Recent content by gonegolfin

What matters is what the Fed is doing with excess reserves and the total size of the Fed balance sheet. Nothing has changed here. IOW, it is important to understand that we certainly could have monetary easing ... while having higher "interest rates" (artificial) at the same time. Brian

Sorry Zippy ... could not let this go. The banks are not borrowing from the Fed overnight. Bank borrowing from the Fed has never been a normal part of monetary policy operations. The discount window programs (primary, secondary, and seasonal) that have their own interest rates set by the Fed...

Your interest rate risk increases when you re-invest, as the term to maturity changes. This is important when assessing the picture of the Fed balance sheet. They have no choice. Traditional monetary policy, where supply and demand for reserves in the banking system determines short term...

Well said. Brian

Yes Danan, regarding this topic your summary is accurate, but a few more specifics should be provided. Some of the below you address above ... and some of the below is adding to your summary. 1) The Fed does not loan to the commercial banking system in any capacity, except via the primary...

You are welcome ... glad I can help. Yes, it is a method used by central banks to sequester reserves while still providing some incentive for lending/investment. But given the extreme level of bank reserves, the Fed is also using it as a tool to recapitalize the banks. It is the first time the...

Under the Term Auction Facility (TAF), the Fed was accepting approved collateral directly from the commercial banks (depository institutions) in exchange for reserves. This was done in auction format, as the name of the program suggests. The TAF was a loan program with a fixed amount of funds...

No, I was following your provided example earlier stating " ... is restricted to Goldman Sachs, Citibank, and a handful of other global mega banks.". These are commercial banks. You then evidently (in your own mind at least) expanded the discussion later to include investment banks and...

Then we are using a different definition of "bank". I am referring to commercial banks. IOW, banks that engage in fractional reserve lending in our monetary system and that have the ability to create and destroy money supply. This is the difference between Fed asset purchases resulting in...

Not quite. The above would not make sense as you stated it. The Fed was purchasing non-treasury assets and offsetting this reserve creation by selling equal amounts of treasuries from its portfolio ... at least until the Fed started running low on US treasuries and needed a Plan B. What was...

You understand the concept and what is happening here, but the terminology/components are not quite correct. The Fed does not buy assets with "newly printed money" to inject reserves into the banking system. The simple act of purchasing those assets injects reserves into the system. When the Fed...

The Fed employs reserves management operations to manage the federal funds rate to its target ... at least it did before 2008. It now implements monetary policy by setting the interest rate on reserves (IOR), which is at 0.25%. The federal funds rate is now meaningless. But let's assume for a...

As for your last sentence, you backtracked off of your original statement by saying that they technically they are not necessarily loans ... but were still holding onto the banks obtaining loans from the Fed. Hence, I continued to address the misunderstanding. #1 The Fed is not "filling the...

I addressed a very specific point. That is, I addressed your statements of the Fed loaning to the banks at or near 0% (in multiple of your posts). I also addressed this myth that is perpetuated in the article that you suggested for reading. You followed my correction by stating ... "whereas...

Misrepresented. Whether the Fed was conducting central bank swaps or temporary open market operations, reserves were injected into the system and then removed upon maturity. But the $16 trillion number is arrived at by summing all of these loans, even though there is nowhere near $16 trillion of...