Part 7/11:
One of the most alarming prospects is Yield Curve Control (YCC)—a strategy the Fed might employ as a nuclear option to prevent a debt default. YCC involves buying unlimited government bonds to keep interest rates artificially low, effectively restarting or intensifying quantitative easing (QE). Historical precedents include Japan’s prolonged YCC to suppress yields, which weakened the Yen; similarly, during WWII, the U.S. employed yield cap tactics to fund the war effort.
If markets demand higher yields—seeing inflation risks or debt sustainability issues—the Fed may be compelled into a YCC stance to avoid higher borrowing costs. This action would amount to money printing on steroids, flooding the economy with liquidity and possibly igniting hyperinflation.