The aftermath of the financial crisis and changes in technology and regulation have spurred a spirited discussion of dealers’ evolving role in financial markets. One such role is to buy securities at auction and sell them off to investors over time. We assess this function using data on primary dealers’ positions in benchmark Treasury securities, released by the New York Fed since April 2013 and described in this earlier Liberty Street Economics post.…FRBNY — Liberty Street Economics
Dealers’ Positions and the Auction Cycle
Michael Fleming and Collin Jones
4 comments:
hmmmm..... did a Ctrl-F on the article and the word 'borrow' appeared ZERO times while the word 'issue' shows up 8 times.... hmmmm....
" The results suggest that dealers continue to play an important role in the intertemporal intermediation of Treasury supply, buying securities at auction and selling them off to investors in subsequent weeks. "
hmmm.... somebody better call the Fed and tell them that's not what is happening and that in reality "the govt is borrowing money from the private sector!"...
Right. The securities that the federal government alone issues as its Treasury liabilities are purchased using settlement balances that the government also alone issues as its central bank liabilities. Obvious asset swap that doesn't affect the amount of nongovernment net financial assets in aggregate, only changes the composition and interest.
If there was not a stupid rule saying the "debt" had to be issued in the same amounts as the spending this would not be an issue (heh) and Dan K etc would not debate with us.
I say go back to central bank term deposits, or "tap issue."
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