Why You Should Read: As John Mauldin keeps saying, federal debt is out of control and headed toward crisis. This report from Michael Lebowitz at RIA Advice explains how the Federal Reserve helps sustain the debt and plans to keep doing so. This may come at the expense of its traditional employment and inflation mandates. Key Points: “Fiscal dominance” happens when debt becomes so large the central bank must help it be serviced cost-effectively. One way the Fed does this is by keeping real interest rates negative, as has been the rule for years now. The government added $2.5T in debt over the last four quarters, of which over $1T went toward interest expenses. The Treasury’s average rate is rising as lower-rate debt matures so the cost will rise substantially more, even without adding new debt. In addition to controlling rates, the Fed also incentivizes banks to buy large amounts of Treasury debt. Bottom Line: Fiscal dominance fuels the already-widening wealth gap by propelling stock and other asset prices higher. The reduces consumer and business confidence, generates economic headwinds and may lead to social unrest. Lebowitz concludes we can still reverse this trend but are running out of time. -Patrick Watson

More From Maudlin Economics: