Yo, they just had $700b in their account at the Fed and they can put IOUs in the FERS for a couple hundred $B… there is no hurry… they can spend their account down to zero in several months… and they don’t need some stupid “coin!” …. they can take the rest of the summer off and worry about this in the fall…
Secretary Janet Yellen said the Treasury Department will begin special steps to avoid breaching the U.S. debt limit, while urging lawmakers to act “as soon as possible” https://t.co/NI5U7M905m
— Bloomberg Markets (@markets) July 23, 2021
6 comments:
You nailed it Matt.
https://seekingalpha.com/amp/instablog/910351-robert-p-balan/5616802-week-end-musings-july-18-2021-dissecting-equity-decline-in-markets-after-opex-near-term?__twitter_impression=true
" The key point has something to do with the budget spending ceiling -- so Treasury is using up what remains in the TGA. When TGA levels are reduced, that mechanically increases BRs. That's one. The other is talks about modifications in the SLR to provide BRs and Cash better treatment on buffer requirements -- that has encouraged G-SIBs, etc. to hoard BRs again. I did not expect this. I think neither did Zoltan, although he speculated at it could happen.
The O/N RRP deluge of take ups caused me to over-estimate how much BR would be sterilized (dashed black line). That really made me look like an idiot. The model was improved, in retrospect (dashed blue line). But we can recover from this mistake.
The huge O/N RRP take ups caused me to over-estimate how much BR would be sterilized (dashed black line). The model of NET of factors supplying and absorbing Bank Reserves was improved, in retrospect (dashed green line) and recalibrated to synch with the bottom of the Bank Reserves brief decline (as should be the case). We get a bottom on Wednesday, July 21. "
Never before have flow followers had a handle on things so beautifully in my opinion. It is fantastic to see and how things have developed over the years.
I'm convinced ( but could be wrong ) that because of the knowledge everyone now has. There must be a better way to follow the flows than just using the size of the deficit ?
Phillip George has attempted just that but I am highly sceptical the way he has done it. I've read all of his blog posts and he is wrong on so many things. But his corrected money supply seems to follow the markets better than other attempts I have seen.
What is the real money supply
http://www.philipji.com/money-supply/what-is-money-supply.html
The riddle of money, finally solved
http://www.philipji.com/riddle-of-money/
This is the type of thing I am talking about. I'm convinced with the knowledge that MMT'rs have We could produce a model that is so much better than the above. Rather than just use the deficit. That doesn't really tell you that much.
Janet needs to get with her predecessor's Money-Financed Fiscal Program (or MFFP for short):-
https://www.brookings.edu/blog/ben-bernanke/2016/04/11/what-tools-does-the-fed-have-left-part-3-helicopter-money/
The clots running the UK are marginally better than their US equivalents in that the UK Tory and Labour Party keep promising to balance the budget (they've been doing so for ten years now)but never actually get round to doing it, and pretty obviously have no intention of doing so. I.e. the "balance the budget" stuff is just for the benefit of the large number of simple minded voters who thing govt budgets are like household budgets.
That’s the same thing Bernanke did in 2008 and caused the GFC… then Powell did it in March 2020 and caused that crash… same thing caused the 1929 crash…
NOW they are not doing it… so we are not crashing… they are transferring the reserve balances from depositories immediately to MMFs who then have NOW been allowed to transact directly with the FRBNY in reverse repo IN A NEW POLICY and the reserve balances at the depositories don’t go asymptotic as usual and we don’t get an asset price crash like we’ve always done before…
Don’t listen to Bernanke he is an academic economist who caused one of those crashes in sept 2008 … it took a securities lawyer Powell to FINALLY figure out a Rube Goldberg lash up workaround they have now that seems to be working so far… but that was after doing it again in March 2020… Powell at least made an adjustment…
But debt ceiling may create conditions that will test how well their lash up is going to work… if the Tsy shortage created by debt ceiling inverts the yield curve and Tsys start to yield less than the RRP 0.05% and the IOR 0.1% then the Fed won’t have any portfolio income to pay the IOR and the RRP and will go bankrupt not being able to maintain their statutory $6.750B residual…
So you might end up with the Treasury defaulted and the CB bankrupt under debt ceiling…
I’m personally pulling for negative rates then a Treasury default and Fed bankruptcy BUT … with Tsy prices remaining at all time highs…. if that wouldn’t make these moron inflationista monetarist asshole second rate intellect pos dumb financially illiterate peoples heads explode nothing will…
Heres hoping…
Well in their defense the “balanced budget!” people are advocating for a more robust productive economy as the savings the deficit represents are a leakage…
I think Warren says axiomatically “if someone saves then we can’t buy all of our output”…which is true you can illustrate that in the Accounting…
So ideally you wouldn’t want a deficit… you’d want a balanced budget…
But ofc the typical balanced budget advocates don’t understand that they make the typical reification error and think their figure of speech “money!” is real and everyone has to borrow it from someone else…. they’re detestable people…
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