Scott Bessent

this massive debt increase, seven trillion that we saw during that period.

So it's a long way of saying the central bank has become much more involved in the economy.

I think a lot of people don't understand we've gone from what used to be fairly straightforward rate setting mechanism to

Now we have kind of this three-headed beast at the Fed or this very complex calculus that I don't think anyone really understands, myself included.

You have rate-setting policy.

You have balance sheet policy.

So the Fed has a very big balance sheet now.

And then you have regulatory policy.

Yeah, well, again, the Fed should make money.

Fed typically used to make money and would remit money back to the treasury.

And back to David's question on the budget deficit, the Fed was sending back about 0.3% of GDP through, we have seniorage, which is the float on the currency.

There are other operations, but then they started QE and no one told the Fed that you're not supposed to buy high.

So-

They paid a high price for bonds, low interest rates, and they're arbitrage.

The Fed's losing about $100 billion a year now.

Well, I think what the Fed did, unfortunately, they took modern monetary theory from... I say they went from MMT, modern monetary theory, to MMP, modern monetary practice.

So the Biden administration issued all this debt and the Fed bought it.

And there's a very good study from MIT that's come out that shows in a way that only...

PhDs at MIT can be very precise.

42% of the great inflation was caused by the budget deficit.