The Fed could just stop paying interest on reserves and make the same aggregate level of reserves mandatory. “Financial repression!” you say. Yep. But it is an available policy alternative. And that means that losing money is just a choice that the Fed is making.
Either Kling was unclear in what he wrote (that would surprise me) or there is something I misunderstand. Maybe both.
In 2008 the Fed starting paying interest on bank reserves they hold. Reserve requirements have also gone up but reserves went up more. In Sept they were $3.1T. The Fed also started QE. In Sept those debt assets totaled $8.8T. QE is financed through reserves and monetary expansion (printing money). New money is interest free. Is Kling just talking about the smaller part of debt financed by reserves?
US total debt is $31T. Isn't the (bigger) part of debt not held by the Fed more important? How much of that is short term?
>>Instead, they issued long-term debt and sold it to Wall Street investment banks, which in turn sold it at a profit to the Fed, which funded it with short-term debt.<<
The Gov't consortium selling & buying from Wall Street, at a big Wall Street profit, is one of the key selling points. To the Bankster donors of the Big Gov't parties.
Another part of it is obscure what it's really doing with multiple orgs who, themselves, might not always be aware of who is profiting most directly from their actions, so they're not lying when they say they're mostly subsidizing Wall Street.
If the Fed starts loosing money, with its directors have bonuses cut? or salaries? If not, why not?
- I expect not, which is typical with gov't jobs, which is why they are so reckless, which is why more of that finance chain should be privatized.
With required systemic risk insurance for the top 30 revenue finance companies.
1. Fed stops rate raises at 5% or lower because it will be too expensive for the govt to borrow, (current year spending & debt rollover), and somehow this is sufficient.
2. We return to QE infinity in order to reduce the cost of borrowing for the govt. and give the mild illusion of a good economy in asset prices.
If #2, (which i expect) - how will we use the time that it buys us? theoretically, this money printer go brrrr strategy drives more inflation. "inflate away the debt" only works if you taper your borrowing while the money devalues. Is that going to happen?
I wouldn’t say it was pointless. It gave them time to change their ways in an orderly, non catastrophic way. They’ve just wasted that time.😂
Pinin' for the Potomac
The Fed could just stop paying interest on reserves and make the same aggregate level of reserves mandatory. “Financial repression!” you say. Yep. But it is an available policy alternative. And that means that losing money is just a choice that the Fed is making.
Either Kling was unclear in what he wrote (that would surprise me) or there is something I misunderstand. Maybe both.
In 2008 the Fed starting paying interest on bank reserves they hold. Reserve requirements have also gone up but reserves went up more. In Sept they were $3.1T. The Fed also started QE. In Sept those debt assets totaled $8.8T. QE is financed through reserves and monetary expansion (printing money). New money is interest free. Is Kling just talking about the smaller part of debt financed by reserves?
US total debt is $31T. Isn't the (bigger) part of debt not held by the Fed more important? How much of that is short term?
>>Instead, they issued long-term debt and sold it to Wall Street investment banks, which in turn sold it at a profit to the Fed, which funded it with short-term debt.<<
The Gov't consortium selling & buying from Wall Street, at a big Wall Street profit, is one of the key selling points. To the Bankster donors of the Big Gov't parties.
Another part of it is obscure what it's really doing with multiple orgs who, themselves, might not always be aware of who is profiting most directly from their actions, so they're not lying when they say they're mostly subsidizing Wall Street.
If the Fed starts loosing money, with its directors have bonuses cut? or salaries? If not, why not?
- I expect not, which is typical with gov't jobs, which is why they are so reckless, which is why more of that finance chain should be privatized.
With required systemic risk insurance for the top 30 revenue finance companies.
This is why one of two things will happen:
1. Fed stops rate raises at 5% or lower because it will be too expensive for the govt to borrow, (current year spending & debt rollover), and somehow this is sufficient.
2. We return to QE infinity in order to reduce the cost of borrowing for the govt. and give the mild illusion of a good economy in asset prices.
If #2, (which i expect) - how will we use the time that it buys us? theoretically, this money printer go brrrr strategy drives more inflation. "inflate away the debt" only works if you taper your borrowing while the money devalues. Is that going to happen?
I don't understand "predicament." The Fed undershot its inflation targets 2009-2020 and overshot in 2022-2022. Their bad, but "predicament?"