Questions tagged [federal-reserve]

Use only for questions that are directly related to the central bank of the United States, the "Fed". For example, US monetary policy, US money supply, US balance sheet, etc. Do not use for generic questions related to central banks, monetary policy or other, which are not directly related to the Fed. Use instead central-banking, monetary-policy, or related tags.

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Eurodollars - the real reason for the "Greenspan conundrum?"

While the jury seems to still be out on a similar question I posed earlier: Why did Greenspan think rate hikes would increase treasury term premiums?, I have recently begun entertaining an entirely ...
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Are major banks in US necessarily going to benefit from the rise of federal fund rates?

https://wtvbam.com/2022/01/05/fed-funds-futures-see-rate-hike-in-march-after-minutes-of-policy-meeting/ It is believed that Fed is very likely to raise the Federal Fund rates in the next a couple of ...
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Why did Greenspan think rate hikes would increase treasury term premiums?

Greenspan once called long-term treasury yield's continued downtrend despite his multiple rate hikes a "conundrum." The Fed has research on what is often called "Greenspan's Bond Yield ...
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Which people or institutions own the assets of the Federal Reserve System?

At this website, I see that the total assets of the Federal Reserve System are worth more than 8 trillion dollars. Which people or institutions own these assets?
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334 views

Who controls money supply if the fed does not?

This whitepaper states (bold mine): According to the consensus view, the two leading culprits of inflation risk today are the fiscal deficit and the money supply. To illustrate, take this CNBC ...
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Are there limitations an what the banks can do with the money they've received from QE?

I'm a math PhD student and have been trying to learn more about the commercial banking system. I've read that Quantitative Easing creates a "dollar prison" and is in fact deflationary but ...
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1answer
39 views

Why does the Fed's issuance of bank reserves to buy long-term Treasuries, shorten the overall maturity of government debt in private hands?

I quote Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy and Professor of Economics at Harvard University. Is the Fed To Blame for Inequality in America? – Pairagraph Can you economists ...
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1answer
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What causes rate transmission to be slow?

A recent quote from David Rosenburg on rate hike expectations reads: Remember, everything the Fed does in a moment of time has a peak impact on the economy 12 to 18 months later. Thus, raising rates ...
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Why do we have *daily* series of T-bill yields?

I understand that each week the US Treasury issues new T-bills at different maturities (1-month, 3-months, 1-year, etc). As far as I understand, this issuance happens every Tuesday. After the auction, ...
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1answer
41 views

Why does the federal funds rate differ from the IOR rate?

If I am not mistaken, the federal funds rate is the rate at which commercial banks, money market funds and market makers pay for overnight US Treasuries. In theory, it should be equal to the IOR rate, ...
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Is Fiat Money Ultimately Tax Based?

First, I am not an economist, so seeking general "good enough" answers. Since Nixon went off the gold standard the U.S. dollar has been a fiat currency backed by federal debt. While I ...
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Why isn't the Federal Reserve interest rate set by a published algorithm?

The Federal Reserve sets the interest rate, presumably based on a number characteristics and trends in the economy: inflation, GDP growth, population growth, unemployment, housing prices, etc. However,...
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Can the Federal Reserve permanently decrease money supply?

As far as I understand it, the primary way the Federal Reserve decreases the money supply is by selling bonds–the entities buying these bonds give up their cash for them and thus M0 is decreased. ...
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How the Fed and Treasury coordinate on liquidity management

On top of the Fed's USD120bn monthly treasury/MBS purchases, the drawdown in Treasury issuance over the last year has also added over USD1tr to the system. The premise is, faced with drawn-out debt ...
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1answer
67 views

Why do we need independent central banks?

Why should we have an independent central bank? Why can not the govt itself do the job that central bank does? One logic people give is that governments are elected for short term and may take ...
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1answer
53 views

Why is IOER so much higher than short term Treasury yields?

