China will fend off risks from excessive optimism that could lead to a "Minsky Moment", central bank governor Zhou Xiaochuan said on Thursday, adding that corporate debt levels are relatively high and household debt is rising too quickly.
A Minsky Moment is a sudden collapse of asset prices after a long period of growth, sparked by debt or currency pressures. The theory is named after economist Hyman Minsky....
"If there are too many pro-cyclical factors in the economy, cyclical fluctuations are magnified and there is excessive optimism during the period, accumulating contradictions that could lead to the so-called Minsky Moment," Zhou was speaking on the sidelines of China's 19th Communist Party congress.
"We should focus on preventing a dramatic adjustment," he said. China will control risks from sudden adjustments to asset bubbles and will seriously deal with disguised debt of local government financing vehicles, Zhou said....
CNBC
China's central bank just warned of a sudden collapse in asset prices
Reuters
I’m not really sure where to pose this question, so I’m gonna put it right here. Where can I find instances of the Treasury General Account increasing from non external sources? In other words, not from taxes collected, bond sales, government fees, etc. Thanks!
ReplyDeleteJust keep a daily eye on the left side of the DTS they have all the daily deposits there...
ReplyDeleteFed "profits" are periodically deposited there maybe that's one that meets your criteria...
ReplyDeleteThanks, Matt. Do Fed “profits” get paid from the TGA? In other words, does the treasury pay interest to the Fed on securities the Fed holds and the Fed subsequently returns the “profits” to treasury?
ReplyDeleteI think you are looking for a sources and uses of funds statement.
ReplyDeleteThe Fed publishes a Z.1 report that includes flow of funds, but I don't think that the Treasury publishes a sources and uses report other than the daily statement.
All uses of funds, e.g., spending in period, must be funded by sources of funding, e.g., from previously acquired assets, revenue during the period, or borrowing.
The Fed and Treasury work together to ensure that the sources and uses of funds balance at the end of the day.
In other words, the Treasury account is at the central bank. The central bank ensures that total uses of funds ($ amount) by the Treasury and total sources of funds ($amount) balance. The "buffer stock" is Treasury debt, which expands and contracts with the fiscal balance.
The amount of Treasury debt is unlimited operationally, but in the US it is limited politically by the debt ceiling imposed by Congress. So technically, there is a limit on government funding itself, although historically it has been a soft limit, with Congres raising the ceiling as needed.
From the accounting POV government spending is "funded" by revenue and borrowing.
This is the accounting sense of "fund."
"Fund" has an ordinary language meaning of "pay for." A currency issuing government is self-funded. It "pays for" spending though issuance of a unit of account that it alone controls a monopoly over.
So the currency sovereign not only funds itself but sets the own rate of the currency as it chooses and also sets prices by what it pays in the marketplace. This is, of course, contrary to market fundamentalism.
MMT economists argue that the spending of a currency sovereign in its own currency is self-funded, This requires a floating rate and also that the government not incur obligations in a unit of account that the government does not issue . That is, no external funding. A sovereign currency issuer doesn't need to obtain funding from sources other than issuance of the currency on which it has a monopoly, which implies self-funding.
Another operational requirement of currency sovereignty (monopoly) is that obligations to the currency issuer can only be paid in the currency that the government issues as the exclusive payment medium. So, for example, taxes can only be paid with cash or reserve balances, which come only from government through prior issuance or central bank lending.
Thanks, Tom. That’s how I see it as well. I’m really just searching for a “smoking gun”, for lack of a better term, that shows the TGA increasing from something other than “funds” already existing in the non-government sector. I have a pretty complete understanding of the accounting from a theoretical point of view, I’m just searching for evidence to support my theoretical point of view.
ReplyDeleteDo Fed “profits” get paid from the TGA? In other words, does the treasury pay interest to the Fed on securities the Fed holds and the Fed subsequently returns the “profits” to treasury?
ReplyDeleteDo Fed “profits” get paid from the TGA? In other words, does the treasury pay interest to the Fed on securities the Fed holds and the Fed subsequently returns the “profits” to treasury?
Yes, the interest payment to the Fed is debited to the TGA and the return of Fed profit to the Treasury is credited to the TGA.
Its' a wash. It's eliminated in the consolidated books of government, in which the cb and Treasury are agencies.
As Kelton has point out, consolidating the books of a single entity with various divisions maintaining separate books is not unusual. Consolidation is standard in accounting. For example the balance sheet of a large corporation, conglomerate, or holding company shows the consolidated books of the corporate divisions and subsidiaries that the entity owns.
BTW, It should also be noted that pay-go doesn't change self-funding on the part of government. Dedicating a particular portion of the revenue stream as source to a specific spending purpose as use doesn't change anything operationally.
ReplyDeleteYes on USTs it goes from TGA to Fed and then back from Fed to TGA when Fed closes out their year... this is periodically reported in the DTS on the days they do it...
ReplyDeletealso, Fed has MBS which goes from mortgage payers to the GSEs and then to Fed and then to TGA when Fed closes out their year... also the GSEs are govt owned so they also xfer profits of USDs to TGA at some points... so mortgage payments have become a sort of tax these days...
Same with Student Loans...
ReplyDeletethis is periodically reported in the DTS on the days they do it...then to Fed and then to TGA when Fed closes out their year... also the GSEs are govt owned so they also xfer profits of USDs to TGA at some points.
ReplyDeleteCan you name one DTS statement day when this happens? Thx. Much appreciated.
I'd have to back and look at every day ...
ReplyDeletehttps://www.google.com/amp/s/www.bloomberg.com/amp/news/articles/2017-05-05/fannie-mae-will-pay-2-8-billion-to-u-s-treasury-after-profit
ReplyDeleteHere June 30 over 5B over 20b ytd
ReplyDeletehttps://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=a&fname=17063000.pdf