Friday, January 13, 2023

Zero Hedge — The Fed Sent $76BN To Treasury In 2022; It Is Now Sending $650 Million To Banks Every Day Instead

More handwringing over "losses." Well, one party's loss is another party's gain.

They still don't get that QE involves fiscal withdrawals comparable to taxes by transferring interest payments to government while the raising rate involves a fiscal injection comparable to deficit spending by increasing interest payments to nongovernment. That is, the former decreases aggregate net financial assets of non-government (reduces nongovernment net savings in aggregate) while the latter increases aggregate net financial assets of non-government (increases nongovernment net savings in aggregate). QT acts like raising rates in that when the Fed sells bonds or lets them mature, then interest payments to nongovernment increase as a consequence, hence aggregate net financial assets of nongovernment also increase. 

MMT 101. To understand the basics of reserve accounting and bank accounting, see MMT economist Eric Tymoigne's primer on money and banking here.  

See in this light, "losses" to government accounts are simply transfers (monetary flows) from government to nongovernment (through congressional appropriations and corresponding "spending") or "gains" to government accounts are transfers (monetary flows) from nongovernment to government. These flows alternatively increase or decrease the stock of nongovernment net savings in aggregate).

Note that "saving" denotes flow that increases a stock and "savings" denotes a stock. So a credit from government to nongovernment, while it appears to be a "loss" for government, if just a transfer in that government issues the currency, typically through the central bank simply by crediting nongovernment accounts. The act of crediting those accounts is currency issuance as a sole prerogative of a sovereign government. The notion that a government that is sovereign in its currency needs to get the currency it is constitutionally empowered to issue is a nonsense. 

Note also that not all governments are sovereign in their currency. To be sovereign in its currency, the government must be the monopoly issuer of a floating rate currency and also must not create obligations in currency it doesn't issue. US states and municipalities are not sovereign monetarily; only the federal government is. Members of the EZ ceded currency sovereignty to the ECB in the Maastricht Treaty and are subject to the rules of the treaty. Government that use other government's currency (Ecuador uses the USD) or fix the exchange rate (for example, by pegging to another currency) are not monetarily sovereign either. 

Incidentally, Russia is monetarily sovereign so it doesn't need to get rubles by exporting its resources. It funds itself. Moreover, it doesn't need foreign currency since it is mostly self-sufficient, being resource rich and having developed its own technology-based industry. Thus, the idea on which NATO strategy is based, namely, that sanctions or price caps are going to prevent Russia from prosecuting its military campaign, are simply wrongheaded. It won't of itself, although Russia could make mistakes. For instance, the fly in the ointment could be Elvira Nabiullina, head of the Central Bank of Russia, who is a neoliberal. On the other hand, she did wisely float the currency in 2015 when sanctions were first imposed.

Finally, this doesn't mean that governments have no constraints. The real constraint is availability for real resources including natural resources and capital resources, that is, industry and technology as well as institutions to support them, e.g, education and training, legal institutions, etc. The financial constraints are inflation and the variable exchange rate for governments that float their currency.

Zero Hedge
The Fed Sent $76BN To Treasury In 2022; It Is Now Sending $650 Million To Banks Every Day Instead
Tyler Durden


Alex Kimani

But see
Eve [should be Yves] Smith, economics correspondent on the site Naked Capitalism refers to a Bloomberg piece that claims that the oil cap is having an effect and has pushed down the price of Urals Crude to $37.50, a 53% discount to Brent Crude.

In fact [and as a former academic expert on western news agencies I find this is extrordinary] all the actual price trackers, including Thomson Reuters, are citing the price of Urals Crude at far higher levels, from $46 to $51.60.

Mercouris says he is beginning to become very frustrated with Bloomberg which he says has been spreading a series of stories whose main purpose is to suggest that western sanctions against Russia have been more effective than they really are. The series included the now discredited story that Russian oil exports had collapsed by 50% in December. A TASS report says that Russian and oil and gas revenues have increased 7.5% month on month in December, amounting to $13.5 billion, according to statistics from the finance ministry, representing an increase of 6% year on year.

Another Bloomberg story made the speculative claim that the recent increase in Russian military production was solely responsible for why Russian industrial production generally was holding up, something the story claimed was financially unsustainable. And now Bloomberg gives a wrong figure for the price at which Urals Crude is trading.

