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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1answer
24 views

What does “writes a check to Congress in exchange for them” mean in this context?

On page 192 of the 5th edition, George Edward Griffin begins to describe the "Mandrake Mechanism", chapter ten, in "The Creature from Jekyll Island". First, the Fed takes all the ...
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31 views

How does the U.S. Fed printing money result in a debt for future generations?

I'm unclear when I see news articles about how the U.S. Treasury will borrow $2 Trillion in the second half of 2020, why would the Fed printing money result in a debt for future generations? I can ...
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46 views

How does the Fed's stimulus push stocks markets higher?

I read that the Fed’s stimulus last March has contributed to a spectacular rally in stock markets. And indeed S&P500 has increased a lot since March. But how does the mechanism work? How does the ...
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223 views

Why do interest rates move together?

Why do interest rates (mortgage, LIBOR, Treasury yields, etc.) move together? What is the fundamental reason behind that? From my understanding, what drives it is the Federal Funds Rate, which is the ...
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Why would banks not want to lend, under Federal Reserve's Main Street Lending Program?

The Fed is paying 95% of the loan, so why would the banks be scared of lending? Even if the bank loses their 5% because they partaked in Fed's Main Street Lending Program, can't the Federal Reserve or ...
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How does the Greenspan/Bernanke Put semantically relate to put options?

If rational investors reckon that "the Fed, under Alan Greenspan, its longtime chairman, would always bail stock investors out of their losing positions", then rational investors would buy ...
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24 views

Interest rate determination in the real world

I have just learnt about the demand and supply framework for money and how the equilibrium interest rate in an economy can be determined. In theory, based on that framework, an increase in nominal ...
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41 views

Negative interest rate on bond yield

In Black-Scholes model $r$ is defined as risk-free interest rate. What I have understood is that risk-free comes from the yields on sale of government bonds. What does that mean if the interest rate(...
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Relative importance of the federal funds market in the post-2009 US economy

In the pre-financial crisis US economy, depository institutions had almost no excess reserves. Hence, it would make sense for some banks to have shortages of reserves and some with excess of reserves. ...
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Federal Reserve OMO money goes to the Treasury? [duplicate]

If Federal Reserve performs open market operation by selling government securities then Fed gets money, who keeps that money? Does it go to Federal Reserve Deposit or the department of Treasury or ...
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56 views

What is the purpose of the Treasury issuing bonds?

I have always thought that the US Treasury issues bonds to raise money to allow the US to pay off debts in the short- and long-term. However, recently, I have read in a book on Modern Monetary Theory ...
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31 views

What does the Fed do with their profits?

As far as I understand the system the Fed prints money which it then uses to buy bonds. Bonds are basically statements of debt meaning that the Fed receives interest from the parties it has bought the ...
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How much moral hazard from Federal Reserve's purchase of junk bonds? [closed]

Why doesn't the Federal Reserve appear to worry Moral Hazard? How bad's the Moral Hazard? The Fed is creating money to transfer to the balance sheets of corporations that invest in securities like ...
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Why's Federal Reserve buying individual corporate bonds, when corporations have been selling them successfully?

On Jun 15 2020, the Federal Reserve is expanding its Secondary Market Corporate Credit Facility into corporate credit to now buy individual corporate bonds, on top of the exchange-traded funds it ...
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Does the government ever pay back its debt from the OMO to the Fed? [closed]

I'm getting confused about how exactly does money being created by the Fed. From investopidia.com: ...
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29 views

Why do banks keep vault cash instead of depositing all reserves at the central bank?

In what way to commercial banks benefit from keeping some of their excess reserves in the vault as opposed to depositing all of their excess reserves with the central bank (assuming the central bank ...
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28 views

Why doesn't QE cause the federal funds rate to continue decreasing?

Quantitative easing (QE) is essentially a large-scale form of open market operations, in which the Fed buys large amounts of treasury bills of all maturities (ranging from 1-month to 30-year) and ...
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How does the federal funds rate compare to the federal discount rate?

