The vast majority of economists believe that the Fed's asset holdings keep down U.S. interest rates. It is inconsistent to believe that the Fed's holdings of U.S. assets keep down interest rates here, but China's holding of foreign assets does not keep down the value of its currency.Beat the Press
Does China's 2.5 Percent Inflation Rate Really Explain the Decline in the Value of Its Currency Against the Dollar?
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C
3 comments:
Calgacus makes some inaccurate comments over there...
Calg: "a central bank like the Fed is really part of the US government. Its holdings of government debt are basically meaningless and cannot affect anything."
No it doesnt effect anything other than the Leverage Ratio of the banking system... no big deal there if they add a bazillion of reserves and collapse the SLR and bankrupt all the banks... pretty meaningless other than we'd all be in Mad Max beyond Thunderdome...
I didn't say that the CB doesn't affect anything. I said that its level of holdings of Treasury debt - which is what Dean Baker was talking about and has nothing to do with the banking system and reserve levels - can't affect anything, which is true.
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