Interest on excess reserves is currently at 0.15%, but the yield on 1, 2, 3, and 6 month Treasury bonds are all only 0.05%. Why is this the case? Shouldn't IOER be about the same if not lower than the ...
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1answer
143 views

Did Capitalism and Adam Smith Support a Central Bank?

Does Adam Smith and Capitalism support a Central Bank/Federal Reserve? I am trying to read through the book "Wealth of Nations" to understand. Having a central/regulatory figure dictate ...
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1answer
24 views

At what frequency does monetary inflation compound?

The M1 money supply of the U.S. dollar is released monthly. But how often does the Federal Reserve or treasury add/remove a new dollar or a new penny? By second, minute, daily?
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1answer
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Has there really been a 170% increase in M1 money supply in the US in February 2021?

tradingeconomics shows an M1 money supply of the past year as follows: This suggests an unusually high increase of ~170% in February 2021. Is this increase real or somehow an artifact of the way the ...
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Do Fed OMOs directly and immediately increase M1 or M2 if they buy treasuries from a member bank? And what proportion of OMOs does that constitute?

I commonly hear that when the Fed conducts open market operations, it is directly increasing the money supply by exchanging newly created electronic money for US treasuries. But in the case where the ...
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2answers
75 views

What is the purpose of taxes if central banks can fund deficit spending?

Somewhat straight forward. If the federal reserve can print money to buy treasuries to fund deficit spending, what is the purpose of taxes? Sure, taxes reduce the amount of deficit that needs to be ...
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1answer
36 views

Does FED's change in short-interest rates impact long term rates?

Through changing the federal fund rate(short-term), does this empirically impact the longer end of the curve? If so, what is the logic or transmission mechanism that caused the change?
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294 views

Is The Money Masters (1996) correct in its main thesis?

The Money Masters is a 1996 documentary film that discusses the concepts of money, debt, taxes, and describes their development from biblical times onward. Its main points were summarized by a ...
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1answer
55 views

How come Fed doing RRP could push short term interest rates below 0?

So there is this Reuters article, saying that the amount of cash has peaked in Fed's RRP facility, meaning that it has entered the RRP market. It also claims that this could push short term interest ...
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1answer
50 views

US Reserve Currency Status Impact on Inflation

Since US dollar has global reserve currency status meaning that other countries need to keep a certain amount of US dollar as reserves. There's a narrative that being a reserve currency, if US prints ...
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Why is hyper inflation not a concern with huge rise in M2? [duplicate]

According to quantity theory of money, with velocity and production being relatively stable, we would expect the amount of inflation to be proportional to the amount of money circulating in the ...
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3answers
87 views

How the Federal Reserve Manages Money Supply

I'm trying to understand how the Federal Reserve manages the money supply via open market operations. According to this post, when Fed buys securities, that increases bank reserves, which allows banks ...
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1answer
62 views

Why does central banks lowering interest rate incentivize more borrowing?

I'm a layman trying to understand how the US monetary system works. I'm particularly interested in how the Federal Reserve can create inflation without printing new dollars and putting them in M1. My ...
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1answer
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Update of Fed mandate(2020) - "shortfalls of employment"

In this Fed link, it's stated that 1 of the most important changes in the document describing the Fed mandate/framework, is On maximum employment, the FOMC emphasized that maximum employment is a ...
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1answer
52 views

Why is the Fed worried about short term interest rates going negative?

I refer to the following article: https://www.bloomberg.com/opinion/articles/2021-02-25/negative-interest-rates-could-be-trouble-unless-fed-acts, notably the following paragraph: Market observers ...
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224 views

M2-M1: what's left in the delta?

If you subtract M2SL - M1SL, the chart looks as follows: The change is due to re-classification: M1 before: (3) other checkable deposits (OCDs), consisting of negotiable order of withdrawal, or NOW, ...
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1answer
69 views

How can the Fed enforce exit criteria if they begin yield curve control?

Over the past year, the notion yield curve control has resurfaced and appeared on FOMC minutes, decades after its last implementation. According to the Fed's introduction page: As the U.S. continued ...
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3answers
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What is the mechanism for when the fed purchases a gov't or corporate bond from a non bank?