The federal funds rate is the interest rate charged to banks when they borrow from each other overnight in the federal funds market to satisfy their reserve requirements. This rate is influenced by ...
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2answers
57 views

What does the Fed mean by “smoothening money market functioning”?

In many recent interviews, Fed Chairman Jerome Powell has repeatedly mentioned that ensuring the smooth functioning of money markets is a key goal of the Fed's recent monetary policy actions. I want ...
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3answers
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When the federal reserve buys bonds or other assets from banks, do the banks make a profit?

My understanding is that the federal reserve is injecting money in the market by buying bonds and debt from banks. Do the banks make a profit on the sale of their bonds or corporate debt to the feds?...
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37 views

How central banks “create” negative interest rates?

How can the Fed push Fed Funds rate to negative? I think I understand how it works with >= 0 -- they just lend reserves for bonds until they hit their targets, but what about <0? Has this something ...
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1answer
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Are FedWire transfers and volume tracking exchanges of reserves between banks that have accounts at the Federal Reserve?

Looking at Fedwire® Funds Service - Monthly Statistics it appears that these transactions are between banks but I'm trying to confirm is whether the stuff they are exchanging is classified as reserves....
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Does the federal reserve create any type of deadweight/welfare loss?

In microeconomics, we learn that when a good is overproduced or under produced, there is a dead weight loss associated with it. It seems like the same concept would apply to macroeconomics, where the ...
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How can the Fed realistically address the issue of frontrunning (in the context of its ETF purchases)

In the first two days in which the Fed's corporate bond program started buying ETFs, purchases totaled around USD305m. The size of the program is much larger, and it would seem very reasonable to ...
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Regarding the role of the Fed in controlling interest rates

When it is said that the Fed cut interest rates, does this refer to the discount rate, fed fund rate or both?
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Impacts of Suspending Mortgage and Rent Payments

Recently, there has been some support for suspending rent and mortgage payments, the goal being to provide financial relief during the Covid-19 response. I'm wondering what the impacts for the ...
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3answers
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How much more can the US Federal Reserve spend on COVID-19?

On Mar. 26 2020, the Federal Reserve’s Balance Sheet Tops $5 Trillion for First Time. Is the Fed's spending capped at some maximum? I studied in Canada and am ignorant of U.S. I'm asking about just ...
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Must US Treasury backstop US Federal Reserve?

The Constitutional Case for the Fed's Treasury Backstops | Cato @ Liberty writes no, I think? But I don't quite understand the financial terms iike "lever-up", backstop", "helicopter money". I looked ...
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Can m0 be created as a loan? [closed]

Are the following true? m0 is only created by destroying something else (federal reserve deposits)? m0 can be created as a loan? Related questions: can something other than federal reserve deposits ...
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1answer
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Can we figured out the total money supply using MB? [closed]

If we look at the total in the federal reserves account Here at the moment is about 3 trillion and if the reserve requirement is 10% does that mean that there is at least 30 trillion out there in ...
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Does the Federal Reserve buy and sell stocks?

Can the Fed buy and sell stock in publicly traded companies? Is there evidence of this and, wouldn't this behavior drive the price as opposed to actual market forces?
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What exactly is on the Fed balance sheet?

All the rage these days is how crazily big the Fed's balance sheet has grown. Looking on federalreserve.gov, I can see its value topped up ~6,573,136 millions USD (~6 trillion USD). Fine, but is ...
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2answers
15 views

The process of printed money reaching the government?

I saw a link that suggested that when the fed prints money, this money is actually lent to the government in the form of bonds, not given. This, despite the fact that the Fed is (loosely) associated ...
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How much money has the Fed printed?

