Thursday, January 30, 2020

Bill Mitchell — Governments can always control yields if they desire


This is post really as much about the growing impact of MMT as it is central banking. Bill cites the recent Fed admission that it can set the yield curve if it chooses as evidence of that. There's a lot packed into this post.

Bill Mitchell – billy blog
Governments can always control yields if they desire
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

11 comments:

Matt Franko said...

This is false as the system demonstrated in Sept:

"Banks do not have a finite quantity of ‘money’ to dish out and will extend loans to credit-worthy borrowers. If they cannot find the reserves in the interbank market to cover shortfalls when the transactions are resolved within the daily payments system, they know they can always access the necessary reserves from the central bank."

Matt Franko said...

See here:

https://www.zerohedge.com/news/2019-09-22/fed-loses-control-its-benchmark-interest-repo-rates-through-roof

Bill's statement here is falsified...

Matt Franko said...

https://fred.stlouisfed.org/graph/fredgraph.png?g=q34l

Ralph Musgrave said...

Matt: where does that zerohedge article contradict Bill? I couldn't find anything.

What the article does say or at least suggest (correctly) is that if there's a big increase demand for reserves by banks, a central bank can supply whatever amount of reserves banks want at the going rate of interest, in which case the CB loses control of the VOLUME of lending. Alternatively, it can make reserves available at a higher rate of interest, in which case it loses conctol of interest rates. But it can't control both volume and price.

Matt Franko said...

Ralph, Bill says "always" which I interpret as continuous time...

"always" would then have to include September 2019 and since there was a well publicized deficiency of Reserve balances available to Depositories in September then Bill's statement is false...

Hate to use the Bryant family tragedy as an example but this is like someone would look at that fatal accident and say "a helicopter pilot can always return to safe VFR conditions if they desire.." meanwhile that obviously didnt happen...

Its not helpful to say something false like this somebody reading that will just think the author doesnt know what is going on ....

Why not talk about what is really going on? What is the point of making false statements in this? I dont see it...

Matt Franko said...

Ralph,

You say "a central bank can supply whatever amount of reserves banks want"

The Central Bank is the institution that establishes the regulatory requirement for Reserves at Depositories (banks) as a % of deposit liabilities... NOT the banks themselves...

The banks are REGULATED... the CB is the REGULATOR... banks seek to comply with regulations...

S400 said...

”Ralph, Bill says "always" which I interpret as continuous time...”

That’s the problem, YOU INTERPRET.
And knowing through history you always think your interpretation is correct and therefore never ever will you take another perspective.

Matt Franko said...

too stupid to figure it out so resort to the ad hominem...

Bob said...

What happened in September was incompetence.

André said...

I do not agree with that claim that Bill and Warren and others defend a lot.

But I cannot see how that zero hedge article specifically disproves Bill's statement

S400 said...

“ too stupid to figure it out so resort to the ad hominem...”

Too stupid to comeback with anything other than the ad hominem “too stupid.