tag:blogger.com,1999:blog-2499715909956774229.post2501124236341058076..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: When is QE not QE?Stephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-2499715909956774229.post-88115216103394781932011-06-07T07:08:42.619-07:002011-06-07T07:08:42.619-07:00You write, "Indeed, if we take the Fed seriou...You write, "Indeed, if we take the Fed seriously that it wants to 'quantitatively ease,' it is not doing it, since the total quantity of Federal Reserve liabilities in the hands of the private sector declined in real terms during 2010." The Fed itself never proclaimed a policy of "quantitative easing." Indeed, Chairman Bernanke repeatedly has emphasized the different perspective of Large Scale Asset Purchases, indicating that it isn't about the expansion of Fed liabilities but about influencing the prices of assets by removing certain types of securities from the market.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-28899279255096320532011-01-04T19:09:08.325-08:002011-01-04T19:09:08.325-08:00Very good. Of course in parking $200b a the Fed, t...Very good. Of course in parking $200b a the Fed, the Treasury had to issue debt, which shortens the time unitl the limit is exceeded. But this seems as good an explanation as any for what is going on. As you point out, the Fed is silent about this. They presumably don't want to draw attention to anything that would make you want to question their independence.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-36211996219711058612011-01-04T14:44:47.196-08:002011-01-04T14:44:47.196-08:00When Treasury announced a resumption of TSF fundin...When Treasury announced a resumption of TSF funding (in early 2010), some speculated that this was a backdoor way of taking back/sterilizing some of QE1. The economy appeared to be strengthening then, and the Fed was about to raise the discount rate, all of which gave credence to this explanation. <br /><br />When the economy weakened in the summer of 2010, QE2 became a possibility and it made no sense to sterilize part of QE1. However, it also became clear that the GOP might take back the House in the midterm elections, making the debt ceiling a political issue for early 2011. Thus, by keeping funds parked at the Fed, Treasury has a store of cash available to pay interest on Treasuries should Congress fail to raise the debt limit. This might reassure the Treasury markets in the event of a government spending "shutdown".<br /><br />Just speculation, of course, but, incredibly, we have little actual information to go on when explaining why the federal government is parking close to $200b at the Fed.Anon1noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-56177332830632524262011-01-03T07:34:43.726-08:002011-01-03T07:34:43.726-08:00Yes, I don't find the money multiplier at all ...Yes, I don't find the money multiplier at all useful. See this:<br /><br />http://newmonetarism.blogspot.com/2010/04/money-multiplier.htmlStephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-66154550654079865852011-01-02T09:28:04.297-08:002011-01-02T09:28:04.297-08:00So you don't believe in the money multiplier? ...So you don't believe in the money multiplier? Interesting. When did this split between old and new monetarism occur? <br /><br />I also agree with your recent comment about the Treasury's general account. The rise is a bit baffling. Is the Fed paying lip service to QE2 and secretly sterilizing behind the scenes? Will be interesting to see if the general account is drawn down in January or not.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-32710981701996119522010-12-31T11:58:26.688-08:002010-12-31T11:58:26.688-08:00An increase in outside money is neither necessary ...An increase in outside money is neither necessary nor sufficient for an increase in M1, M2, or MzM. The idea that the effects of monetary policy can be summarized by the effects on some monetary aggregate is of course an Old Monetarist idea. There are many ways in which Old Monetarism is not very useful, and this is one of them.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-20538712955836276622010-12-31T11:28:16.871-08:002010-12-31T11:28:16.871-08:00So, how it is possible to see an increase in M1 M2...So, how it is possible to see an increase in M1 M2 and MzM recently? It is possible the monetary base has not increase, but the important is monetary supply, is it not?www.MiguelNavascues.comhttps://www.blogger.com/profile/00880006105532291958noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-16424668115271856352010-12-31T08:26:08.139-08:002010-12-31T08:26:08.139-08:00Yes, good point. What matters is the outstanding l...Yes, good point. What matters is the outstanding liabilities of the consolidated government - currency, reserves held by private financial institutions (I guess we're including Fannie and Freddie here), and Treasury securities in private hands. If the Treasury issues T-bills and deposits the proceeds from the sale in a reserve account with the Fed, this will essentially not matter, to the extent that T-bills and reserves are roughly identical assets. What makes reserves different is that they can be converted one-for-one into currency, which is clearly different from T-bills, in that it can be used in retail transactions. Now, suppose that the Treasury dropped the supplementary account balance to zero (say, when the T-bills mature), so that privately-held reserves rise by $200 billion. Will any of that $200 billion end up as currency? It's not clear why it would, but the Fed does seem to think that they can get some more inflation out of QE2, in part by flooding the system with reserves. If the Fed people are right, then the positive balance in the supplemental account works against what they are doing. At best it's neutral, but then why is the Treasury holding $200 billion in the account?Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-23362753697355477662010-12-30T18:41:05.368-08:002010-12-30T18:41:05.368-08:00I understand you want to draw a big distinction be...I understand you want to draw a big distinction between "reserves" and "currency" on one side, and T-Bills/Treasuries on the other. Unfortunately,this distinction is completely artificial. There is no distinction other than the yields (0% for currency, FFR for excess reserves, and term structure for T-Bills/Treasuries). The operationnal reality is that treasuries in circulation as a result of the "supplementary financing account" are just private accounts at the U.S. Treasury... just likes excess reserves are private bank accounts at the Fed (you want to open an account at the Treasury? Go ahead: http://www.treasurydirect.gov/tdhome.htm ). If you want to call reserves or currency "outside money", fine with me. There is no basis however for excluding T-Bills/Treasuries from this definition.Anonymousnoreply@blogger.com