Greg Robb — The Fed is dusting off a QE replacement, last used during World War II

MMT economists have been saying that the government acting through its central bank has this power as currency monopolist to manage the yield curve in addition to setting the policy rate, if it chooses to use it. 

What difference does this make? The 5 and 10 year rates serve as benchmarks for commercial lending. Since housing is such an integral part of the economy, mortgage rates are especially influential and it has been argued that central bank interest setting acts primarily through the housing channel. So flattening the yield curve would make a difference.

MarketWatch
The Fed is dusting off a QE replacement, last used during World War II

Greg Robb | Senior Economics Reporter

Sputnik International — Trump Urges DoD to Purchase Twice as Much Military Equipment at Half Price

Has the president figured out that the currency issuer has a monopoly on the currency and can set prices in markets rather than be a price taker?

Sputnik International
Trump Urges DoD to Purchase Twice as Much Military Equipment at Half Price

Bill Mitchell — Deutsche Bundesbank exposes the lies of mainstream monetary theory

On one side of the Atlantic, it seems that central bankers understand the way the monetary system operates, while on the other side, central bankers are either not cognisant of how the system really works or choose to publish fake knowledge as a means to leverage political and/or ideological advantage.|

Yesterday, the Deutsche Bundesbank released their Monthly Report April 2017, which carried an article – Die Rolle von Banken, Nichtbanken und Zentralbank im Geldschöpfungsprozess(The Role of Banks, Non-banks and the central bank in the money-creation process). The article is only in German and provides an excellent overview of the way the system operates. We can compare that to coverage of the same topic by American central bankers, which choose to perpetuate the myths that students are taught in mainstream macroeconomic and monetary textbooks. Today’s blog will also help people who are struggling with the Modern Monetary Theory (MMT) claim that a sovereign government is never revenue constrained because it is the monopoly issuer of the currency and the fact that private bank’s create money through loans. There is no contradiction. Remember that MMT prefers to concentrate on net financial assets in the currency of issue rather than ‘money’ because that focus allows the intrinsic nature of the currency monopoly to be understood.

Bill Mitchell – billy blog
Deutsche Bundesbank exposes the lies of mainstream monetary theory
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — The reality of Germany and the buffoons in Brussels intervenes …

This week, I seem to have been focused on central banking this week, which is not my favourite topic, but is all the rage over the last several days given the decision of the Bank of Japan to use negative interest rates on any new bank reserves and then continue to pump reserves into the system via its so-called QQE policy (swapping public and corporate bonds for bank reserves), and then imposing a tax on the reserves so created. Crazy is just one euphemism which comes to mind. So still on that theme and remembering that the Bank of Japan explicitly stated that the combination of QQE and the tax on reserves (they call it a negative interest rate – same thing) was introduced to increase the inflation rate back up towards its target of 2 per cent per annum, I thought the following paper was interesting. The paper from the Research Division of the Federal Reserve Bank of St Louis (published July 2015) – Current Federal Reserve Policy Under the Lens of Economic History: A Review Essay – considers the unconventional monetary monetary policy interventions taken by the US Federal Reserve Bank between 2007 and 2009 and comes to the conclusion that “there is no work, to my knowledge, that establishes a link from QE to the ultimate goals of the Fed inflation and real economic activity”. Maybe the Bank of Japan and the ECB bosses should sent this researcher an E-mail and request his evidence. They don’t seem to have been able to escape from the straitjacket of their neo-liberal Groupthink.…

This is much more about central banking, QE, and economists' erroneous understanding of this than specifically about Japan or the EZ.

Bill Mitchell – billy blog
The reality of Germany and the buffoons in Brussels intervenes …
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Peter Cooper — What is Modern Money?

A modern money system, as that term is applied in Modern Monetary Theory, typically has three key features. Two of these features are always present. The third is optional but normally should be in place for the full benefits of modern money to be enjoyed: 

1. The currency is a public monopoly. Government issues the currency and is the only entity allowed to do so. 

2. The currency is nonconvertible. It is a fiat currency. The government does not promise to convert its currency into a precious metal or some other commodity at a set price. 

3. The exchange rate is allowed to float. The government does not promise to maintain a fixed exchange rate with any foreign currency. Instead, the exchange rate is ‘flexible’ or ‘floating’. As already mentioned, this feature is usually operative, but not always. 

Taking these three features together, we can say that modern money normally involves a ‘flexible-exchange-rate nonconvertible currency’, or ‘flex-rate currency’ for short....

heteconomist
What is Modern Money?
Peter Cooper