think of it as a subsidy to anyone who wants to borrow throughout the entire economy. But the more accurate way to think about it is as on offset to the deflation brought on by the virus.

This is standard economic theory. Due to the virus, many people are laid off and companies are losing money. Therefore, having cash on hand becomes much more important than it was a few months ago, as salaries and corporate revenues are not coming in the way they used to. Therefore, demand for cash is higher than it was before the crisis. Higher demand with the same supply leads to increased value of money (deflation). The Fed prints money (inflation) to offset this deflation and move the value of money back towards its pre-crisis level. In broad terms, you are correct that this is a tax on lenders and a subsidy to borrowers. But there was also a very sharp, unexpected tax on borrowers and subsidy to lenders when coronavirus caused deflation. This is very necessary as deflation has large, real impacts on the economy.

In addition, the Fed has publicly stated their goal to maintain inflation at 2%/year. Corporations and many individuals use this rate in their financial projections. So the covid shock, if the Fed did not offset it, would drive inflation below this rate and make many in-flight investments no longer worthwhile. This is the entire reason the Fed exists and is a very, very positive thing for the economy. You are framing it in a misleading and negative light. Like I said, in a sense you are correct when you say the Fed gives subsidies. But the Fed is not giving handouts. Carnival still borrowed the money and has to pay it back, they just did so at a lower value of money than the crisis levels- but still a HIGHER value than the pre-crisis levels. Stabilizing the value of money is this way is a good thing and I wish you had recognized this while writing your analysis

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"A central bank announcement of intent itself provides a subsidy."

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