Friday, June 10, 2016

I'm in a Twitter argument with N. Kocherlakota


Kocherlakota thinks that lowering the deficit (consequence of lower IOR, he says) "saves" taxpayers money.

4 comments:

Matt Franko said...

" transfers income from banks to taxpayers"

So what is he saying that if they stop the IOR, then they have more USD balances left over at the end of the year "earned" from the USTs and MBS to transfer to the UST account?

Hence, "to taxpayers" ? So 'the taxpayers' account is the Treasury account?

Michael Norman said...

Yes. That's essentially what he is saying because in another reply to me he says it lowers the deficit, to which, I responded by saying government "saving" = non-gov't dis-saving, i.e. lower income and savings so thanks for making my point.

Matt Franko said...

Maybe he thinks the IOR is paid via an appropriation?

Otherwise what is happening is that people pay mortgage interest to the Fed via the MBS and then the Fed pays the IOR with it... so I dont see how 'the taxpayer' benefits if their mortgage interest ends up in the Treasury account?

iow its still not in their own (personal) account its either paid to banks or paid to the Treasury... its like a tax...

Anti said...

The Canadian central bank's been using IOR for over 20 years, and they lower IOR when they want to ease to make sure they hit their 2% inflation target.