When we elect governments we should expect that they will do what they promised and represent our best interests. We don’t expect them to represent a small, privileged sector of the economy at the expense of the rest of it. The problem is that we overlay these aspirations onto an economic ownership system which has a different logic to our understanding of the operations of a democratic state. And mainstream economics gives reverence and priority to the logic of capitalism rather than ensuring that the quality of democracy is maintained. Which reflects its origins – as an apologist for the unequal ownership of the material means of production and the consequences that arise from that inequality. We keep seeing a restatement of that priority from prominent policy makers and while that generation is in charge it will be hard to really shift the paradigm.…Bill Mitchell – billy blog
The ‘disciplining role of markets’ should be replaced by the disciplining role of democracy
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
“Fiscal policy directly impacts on bank reserves, which require monetary policy liquidity management operations to take into account or lose control over interest rates.“
ReplyDeleteI guess the MMT thesis is if govt doesn’t issue USTs to reduce the reserve balances at depositories created by spending then the short term rate can fall below target ... but what about like now where you have govt issuance exceeding govt spending by > $1T over the last year... iow reducing reserve assets more than govt spending is increasing them... rates go above target?
Where do you see reserve assets decreasing?
ReplyDeleteMaybe like this : “govt increasing rate of net UST issuance faster than govt increasing the rate of net Reserve creation”
ReplyDeleteiow Fed has been creating Reserves via asset purchases by $120B per month but Treasury had been issuing Securities at $400B per month... so TGA went up by about $1.5T last summer... TGA low was March 23rd (market bottomed) at about $380B then went straight up to $1.8T by end of summer (created the massive equity rally) because Reserves at depositories went way down ... TGA now down to $1.6T but that is still a float of Treasury securities in excess of $1T that nobody wants or needs...
It’s like the MMT excess reserves rates thesis in reverse... or maybe corollary to MMT rate thesis..
MMT rate thesis is “if govt doesn’t reduce reserves by treasury issuance then FFR goes to zero” what is the corollary?
“If govt securities issuance exceeds reserve creation then rates go up”?
US 10 yr at 1.3% while EZ 10-yr maybe half that? It’s probably because the Treasury depts over there don’t have an extra trillion EUR of securities issued that nobody over there wants or needs...