New answers tagged

0

Well, the ECB has given it [re]consideration... by excluding repos from their M3 starting in August 2012. From a monetary analysis perspective, it should be checked, then, whether any of the liabilities issued by the shadow banking system substitute traditional bank deposits – that is, whether they are comparable, say, with the bank deposits ...


0

I will add this as answer: Your comment "If you put your money into a Commercial bank, the "new" money being produced is the deposit account." That's not how banks increase the money supply. They increase the money supply when they issue a loan. They do not require reserves to do this. Even in times when reserve requirement is 10%, the banks can create, ...


0

To counter Frank's argument that "any exchangeable commodity is in fact money"... even the economists of shadow banking (Pozsar, 2014) don't hold that view: Money is usually defined from a functional perspective as a “unit of account, store of value and medium of exchange.” However, this definition does not take into account the quintessential attribute ...


0

A repurchase agreement (“repo”) is used by investors to effectively borrow against their portfolio, which can then be used to finance other positions. For the “borrower,” it is the economic equivalent of a loan. A loan is a liability, and money is an asset. For the “lender” it is a short-term asset. It can be an asset in a money market fund, and money ...


1

No or not necessarily because you can't know if the actor will save income or pay down debt, or spend more. The interest rate is not a single factor that determines behaviour. Nearly all of it is privately created debt money (97%), in circulation. Your 'money' is some bank's liability. You trade their IOUs and they are trusted/licensed to create them. (By ...


0

This question is directly equivalent to "If I issue a bearer bond, is this bearer bond money?" The answer is yes. It is fungible, transferable and a medium of exchange. The extent to which it is 'money' depends on the extent people trust you. Money in prisons is often packets of cigarettes. Is a brick money? Yes. By making a brick, you are making money. ...


3

No, you didn’t. All money is debt, but not all debt is money. There are two easy ways of thinking about this. The first is to think about the properties of money: unit of account, store of value, medium of exchange. Focusing on the latter two: Is the money you owe to me a good store of value? No offense, but I’d rather have cash or keep it in an insured ...


0

that is a really good question. One nuance to your answer might be found in this video. Basically, Ben Bernanke once defended the Fed's QE Program by saying, "What we did was Qualitative Easing, not Quantitative Easing." The Fed made a specific effort to buy securities like MBS after 2008. In a true QE Regime, the Fed would buy comic books if they could - ...


1

Conceptually asking when/how much new money will cause inflation has a very nuanced answer. For example, how come the Fed's QE Program from 2008-2013 hasn't lead to inflation? One reason why QE might not lead to consumer goods inflation can be found in the famous equation: MV=PQ. In other words, the money supply (M) can go up due to QE. BUT, if Velocity (V)...


0

so admittedly the question as a whole seems slightly confusing. BUT taking the first part: When the Federal Reserve wants to increase the inter-bank lending rates (The "Fed Funds" rate) -- it SELLS its own Treasury Bills through something called "Open Market Operations." By selling its T-bills, it takes money OUT of the system. Less money in the "system" ...


1

I believe that the Fed is more focused on saving the US economy from collapsing because of the effects of the coronavirus situation. When the Fed wants to loosen monetary policy and increase liquidity, it lowers the reserve requirements ratio which will make lending cheaper. Lowering the reserve requirement increases the amount of money that banks have ...


0

Reserve requirements do very little to stop bank runs, and other countries abolished them years ago. Deposit insurance is the main mechanism to stop bank runs, as well as capital requirements.


1

Let’s unpack “government non-interest bearing debt,” assuming that we are talking about government-issued notes and coins (dollar bills). (This does not include other instruments in monetary aggregates, like bank deposits.) Money is an instrument issued by the government. It pays no interest. This only leaves “debt.” Are notes and coins debt of the Federal ...


3

Investors are not paying to hold Treasury bonds (yet), nominal yields are still positive (but that could change...). All that is happening is that inflation-protected securities are guaranteeing a return less than CPI inflation. This is not that much of a mystery: there is no way to buy the CPI index (other than trading inflation derivatives). You can buy ...


0

Stock market is very complicated and there are many factors in play other than interest rates. For example, let's say the word on the street is that the Fed is going to increase interest rates by 50 basis points at its next meeting, but the Fed announces a increase of only 25 basis points. The news may actually cause stocks to increase – because assumptions ...


Top 50 recent answers are included