Scott Sumner asked a few questions about Modern Monetary Theory (MMT) (link), and this article is a short response to some of them. The issue at hand is the effect of open market operations, in particular, in the pre-2008 U.S. system (where reserves paid not interest)....Bond Economics
Comments On Scott Sumner's Questions About MMT
Brian Romanchuk
1 comment:
After 1995, the percentage drifted higher (with a few spikes)“
Fiscal balance transitioning into Fiscal surplus... when in fiscal surplus govt “saves money!” in Depository’s Liability accounts on RHS, which result in Reserve Asset increase on LHS... USTs are net redeemed so there is no net “reserve drain” as there is no net bond issuance..
Collapses LCR (govt deposit liabilities in the denominator) and retards bank credit... eventually a recession...
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