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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82 views

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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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 ...
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25 views

How did the massive flight to long-term bonds create a liquidity crisis?

A few weeks ago I noticed that several blogs and such were adamantly proposing that the Fed lower rates immediately by 50 bps. They said that the flight to safety -- to long-term government bonds -- ...
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Fed vs Treasury: 2008

Re-visiting the issue of the Troubled Assets Relief Programme (https://www.thebalance.com/tarp-bailout-program-3305895), both the Treasury and the Federal Reserve had a role to play in the "bailout". ...
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90 views

Are Open Market Operations a Gift to the .1%?

My Background I was an Economics major a long time ago and I don't work in a related field. I have this question that's been nagging me. I hope somebody can answer the questions at the bottom. ...
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111 views

Is an alternative other than negative interest rate possible?

Currently there is a lot of talk about negative interest rate and possibly US would be adopting that. Denmark was the first country in the world which has "successfully" applied negative interest rate....
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What is the best observable proxy for the instantaneous risk-free market interest rate?

I am exploring a number of different models using daily data, of the US economy, and am trying to gather up observable proxies for some of the most important macro and micro variables, and surveying ...
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51 views

Is there a relationship between stock market hedge fund leveraging and the repo market?

Lately there have been many articles attempting to link repo-market borrowing with equity market increases. 1 I can see a link if the hedge fund is buying treasuries or mbs and financing it by using ...
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Why did the Federal Reserve change the data about USA GDP?

This is the data published on 20 March 2013 FOMC meeting: (http://www.federalreserve.gov/monetarypolicy/fomcprojtabl20130320.htm) 20 March 2013, Change in real GDP (actual): year 2008: -3.3% year ...
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How would M2 and Velocity of M2 be affected if balance sheet expansion continues long-term?

Let’s assume that the Federal Reserve does NOT discontinue injecting liquidity into the Repo market but, instead, continues a long-term policy of continuous and regular liquidity injections. Let’s ...
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Brainard on ELB Policy

In this speech, FRB Governer Lael Brainard suggested the following approach to monetary policy at the Effective Lower Bound: .....I have been interested in exploring approaches that expand the ...
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How do central banks earn profit?

I thought of Central banks as the regulators of financial markets. But surplus reserves of some Central banks surpass giant corporate companies. Please explain me how do they manage to make profit in ...
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Dynamic factor model for inflation (UIG)

I'm trying to replicate some results of Fed Underlying Inflation Gauge (UIG) model, which is a dynamic factor model to capture inflation trend. https://www.newyorkfed.org/research/policy/underlying-...
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Is it possible to see the precise steps that the Fed uses to make its decisions?

The current economic in the US is very complex and uncertain. Is it possible to see the precise steps that the Fed uses to make its decisions? Why did they choose a rate of that amount and not another ...
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47 views

The Fed Lowered Interest Rates, Are they going to buy Bonds?

I originally asked this question on personal finance/money because I didn't know that this exchange site existed. link to same question at person finance/money. Someone on that site mentioned that it ...
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1answer
35 views

How does the Federal Reserve reduce “excess reserves”?

Over the last few years, the amount of currency is circulation (and the corresponding liability on the Fed's balance sheet) has been growing; however, the asset side of the BS hasn't increased. By ...
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What is the privilege of a primary dealer?

Primary dealers have a privileged position, so there is value in being registered as a primary dealer. - https://economics.stackexchange.com/a/13450/8387 I was previously under the assumption that ...
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59 views

Why aren't open market operations a zero sum transaction?

I know that when the Federal Reserve buys Treasury bonds it increases the money supply, but I don't understand the process behind it. The model that I have given below (which is my best understanding ...
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25 views

What is it about the money market safeguards that increase volatility?

In recent coverage of the Fed's repo operation, I was struck by this line: It also indicated Wall Street is struggling to absorb record sales of Treasury debt to fund a swelling U.S. budget ...
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1answer
56 views

Why are bond yields so low when Fed is cutting rates?

Fed cut its rates for the first time in 10 years in July and it is about to cut the rates at least by 25 basis points during its September meeting. Usually, when Fed cuts the rates the bond yields ...
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1answer
561 views

What happens when a reserve bank runs out of foreign currency reserve?

What happens to a country when a reserve bank runs out of foreign currency reserve?
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When the Central Bank sells a bond, where does the money go ultimately?

As the accepted answer points out, the premise of my question was flawed. Thank you for the dispelling of my wrong assumptions. The original question follows. There are two related questions (and ...
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110 views

Why did the EUR/USD go down immediately when the Fed cut interest rate?

I was following the Fed’s decision on interest rates. I thought if there is an interest rate cut, the EUR/USD will go up but contrary to that it went down on 07/31/2019 immediately after the decision ...
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How does the Fed choose its asset purchase rate in an ample reserves era?

The St. Louis Fed's article "A New Frontier: Monetary Policy with Ample Reserves" states that the Fed now uses the IOER and ON RRP rates to set the FFR, instead of open market operations, which are no ...
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Why the historically narrow asset class purchases from QE

Let's begin by mapping out some context by assuming the following goals of implementing QE: prevent dire systemic liquidity concerns reach inflation targets manage expectations in the private sector ...
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What major monetary policy actions were taken during the Great Recession (2007-2009)?

