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Source Why is the Government Buying Long-Term Bonds?

When Fed policymakers decide that they want to raise interest rates, the Fed sells government bonds*.

the Fed sells government bonds

Does that mean

(1) the fed sells some bonds to the government.

or

(2) the fed sells some bonds named as "government bonds". ?

I think it is an ambiguous sentence.

If not, how could we know the meaning?

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    The meaning is (2) and the ambiguity is resolved because we know already that government bonds are sold by the government to people wishing to buy them. Commented Apr 18, 2023 at 9:14
  • @MichaelHarvey But the Fed can sell bonds, too. I'm no economist, but I believe that it sometimes sells them to the government (for example, to reduce the money supply). Commented Apr 19, 2023 at 0:51
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    The grocer sells Haas avocados. Does the grocer sell avocados to a person named Haas? No*. The grocer sells Haas avocados to anyone who wants to buy them. (Someone named Haas actually *might go to the grocery store and buy avocados, but that's not what the original sentence means.)
    – RonJohn
    Commented Apr 19, 2023 at 17:59

3 Answers 3

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It's not ambiguous.

For a start, "government bonds" is a recognised compound noun.

But also, when 'government' is used as a non-countable noun (ie without an article) it means the concept of government or action of governing, rather than the governing organisation itself. If we were talking about selling bonds to those in power we would refer to them as "the government".

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    It would be possible to write, The Fed sells the government bonds, to mean that the Fed is selling bonds to the U.S. government but that can be confusing because government bonds is also understood as a compound noun. So in this case, if you want to say the Fed is selling bonds to the U.S. government, you should be explicit and say, The Fed sells bonds to the government.
    – EllieK
    Commented Apr 18, 2023 at 13:21
  • @EllieK In practice there wouldn't be very much ambiguity: ‘the government bonds’ would only make sense as a compound noun if the context made clear which government bonds were being referred to. If so, then that interpretation would be very likely; without that, the other interpretation would be correspondingly likely.
    – gidds
    Commented Apr 18, 2023 at 22:52
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    Worth noting, you'll find many examples that skip the 'the' for no good reason other than reducing their word count. This would primarily come up in the headline of an article, rather than a full sentence as discussed. Looking at the front page of abc.net.au/news as an example, we have a reference to ACT Supreme Court that is clearly missing a 'the' abc.net.au/news/2023-04-19/… This headline is also missing an 'a'. Staff stood down at Queensland hospital amid review of audiology outcomes for hundreds of babies
    – Scott
    Commented Apr 19, 2023 at 4:36
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    @Scott That's why headlines are more often ambiguous, and there are many humorous examples.
    – Barmar
    Commented Apr 19, 2023 at 14:49
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It’s unambiguous. In order for the other reading (that the Federal Reserve sells bonds to the government) to be possible in American English, the sentence would need to say,

The Fed sells the government bonds.

In practice, you can expect the reader to have enough background knowledge to know that the Federal Reserve is part of the U.S. government, and does not sell bonds to it. So this sentence would probably be read as saying that the Federal Reserve sold some specific U.S. Treasury bonds to the public.

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Ambiguity can often be resolved by background knowledge.

So the question becomes "what are government bonds":

A government bond is a debt security issued by a government to support government spending and obligations. Government bonds can pay periodic interest payments called coupon payments. Government bonds issued by national governments are often considered low-risk investments since the issuing government backs them. (investopedia)

So there is no real ambiguity, but you need some background knowledge.

You also ask about the syntactic ambiguity. The correct parsing here is [verb sells] [compound noun, object government bonds]. But there is an alternate parsing since "sell" can also be ditransitive. [verb sells] [indirect object, receiver (the) government] [direct object bonds]. That parsing is not favoured for two reasons, firstly the noun "government" would need an article. Without an article the word "government" must be parsed as an attributive noun, a part of the phrase "government bonds" and not two separate objects. Moreover our background knowledge about what central banks do helps to understand that it doesn't sell bonds to the government - how would that raise money for the government? It sells bonds to investors.

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