tag:blogger.com,1999:blog-2761684730989137546.post6357072582468956673..comments2024-03-29T02:19:19.866-04:00Comments on Mike Norman Economics: Kenneth D. Garbade — Direct Purchases of U.S. Treasury Securities by Federal Reserve Banksmike normanhttp://www.blogger.com/profile/03296006882513340747noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-2761684730989137546.post-91853232731778531822014-09-29T11:08:31.317-04:002014-09-29T11:08:31.317-04:00In 1935 Congress acted to prohibit direct purchase...<i> In 1935 Congress acted to prohibit direct purchases of Treasury securities by Federal Reserve Banks (...) In June 1979, Congress renewed (for two years) the $5 billion exemption to the prohibition on direct purchases...</i><br /><br />So, it´s up for Congress to decide whether direct financing of the Treasury at the Fed is admissible.<br /><br />This is unfortunately not an option in the eurozone, where a (virtually unchangeable) Treaty prohibits direct financing of governments by the ECB.<br /><br />Here we can see the key Constitutional difference between the U.S. and the countries using the euro. <br /><br />Whereas in the first case money is formally under the control of a representative body, in the second one the Sovereigns are left at the mercy of "the markets" - meaning, in practice, the commercial banks. <br /><br />Notice that not only the ECB does not make direct purchases: as a general rule, it does not even buy government securities in open market transactions. Instead, it "advances" money to the commercial banks, that the banks may use - at their whim - to purchase government securities. <br /><br />The concept of "bankocracy" thus seems to apply as a neat description of the power structure of the eurozone - at both the formal/constitutional and material levels.Jose Guilhermehttps://www.blogger.com/profile/00313496015841693181noreply@blogger.com