Fed Policy And Commodities As Inflationary Hedge Assets
What did the Fed do when they printed so much money in 2020?
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The Fed bought government bonds. In other words, they basically lent money to the government to issue stimulus bills.
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The Fed has been buying up corporate bonds from zombie companies with cash flows less than their debt service requirement. In short, these companies are basically borrowing money to service their debt.
These zombie companies are not only wasting societal resources that can be used for well-run companies, but they also no longer have the fear of bankruptcy that would incentivize them to make prudent business decisions.
This massive injection of liquidity into the bond market decreases bond yields, which will only force people to invest in higher-risk assets like the stock market.
In fact, the only place for capital to flow into is the stock market because interest rates have been so low that nobody wants to keep their money in cash either.
More details…
https://www.benzinga.com/federal-reserve/20/11/18576958/fed-policy-and-commodities-as-inflationary-hedge-assets