tag:blogger.com,1999:blog-6616959642391988608.post3033432885846715355..comments2024-03-28T00:18:25.641-07:00Comments on Calafia Beach Pundit: Post FOMC charts and commentsScott Grannishttp://www.blogger.com/profile/14028519647946868684noreply@blogger.comBlogger24125tag:blogger.com,1999:blog-6616959642391988608.post-39179476792694631262015-09-18T19:10:53.301-07:002015-09-18T19:10:53.301-07:00There is no reason to worry about the business cyc...There is no reason to worry about the business cycle. The economy remains deeply depressed. Real growth is low, employment is low. Investment is low. Housing starts are low. This is stagnation. And it is a predictable consequence of Obama's micro-economic policies.<br /><br />As to inflation, price indexes are rising slowly but I see little evidence that anything the Fed has done or failed toCharleshttps://www.blogger.com/profile/00607057013050715435noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-35943654465018523412015-09-18T11:00:42.113-07:002015-09-18T11:00:42.113-07:00Mr Grannis, I will reread your post and the articl...Mr Grannis, I will reread your post and the article I copied and pasted.<br /><br />Thank you for your thoughts.<br /><br />Ben Jamin, you are the best!!Hanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-19521900730182175892015-09-18T09:34:50.608-07:002015-09-18T09:34:50.608-07:00All of this talk about raising rates and whether i...All of this talk about raising rates and whether it is the right time or not. Everyone is focused on the wrong question. Let’s talk about what is “normal”. I hear a lot of media pundits talking about the normalization of interest rate policy. That is a red herring if I have ever seen or heard one.<br /><br />Federal Reserve balance sheet (All Federal Reserve Banks – Total Assets, Eliminations Thinking Hardhttps://www.blogger.com/profile/11528747799967719972noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-58431660430653591142015-09-18T08:45:21.251-07:002015-09-18T08:45:21.251-07:00Hans---
My toupe and cane nod in agreement with yo...Hans---<br />My toupe and cane nod in agreement with you!Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-58466600665875633752015-09-18T08:26:28.366-07:002015-09-18T08:26:28.366-07:00Hans: The article you quote is incorrect. The Fed&...Hans: The article you quote is incorrect. The Fed's purchases of notes and bonds are financed by the issuance of bank reserves. The Fed can only create bank reserves; the Fed can't create money unilaterally or directly. The Fed issues new currency on demand from the banking system, but banks must surrender $1 of reserves for each $1 of currency. QE does not boost the M1 or M2 money supplyScott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-12156477652391015162015-09-18T08:14:54.115-07:002015-09-18T08:14:54.115-07:00Mike: re Fed's interest earnings. The Fed earn...Mike: re Fed's interest earnings. The Fed earns interest (~1.5-2%)on the trillions of notes and bonds it owns, and pays 0.25% on the bank reserves it created to buy those notes and bonds. The difference is the Fed's "profit," which amount, after paying its own expenses, the Fed remits to Treasury. Last year that amounted to about $100 billion. This year will probably be similar. Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-29703577825812892682015-09-18T08:13:34.727-07:002015-09-18T08:13:34.727-07:00"The figure comes to $3.4T, which is roughly ..."The figure comes to $3.4T, which is roughly what it needs to be to explain the increase in True Money Supply.<br /><br />A separate question is: Why hasn’t the large Fed-promoted increase in the US money supply led to a substantial increase in the ‘general price level’?<br /><br />This is a question for another time as this post is already too long, but suffice to say right now that:<br /><Hanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-4860889909352353042015-09-18T08:12:00.602-07:002015-09-18T08:12:00.602-07:00 CONTINUANCE
Next, for the sake of explanation l... CONTINUANCE <br /><br />Next, for the sake of explanation let’s assume that PDA (Primary Dealer A) is a subsidiary of Bank A and maintains a demand deposit at Bank B. When PDA sells assets to the Fed, the Fed deposits payment in the form of newly-created dollars into PDA’s demand account at Bank B. Since customer deposits are liabilities of banks, if the process ended with the Fed depositing newHanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-37564571654265845122015-09-18T08:10:09.677-07:002015-09-18T08:10:09.677-07:00Regarding the effects to the money supply from FRB...Regarding the effects to the money supply from FRBQEs..<br /><br />"February 16, 2015<br />One of the most persistent beliefs in the world of economics today is that the Fed’s QE (Quantitative Easing) adds to bank reserves but does not directly boost the US money supply. The popularity of this belief is remarkable considering that anyone who bothers to do a few simple monetary calculations Hanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-89831235800876753372015-09-18T08:05:59.200-07:002015-09-18T08:05:59.200-07:00Mr Dawg, there is risk aversion in federal notes a...Mr Dawg, there is risk aversion in federal notes and bonds..LOL<br /><br />And yes I have seen a chart of M2, which merely adds to the totals of <br />seen charts of M1.<br /><br />I am still waiting for answer and more than likely will forever because<br />there is no sound reply, other than the FRB telling bankers do it or else.Hanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-28103285875382021702015-09-18T07:55:36.562-07:002015-09-18T07:55:36.562-07:00Hans:
It's been answered over and over.
