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14 votes

Does the Federal Reserve buy and sell stocks?

@capm is correct that the Fed is not allowed to buy equities (though they may lend against them if need be, so long as they are secured to their satisfaction— see, for example, all the things they ...
dismalscience's user avatar
14 votes
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Does the Federal Reserve buy and sell stocks?

No, the Fed is not allowed to buy stocks, they are allowed to buy government securities in open market operations in order to achieve the target rate for the federal funds rate. The guidelines for ...
capm's user avatar
  • 316
14 votes

Is the Federal Reserve issuing money in a fair way?

Normative questions require a standard of fairness in order to then be analyzed and answered with some degree of "objectiveness" so that the answer is not just a declaration of philosophical-...
Alecos Papadopoulos's user avatar
10 votes
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Why did the Federal reserve balance sheet capital drop by 32% in Dec 2015?

The Fixing America's Surface Transportation Act (FAST), which was enacted on December 4, 2015, requires that aggregate Federal Reserve Bank surplus not exceed \$10 billion. The amounts of the line ...
AKdemy's user avatar
  • 4,122
9 votes
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Is the Federal Reserve issuing money in a fair way?

The Fed introduces money in the economy through the banks via the mechanism of fractional-reserve banking, as you mentioned in your article. This means the Fed is then allowing the banks to provide ...
JoaoBotelho's user avatar
  • 2,155
7 votes
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how is new money actually introduced in the United States?

The Treasury auction process is described here: Treasury Direct Bidders can either enter competitive or non-competitive bids. Non-competitive bids are limited in size; the price is set by the ...
Brian Romanchuk's user avatar
7 votes
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M2-M1: what's left in the delta?

No, term deposits aren’t affected, it’s a change reflecting how often transfers can be made from savings accounts, which changed last April. Per their announcements page: As announced on December 17, ...
dismalscience's user avatar
6 votes
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Who owns the federal reserve?

The Federal Reserve is a system, consisting of the reserve banks, which are "owned" (in a limited fashion) by their member banks (members select the leadership of the reserve banks), and the Federal ...
dismalscience's user avatar
6 votes

Is the Federal Reserve issuing money in a fair way?

No, because monetary policy is known to increase inequality. In effect, evidence indicates that monetary policy has contributed toward higher inequality. Therefore, the Fed is not being very ...
luchonacho's user avatar
  • 8,591
6 votes
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Did Capitalism and Adam Smith Support a Central Bank?

Does Adam Smith ... support a Central Bank/Federal Reserve? Adam Smith was firmly in favor of central banking (although not necessarily in the same way as understood today). In Chapter 3 Book 4 of ...
1muflon1's user avatar
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6 votes
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Why didn't M1 grow much during 1970s inflation?

Inflation does not necessarily depend on M1 but broader monetary aggregates. Standard monetary aggregate in inflation research is M2, M1 is rarely used and it is irrelevant here because it does not ...
1muflon1's user avatar
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5 votes

How does the Federal Reserve remove money from circulation?

One of the Federal Reserve's (the Fed) primary policy tools is the Federal Open Market Committee (FOMC). Through open market operations the Fed can buy or sell securities on a secondary market. By ...
chris759's user avatar
5 votes
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How does the Federal Reserve unwind the asset purchasing scheme announced in response to the 2020 Coronavirus Pandemic?

The unwind depends upon what the central bank did. If the central bank did a repurchase agreement (“repo”) or lent against assets for a fixed time, the agreement automatically unwinds at the term of ...
Brian Romanchuk's user avatar
5 votes
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What is the purpose of the Treasury issuing bonds?

There are some semantic issues here. A more careful statement of the MMT position is that there is no economic reason for the Treasury to issue bonds. However, there is a self-imposed institutional ...
Brian Romanchuk's user avatar
5 votes
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Is it true that the Federal Reserve is not federal and has no reserves?

Is it true that the Federal Reserve is not Federal and has no reserves? Both claims are blatantly false. On Reserves Fed literally has power to create new reserves for other banks or for its own ...
1muflon1's user avatar
  • 57k
4 votes
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Why did the Fed raise interest rates between 2004 and 2006?

Good question! It seems that one of the reasons was precisely that inflation did not respond. They kept raising interest rates, hoping it would respond at some point. In fact, nominal interest ...
Fix.B.'s user avatar
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4 votes
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What is the effect of Quantitative Easing on the US budget deficit?

No, the deficit is not getting larger due to QE. Certainly not directly, because that's impossible, and also not indirectly, either. Quantitative easing is a policy of purchasing government bonds ...
dismalscience's user avatar
4 votes

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

There are several issues here: There are banks offering close to $1.5\%$, some well-known such as Goldman Sachs and American Express Most banks currently have excess reserves deposited in the ...
Henry's user avatar
  • 4,765
4 votes

How does national debt work?

Your understanding is wrong. Nations accrue debt by selling bonds. They pay interest on those bonds to the bond-holders.
410 gone's user avatar
  • 8,168
4 votes
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Why did the Dollar weaken after interest rate increase?

It is correct that higher rates should strengthen the dollar... IF the increase in interest rates is unexpected and all else equals. I haven't followed this particular rate hike, but here is a ...
M3RS's user avatar
  • 1,087
4 votes

Why do interest rates move together?

This is quite a diverse and complicated question, given there are so many different markets with so many different types of interest rates. I'll try to break it down into 3 main sections (for layman, ...
AKdemy's user avatar
  • 4,122
4 votes

When the Central Bank sells a bond, where does the money go ultimately?

Federal reserve, has no limit on how much money they can print. Thus, when central banks buy bonds , new money flows into the system. Also, when federal reserve sells the bond , the money is taken ...
nsivakr's user avatar
  • 177
4 votes
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When the Central Bank sells a bond, where does the money go ultimately?

Firstly, the central bank doesn't issue bonds. The treasury (in the executive government) does, as a way to finance government expenditure, and make real investments in the economy. In modern ...
ahorn's user avatar
  • 1,230
4 votes
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How does the federal funds rate compare to the federal discount rate?

You are right the two series closely follow each other for the reasons you mention. During quite some time the discount rate actually used to be a ceiling for a funds rate. This is precisely, because ...
1muflon1's user avatar
  • 57k
4 votes

What is the purpose of the Treasury issuing bonds?

I agree with @BrianRomanchuk +1 answer which is written in the context of modern monetary theory (MMT), but an important thing to note here is that MMT is not widely accepted monetary theory in ...
1muflon1's user avatar
  • 57k
4 votes
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What is the purpose of taxes if central banks can fund deficit spending?

Because Fed or any central bank cannot fund 100% of a budget without any adverse effect. I do not know where you heard such argument but it is blatantly false. First, it is virtually unanimously ...
1muflon1's user avatar
  • 57k
4 votes
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Treasury yield data

When first issued, treasuries can be bought directly from the US treasury via auctions, but resulting data on yields is relatively infrequent and only gives a snapshot at issuance, which is then ...
BrsG's user avatar
  • 1,652
4 votes
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Reserve Requirements for Banks

US reserve requirements were abolished in 2020 (see Fed) so there aren’t any anymore. In the past they were applied on a institution level. So they would apply to branch separately only if the branch ...
1muflon1's user avatar
  • 57k
4 votes
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How the fed influences treasury rates through open market operations

For Option 1 (lowering yield) the procedure is not described correctly in the OP. The Fed does not place bids in the market. In fact, they ask primary dealers for their offer price for a range of ...
dm63's user avatar
  • 1,313

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