The Fed must deal with its bonds

Dear John: I have read your Post articles regarding the Federal Reserve’s dilemma with its cash and bond holdings.

Your view that the Fed might just hand over the cash and bonds to the Treasury over time is fascinating. I have been trying to figure out what it will do with all of its cash after it stops reinvesting and bond maturities pile up.

Have you seen anyone else discussing this? D.C.

Dear D.C.: People have been trying to figure out the end game of quantitative easing ever since the Fed started buying mortgagebacked securities in late 2008. The goal back then was to buy securities so that interest rates would remain low.

The fact that the Fed was buying these bonds with newly printed electronic money was unique, but not unprecedented. The bonds that were bought can’t just disappear, however. Something has to be done with them.

So the Fed could cash them in and — like it has been doing with the interest on those securities — turn the money over to Treasury.

But then the US government will be mone- tizing that newly printed money, an action that is considered inflationary. And fighting inflation is supposed to be the Fed’s main job.

Dear John: We are in the e-commerce business. We ship 95 percent of our goods via the US Postal Service. It is a beautiful service. M.D.

Dear M.D.: I had to put in a good word for the hard working people at the US Post Office. As I’ve said before, I’ve never had trouble with mail delivery. And my mail carrier gives our dogs a treat every time we run into her.