Risk ...Hans:<br /><br />It's been answered over and over.<br />Risk aversion.<br /><br />Have you ever seen a chart of M2?Johnny Bee Dawghttps://www.blogger.com/profile/06836875640973245734noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-12135283976155906672015-09-18T07:53:00.478-07:002015-09-18T07:53:00.478-07:00Hi Scott,
I thought they were keeping all the int...Hi Scott,<br /><br />I thought they were keeping all the interest - like 600 Billion so far and giving it to the Fed to pay down debt. I also thought the Fed said they would not unwind the transaction and are keeping all the runoff as the debt matures / mortgages prepay.<br /><br />Isn't that the equivalent of printing a lot of money - short and long term?<br /><br />Thanks - Mike<br /><br /Mikehttps://www.blogger.com/profile/09170174212930769052noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-3834341765665446822015-09-18T07:17:11.864-07:002015-09-18T07:17:11.864-07:00http://www.wisegeek.com/what-are-bank-reserves.htm...http://www.wisegeek.com/what-are-bank-reserves.htm<br /><br />Reserves are in effect walk-a-round money or wallet money, in<br />case there is a need for "fast" cash.<br /><br />I have asked this question before and never get an answer.<br /><br />Why would a banker trade notes and bonds for lower yielding<br />reserves?<br /><br />The EXPLOSION of M1, since you guessed it, 2008.<br /><Hanshttps://www.blogger.com/profile/05183141792723754273noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-38602830469107708872015-09-18T00:02:07.971-07:002015-09-18T00:02:07.971-07:00Scott:
This is unrelated to the topic at hand but...Scott:<br /><br />This is unrelated to the topic at hand but I wanted to make a point about something you said a couple of years ago about the Aussie buck. At that time I suggested that the A$ was overvalued at over 1:1 and you kindly analyzed the situation based on a PPP analysis and suggested that the A$/US$ would eventually go to .67. I am happy to report that I am here (in Oz) and my U.S. WilliamSSmithhttps://www.blogger.com/profile/13300069036149265406noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-8143946496684096042015-09-17T21:58:26.577-07:002015-09-17T21:58:26.577-07:00There are so many things that don't make sense...There are so many things that don't make sense (that seem twisted to me). First, what is the meaning then of the fed's balance sheet? By your logic, it doesn't matter how large it gets; it's all just a transfer. Second, wouldn't banks always be willing to sell more bonds and notes at very, very high prices to the Fed in favor of an almost equivalent interest rate - risklessRichard H.https://www.blogger.com/profile/11837604197337217284noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-55878147065580392922015-09-17T19:37:14.247-07:002015-09-17T19:37:14.247-07:00It's important to remember, however, that QE i...It's important to remember, however, that QE is not equivalent to "printing money." Based on our experience so far with QE, it is better thought of as satisfying the demand for money equivalents. Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-83956247026249494902015-09-17T19:35:46.241-07:002015-09-17T19:35:46.241-07:00I checked the figures. The Bank of Japan does abou...I checked the figures. The Bank of Japan does about $55 billion a month in QA, in an economy about half the size of the United States.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-76331288603523182015-09-17T19:31:47.335-07:002015-09-17T19:31:47.335-07:00As Milton Friedman taught us, inflation happens wh...As Milton Friedman taught us, inflation happens when the supply of money exceeds the demand for it. To date, the Fed has created trillions of dollars of "money" (i.e., bank reserves, which are functionally equivalent to T-bills and which are the ultimate form of money, since they have no risk, are liquid, and pay interest. Banks have to date been happy to hold on to those reserves and Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-46086453452883653242015-09-17T19:27:02.038-07:002015-09-17T19:27:02.038-07:00The Fed can't print money, but it can create b...The Fed can't print money, but it can create bank reserves anytime it buys notes or bonds. For the Fed, the purchase of assets is equivalent to a swap, or an exchange. The Fed credits banks with reserves, and in exchange receives notes and bonds. From the perspective of banks, they sell notes and bonds to the Fed and receive bank reserves, which are functionally equivalent to T-bills since Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-74437675292699886852015-09-17T19:23:25.283-07:002015-09-17T19:23:25.283-07:00Also, please, what do you mean by "decline in...Also, please, what do you mean by "decline in the demand for money which would precipitate a meaningful rise in inflation"? <br />Things are getting just too weird: isn't there always an unlimited demand for money, at least at zero or very low interest rates?<br />RichardRichard H.https://www.blogger.com/profile/11837604197337217284noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-43412479185487805752015-09-17T19:22:22.972-07:002015-09-17T19:22:22.972-07:00Scott: Yes---and the Bank of Japan is conducting a...Scott: Yes---and the Bank of Japan is conducting about $80 billion a month in QE, if my memory serves and the exchange rates are what I think. This leads me to suspect QE should be considered conventional policy.Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-77278283977307331762015-09-17T19:17:04.421-07:002015-09-17T19:17:04.421-07:00Wait a second, "swapping bank reserves" ...Wait a second, "swapping bank reserves" implies the money was already there, sitting around in the Fed's vault. But it wasn't. It was newly created (printed).<br />Richard H.https://www.blogger.com/profile/11837604197337217284noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-61043933124329752372015-09-17T18:31:42.348-07:002015-09-17T18:31:42.348-07:00I think the evidence shows that the BoJ was way to...I think the evidence shows that the BoJ was way too tight for decades, since the yen appreciated relentlessly against almost all other currencies. They finally corrected that mistake starting about two years ago. I'm not sure that means they started "printing money," or whether they simply stopped making money scarce. Whatever the case, it looks like they are now supplying all the Scott Grannishttps://www.blogger.com/profile/14028519647946868684noreply@blogger.comtag:blogger.com,1999:blog-6616959642391988608.post-65681672373990879672015-09-17T16:45:10.123-07:002015-09-17T16:45:10.123-07:00Scott Grannis: in your estimation, is the Bank of ...Scott Grannis: in your estimation, is the Bank of Japan printing money or not?Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com