The Federal Reserve is the bank of banks in the US. While it cannot force banks to change their rates in order to monitor the economy, it has several other ways to influence. One way it by printing ...
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US unemployment data release date

Using the CSV file provided by St. Louis Fed (which is based on the data series LNS14000000 from the Bureau of Labor Statistics) I noticed that the date is always the first day of each month for the ...
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Why does a loose Fed policy reduce the downward pressure on the currencies of emerging markets?

To start off, my background is not in economics but in Computer Science. I recently read in the Economist that a looser Fed policy removes downward pressure on the currencies of emerging markets. Is ...
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1answer
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What caused “excess liquidity” in equity market, when CPI was deflationary at the same time period, which caused 'market crash in 1929' in USA?

To begin with, my question is NOT about the reasons of "the great depression" or "market crash" which led to the great depression. Rather, my question is about the reasons for the 'excessive cash ...
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How does the Fed measure the shadow banking sector in the US?

It's apparently popular to say on TV [at 2:20 in that clip] that the Fed has no idea what's going on in shadow banking sector. To what extent is that true? (I could ask this on Skeptics as well given ...
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What's Term Auction Facility and how does it address the liquidity problem

I have read https://en.wikipedia.org/wiki/Term_auction_facility and https://www.investopedia.com/terms/t/term-auction-facility.asp Under the program the Fed auctions collateralized loans with terms ...
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How does the Federal Reserve unwind the asset purchasing scheme announced in response to the 2020 Coronavirus Pandemic?

On Monday, 06 April, 2020 the Financial Times reported that the Federal Reserve balance sheet could increase to $9 trillion. This is partly due to the myriad of initiatives, some new, to protect the ...
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119 views

What amount of Quantitative Easing will cause hyperinflation?

You all know that Quantitative Easing shifts the LM and AD curves right, so I haven't taken the time to redraw this picture. What's the maximum amount of Quantitative Easing that the Federal Reserve ...
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135 views

Is there some background/explanation why the Fed discontinued publishing their M3 indicator, circa 2006?

As Wikipedia says and as it can be easily verified, since 2006, the Fed no longer publishes an M3 indicator (unlike the ECB which still hangs on to that notion). So is there some background or ...
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what would be an efficient investment when central banks have massive qe?

Recently the central bank said in a statement on its website. “Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift ...
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2answers
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How is the Corona $2 trilion stimulus package going to be financed?

Perhaps this is a simple question but as a non-US citizen I don't understand how the US government is going to finance the $2 trillion stimulus package to combat the economic damage due to the Corona ...
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Why isn't the Federal Reserve bothered by the drawbacks of its unlimited Quantitative Easing?

On Mar. 26 2020, Fed announces unlimited QE and sets up several new lending programs : finance. I know little on the U.S., as my B.A. economics degree is from a Ontario university. If I remember the ...
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What is the Federal Reserve's “money printing” impact on inflation [closed]

In wake of Coronavirus, when the Fed announces it is printing \$2.2T, what is the impact on inflation? Does the M2 increase by \$2.2T? (Thus a 12.5% increase in inflation? That can't be right?) Is ...
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0answers
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Federal Reserve Leveraging of COVID-19 Fund

Reading an article in The New York Times about the COVID-19 stimulus bill, I stumbled on this detail the Fed can take a limited amount of funds and deploy them widely: The central bank only needs ...
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Question about Federal reserve open market operations - reducing money supply

I'm trying to understand how open market operations work to reduce money supply. So the Federal Reserve sells bonds... when this happens, the bank balances of the bond-purchasers goes down... the ...
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2answers
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Allowing the reserve requirements drop to zero

On 15 March 2020, the Federal Reserves announced that it would cut its benchmark rate to near zero and that it would also reduce the reserve requirements ratio to zero percent. This is part of its ...
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Why can money be described as “government non-interest bearing debt”

Trying to get some intuition on this statement I came across while reading Miguel Didrauski's dissertation "Rational Choice and Patters of Growth in a Monetary Economy". My sense is that it has ...