Thanks Adam - this is great and captivating content. Hopefully a helpful comment : did you mean to refer to Supplementary Liquidity Ratio (rather than Leverage) when you define “SLR” upfront? Not a big deal but leads to a bit of confusion later on.
Even if they weren’t, we can see via double entry bookkeeping that it *always* makes sense for banks to swap the reserves now sitting in one of their accounts (created when congress credited someone’s bank account for whatever it was buying) , for the interest-bearing treasury bond that treasury put out to “pay for” that spending.
The bond markets will never seize up or crash unless the fed willfully decides it wants them too. Just look at Japan, National debt pushing 240% of GDP and yet their central bank has had no problem using QQE with yield curve control to accomplish everything it wants to with the bond markets. (trying to hit inflation targets with monetary policy is a whole different can of worms though, obviously). This is just typical zero hedge trying to make money off of moving a market and trying to sideline the Biden Admin in the process.
Thanks Adam - this is great and captivating content. Hopefully a helpful comment : did you mean to refer to Supplementary Liquidity Ratio (rather than Leverage) when you define “SLR” upfront? Not a big deal but leads to a bit of confusion later on.
Lots wrong with this. All Primary dealers are required to bid on all treasury auctions.
https://www.newyorkfed.org/markets/primarydealers
Even if they weren’t, we can see via double entry bookkeeping that it *always* makes sense for banks to swap the reserves now sitting in one of their accounts (created when congress credited someone’s bank account for whatever it was buying) , for the interest-bearing treasury bond that treasury put out to “pay for” that spending.
http://www.profstevekeen.com/2020/09/06/one-mathematical-model-of-modern-monetary-operations/
The bond markets will never seize up or crash unless the fed willfully decides it wants them too. Just look at Japan, National debt pushing 240% of GDP and yet their central bank has had no problem using QQE with yield curve control to accomplish everything it wants to with the bond markets. (trying to hit inflation targets with monetary policy is a whole different can of worms though, obviously). This is just typical zero hedge trying to make money off of moving a market and trying to sideline the Biden Admin in the process.
is it every possible to just give money to Treasury without issuing bonds. Seems better.
is it every possible to just give money to Treasury without issuing bonds. Seems better.