Mercouris says that he will in future be discounting anything that Bloomberg has to say about the Russian economy even if it is based on what appear to be reliable data. There is now a consistent pattern from Bloomberg of reporting things that are entirely wrong in that specific area of data reporting in which they always used to claim they were especially reliable.
Empire, Communication and NATO Wars
Something Big This Way Comes
Oliver Boyd-Barrett

See also

Zoltan Pozsar. Important. Geopolitics and global economics.

Strategic Culture Foundation (sanctioned by the US Treasury Department)
The 2023 War – ‘Setting the Theatre’
Alastair Crooke | founder and director of the Conflicts Forum, and former British diplomat and senior figure in British intelligence and in European Union diplomacy

Also at SFC
U.S. Jackals Smelling Blood i.e. a Prohibitively Huge Potential for Profit in the Russian Arctic
Natasha Wright


Matt Franko said...

“Sending $650 million to banks everyday “

Boy gee whiz that sure is a lot of munnie….

So how does this work now?

Theyre going to secretly take that munnie and surreptitiously give it back to government representatives with the quid pro quo so then those government representatives are going to fund scholarships to all the Liberal Art institutions to teach monetarism to the rising generation?

Am I getting this right?

So then those new generation will think munnie is real and therefore we have to be careful to not run out of it?

Then the government will be able to deny fiscal support to initiatives that would improve social welfare and decrease economic inequalities?

“Hey! We’d like to but as you know we’re running out of money!” ?

Is this how it works?

Am I getting this now?

So these crafty neoliberals are secretly taking all these bazillions of government munnie and then turning it back around to undermine the very source of all their government munnie?

To create all this chaos?

This is your thesis?

Konrad said...

“The idea on which NATO strategy is based, namely, that sanctions or price caps are going to prevent Russia from prosecuting its military campaign, are simply wrongheaded.”

Zero Hedge has been seduced by propaganda. The target was never Russia. The target was always Europe.


U.S. power rests on the dollar being the most widely used reserve currency, and also on the “petrodollar” (i.e. the energy market being largely priced in dollars). When you control the international energy market, you control national economies, plus national food supplies, since agriculture depends on energy, and on petro-chemicals for fertilizer. If any nation displeases you, you can cripple that nation by pressing a button. You can shut down its economy and starve its people. No energy means no food, and no economy. No lights, no transport, no communication, no nothing.

Since the U.S. Empire is dying and is desperate, its task was to get total control of Europe by getting control of Europe’s energy and food market. Therefore the USA had to cut Europe off from cheap and abundant Russian energy. The USA engineered the Ukraine situation as a pretext to make Europe go on a suicidal hunger strike and boycott Russian food and energy. The US also destroyed the Nord Stream pipelines to make sure that Europe could not escape, and go back to using cheap Russian energy.

Europe is about to cut itself off from most Russian oil. Then Russia will sell oil to middle parties (India and other nations) who will sell Russian oil to Europe at greatly increased prices. The USA will continue to use financial shenanigans to control Europe’s oil market, and thereby control Europe.

Russia will not be hurt. Again, the target was never Russia. It was always Europe.

Regarding natural gas, the USA is now the world’s largest exporter. The USA will use this to control Europe’s natural gas market, and thereby control Europe. From Jan to Oct 2022 the USA shipped 9.7 billion cubic meters of natural gas to Europe. Each year the USA doubles the amount of natural gas it sends to Europe.

So far, Europe has 21 terminals to receive natural gas from the USA, of which 9 are being expanded. Two more LNG terminals are under construction. Eleven more terminals are planned. Also, Europe has four giant gas storage facilities to hold LNG from the USA.

The USA will rule Europe via natural gas. Washington is even talking about denying natural gas to average Americans.

The USA cannot hurt Russia, since Russia is self-sufficient. Once again, the target was never Russia. It was always Europe, plus other nations that the U.S. Empire can control such as Brazil, whose GDP is as large as Russia’s. This was why the U.S. money powers ordered Brazilian election authorities to rig the 30 Oct 2022 election to get rid of Bolsonaro and install Lula, who is a neoliberal puppet.

Ukraine is merely the cover story for all this. Ukraine is being used up, and it will soon be discarded, leaving a hollowed-out husk. All the woke morons who have Ukraine flags in their social media bios are being used as puppets.