What major monetary policy actions were taken during the Great Recession (2007-2009)? Quantitative easing and unconventional policy actions such as asset purchases and "forward guidance". I think I'm ...
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76 views

Why's Bernie Sanders wrong to allege that JP Morgan received more than $390 billion in financial assistance from the Fed?

This r/badeconomics post avouches: [JP Morgan] received more than $390 billion in financial assistance from the Fed. Sanders has repeated this lie for several years. He gets the \$...
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2answers
246 views

How did the Federal Reserve determine 3.5T USD in assets?

The financial media have reported that... In general, Fed officials appear to have converged to a minimum balance sheet of roughly $3.5 trillion, which means the runoff would end in the second ...
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Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase?

Is it true that when the overall money supply decreases, that the demand for money decreases and the demand for bonds and securities both increase? I understand that to increase the money supply, the ...
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3answers
2k views

What is the effect of Quantitative Easing on the US budget deficit?

Is the deficit getting larger because of QE?
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1answer
43 views

Does the Federal Reserve have bank accounts for banks?

Banks are constantly transferring electronic dollars to each other. There must be an entity that tracks how many digital dollars each bank has. Does the Federal Reserve have "accounts" for banks? In ...
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63 views

Difference between “Level” and “Flow” in the Z.1 Fed data

The Z.1 Fed data can be found in FRED. I notices that many similar data sets are labelled "Flow" or "Level". For example, Financial business; total liabilities, Flow Federal government; total ...
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5k views

Are bank reserves part of M1 or only part of M2, and why?

(1) Toyland earns $$100,000 revenue in cash this week. Toyland managers use this $100,000 to pay down a short-term loan from Bank One. Bank One keeps the cash in reserve. As a result of this ...
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117 views

Why doesn't the central bank extend loans directly?

I've been thinking about the credit theory of money lately and how it creates money. Since Banks look for sufficient reserves after extending a loan, and since the central bank always loans out money ...
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56 views

Where the money from QE goes

So when QE is used (or something similar that results in printing mone), where does the newly created money go? Does some entity get free money? Why is that allowed?
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261 views

By what steps and contracts does new money enter the economic system?

Like many noneconomists who read about economic history and finance, I always remain somewhat baffled by the opaque generation of currency under the federal reserve system. My understanding is that ...
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1answer
45 views

Did the Nixon shock cause skyrocketing real estate prices in the US?

Ca. 1970 the prices of real estate started skyrocketing in the US: Real estate prices chart. Same with gold: Gold prices chart. So my conclusion is that real estate did not increase in value, it was ...
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1answer
106 views

Why are required reserves so trivially low?

We know that required reserves are the reserves that central bank requires banks to hold in reserves. Reserves= Required Reserves +Excess reserves. But I see that in 2017 Total Reserves (RESBALNS) = ...
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2answers
130 views

Why did the Dollar weaken after interest rate increase?

Yesterday the Fed increased the interest rate of the Dollar yet it's value decreased against various currencies (Source). According to this article it should be the other way around : In economic ...
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1answer
67 views

How does national debt work?

I'm trying to understand national debt. I gather that the United States, and other nations with central banks, accrue debt basically by printing new money at their central bank. This, I hypothesize, ...
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70 views

Considering how USD enters the market, is the USD actually unbacked? Could the USD represent a unit of a “fund” of securities held by the Fed?

From my understanding, all new money enters the market either 1) by the Fed lending it to banks, so the Fed essentially owns bonds in the exchange, or, 2) The Fed purchasing other financial assets. So ...
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1answer
139 views

In quantitative tightening do banks have no choice in refusing to buy bonds from Central Banks (mainly Federal Reserve)

In light of the recent unease about interest rate rise, I've been taking a growing interest in how our economy actually works, something I've been trying to avoid. So this forum is a way for me to ...
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2answers
187 views

The Fed pays 1.50% interest on reserves; so why are interest rates so low?

Since 14th Dec 2017, the Federal Reserve Bank has paid 1.50% interest on excess reserves. So why do depositors' interest rates still remain so low? According to BankRate, across the US, the ...
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1answer
620 views

Can the Fed control the shape of the entire yield curve?

Is it often taught that the Fed can only affect the short end of the (Treasury) yield curve, while the long end is governed by investors' inflation expectations. Could the Fed in principle control the ...
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602 views

how is new money actually introduced in the United States?

I'm aware that the fed controls the supply of money by contracting and expanding through permanent and temporary open market operations. Consisting of purchasing Treasury securities or through repos. ...
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Does Fannie Mae get money from the FED

Does Fannie Mae directly or indirectly get money that is printed from the federal reserve to buy mortgages, or have they ever? If so, when has this happened? How much money? What is the process by ...
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25 views

Does the separation of FinCEN, and The Federal Reserve protect the integrity of a representative democracy? [closed]

From my understanding, FinCEN is controlled or heavily influenced by the UN. In addition, The Federal Reserve is not a governmental body, yet it has appointees from the current administration. I'm ...
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1answer
61 views

The Fed has a $4.5 trillion balance sheet: where did they get that money?

Who paid for that $4.5 trillion balance sheet? https://www.cnbc.com/2017/09/19/hedge-fund-titan-ray-dalio-says-to-succeed-in-markets-you-need-to-bet-against-the-consensus--and-be-right.html
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90 views

How does the Fed predict Economic Growth?

Which factors or formulas are used by the Fed to predict Economic Growth?