With interest rates hitting their effective lower bound, and the general skepticism towards the effects of growing central bank balance sheets via buying central government bonds, central bankers are being forced into a role they had largely avoided: directly extending credit to actors other than the central government. In some ways, this is a reversion to pre-World War II norms. From an analytical perspective, this shift largely eliminates the usefulness of most macro theory with respect to monetary policy....
Wednesday, December 2, 2020
The New Era In Central Banking: Credit Policy — Brian Romanchuk
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2 comments:
They can go negative rates and keep adding Reserves to lend out all day...
These markets are all Broker/Dealer markets ... not so simplistic as Brian is representing here...
Dealers buy from Treasury .... CBs (wanting to get a good deal) buy assets from Dealers... Dealers are reciprocatively regulated by CBs....
It’s complicated...
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