Reductions in these premiums would lower the cost of capital both to banks and the nonbank private sector, over and above the beneficial effect 15 already conferred by lower interest rates on government securities. The Fed can inject money into the economy in still other ways. For example, the Fed has the authority to buy foreign government debt, as well as domestic government debt.
Potentially, this class of assets offers huge scope for Fed operations, as the quantity of foreign assets eligible for purchase by the Fed 16 is several times the stock of U.S. government debt. I need to tread carefully here.