My understanding is when the fed buys a bond from a bank they use bank reserves (bank reserves are swapped for a bond). How does the transaction differ when a non bank (ex hedge fund) is involved?
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Are stimulus checks created out of thin air? [closed]

My question is regarding the checks which the US government has sent out during the pandemic. Below is a chart of M2 money supply increase as a result of it: It is also said that 40% of all the m2 ...
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1answer
50 views

Is it easier to borrow money during a recession or high inflation period?

During a recession the FED applies expansionary monetary policies while during high inflation periods it contracts the money supply which respectively lowers and raises interests rates. Given that ...
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1answer
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How did the US Government fund its deficit when the Federal Reserve was pruning its balance sheet in 2018-1019?

The primary way for Governments to fund their deficits is by issuing new currency from the central bank against new treasury bonds. The Federal Reserve reduced its [balance sheet]1 from 4.4 trillion ...
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1answer
36 views

Why is market absorption of issued US Treasury Bonds (with the Fed purchase plan) a problem?

Financial market reports suggest that there are uncertainties about the Federal Reserve's ability to absorb new US Treasury Bonds issued in larger quantities to support the US government's growing ...
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1answer
54 views

Why it is important to observe if the 10Y treasury yield moves nowadays?

in the context of low yields, where fed continues with fiscal stimulus, I've heard from many economists that this week the 10Y treasury rate has been finally increasing. In which situation is this ...
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1answer
53 views

Where can I retrieve a complete history of macro economic data annoucements?

I'd like to get the complete ( well at least the last 20 years) history of economic data announcement calendar firstly for US and secondly for G5 countries. I have found many websites that propose the ...
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1answer
32 views

What's the advantage of repurchase agreements over collateral backed loans?

Is there any material difference between a repo and a collateral backed loan? The one I can think of is that the collateral is owned by the lending party during the loan. So if the Fed uses this with ...
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1answer
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Do open market operations permanently increase the money supply?

Suppose the Fed buys 1000 dollars worth of T-Bills in the open market to try decrease interest rates and increase the money supply. It does this by printing money and electronically increasing the ...
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1answer
58 views

Is there an alternative to currency to facilitate exchange of goods and services?

Say I have collected a bunch of seashells. Tom wants to have my seashells. Therefore the seashells have value and I have just created wealth. And so Tom buys my seashells for \$10. But even though I ...
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2answers
107 views

When does US Federal Reserve redeem the corporate bonds it bought?

The US Federal Reserve did the corporate bond buying program in the 2008 crisis and again now during the 2020 pandemic. What happens to the bonds it is buying? That is, someday it matures and ...
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Due-diligence behind discount window lending

Its clear the Federal reserve is doing risk assessments at the discount window since they separate credit into primary and secondary. I'm curious how secondary credit risk is handled. Given that ...
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When are banks allowed to fail?

If the Federal Reserve acts as a lender of last resort and steps in to prevent bank runs, then how do banks still fail? Do they only step in if the bank is solvent but in emergency need of funds?
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How does the fed pump the stock market [closed]

I've been hearing a lot about the fed "pumping the stock market" with trillions of dollars to maintain prices. I know the fed isn't allowed to actually buy stocks so how is this money being ...
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overnight index swaps OIS

I'm writing a paper where I am using expected federal funds rates at different horizons and wanted to use the OIS as a proxy for what the market expects the FFR to be post FOMC-meetings. However, I ...
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1answer
50 views

Why is the fed forbidden from buying gov't debt directly from the treasury?

I know it's forbidden in its charter. But what is the economic rationale?
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36 views

Does treasury pay interest+ face value to the fed?

heard all the profit that the fed makes goes into treasury.. does that mean the treasury department can make unlimited money buy selling bonds to the fed? like if they issue bond to people, and the ...
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CPI dataset from BLS

I hope this question is not inconvenient for any of you, so I would appreciate if you do not mark it as not useful. I want to work with the data of the CPI from the BLS (I am not American, and this is ...

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