tag:blogger.com,1999:blog-30643134.post8555648288643760814..comments2023-12-26T01:10:26.319-05:00Comments on Accrued Interest: James Grant: Depends greatly on our own point of viewAccrued Interesthttp://www.blogger.com/profile/05096191765979971184noreply@blogger.comBlogger18125tag:blogger.com,1999:blog-30643134.post-26059975799746295652009-06-14T05:30:23.897-05:002009-06-14T05:30:23.897-05:00I didn't think that reserves held at federal r...I didn't think that reserves held at federal reserve banks are included in the Fed's M1 (and hence M2). it's unusual not to include high powered money in the M1, but it doesn't matter much. if the member banks create credit with their excess reserves, it'll THEN show up as M1, as it'll appear as a deposit - and hence show up in M1. <br /><br />for mine, this is the reason we don't need to worry much about so called money printing. the excess reserves are ammo that the banks can use to create a credit boom - but just now they are not lending, so it's not the point.Matt Johnsonhttps://www.blogger.com/profile/02230563615107959319noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-35557690181463717902009-06-14T02:15:31.217-05:002009-06-14T02:15:31.217-05:00Bernanke gave some interesting comment on inflatio...Bernanke gave some interesting comment on inflationary pressure and excess reserves in this speech (see first par. under Exit strategy).<br />http://www.federalreserve.gov/newsevents/speech/bernanke20090113a.htm<br /><br />What I wonder about is a possible mismatch in financing the Fed activities.<br /><br />Assume for a moment that circulation of money normalizes, that banks repay the Fed and that excess reserves are withdrawn because banks can now find more interesting investments than depositing them at the Fed.<br /><br />Could the deflating of the Fed's balance sheet from over 2T to let's say 1T pose a problem for the Fed?<br /><br />The Fed would need to dump most the securities it held on the market (they went from about 450 T to 1,133 T and only 200 T is financed by the US Treasury) or it would have to print money. Now the latter would undoubtly be inflationary while the first would imo be devastating for the bond market. A deviation from the private sector to risk because of a normalization of the financial markets would already be accompanied by a more risk assertive investment philosophy, thus away from the government notes and bonds and this would coincide with a Fed dropping treasuries and mortgage backed securities in the market.Romandièrehttps://www.blogger.com/profile/08846163422992501384noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-74895510759837026542009-06-13T20:02:57.805-05:002009-06-13T20:02:57.805-05:00I think what KD is saying is he believes the super...I think what KD is saying is he believes the super cabal of international central bankers are engineering an equity mkt crash to push money back into the treasuries market. <br /><br />But based on the unfolding japan-italy bond scandal it seems like the opposite is happeningIn Debt We Trusthttps://www.blogger.com/profile/05283475872936333396noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-3577259065829016982009-06-13T19:22:07.800-05:002009-06-13T19:22:07.800-05:00This rationale makes for a great trade. But, beyo...This rationale makes for a great trade. But, beyond that, you're out to lunch.<br /><br />The paragraph about balance sheet repair is the whole crux. How is Bernanke gonna TAKE that back?! There's no monetary consequence of that? So, we avoid deflation. That is good. But, what's the trade-off? Tepid economic growth? Is that it? Hell, if that's the worst that can happen.........I don't see the problem in creating bubbles! Maybe Greenspan actually got it right along!?<br /><br /><br />Personally, I think the gold-bugs are very early to the party. But, I also believe that the ramp will happen so quick.......you'll be paid for being patient and early. <br /><br />Deflation? Are you serious? I'm totally on your side if there were no politicians or federal reserve bankers. There is no effing way deflation will be allowed to stand. Forget it. I don't think you realize just how political deflation now is. It will not be allowed to stand. The fed wants inflation, its begging for inflation. That is the only clue they've won. And they won't stop until they kill everybody or win.Horace Kenthttps://www.blogger.com/profile/11089711200880505084noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-53070026592816858172009-06-13T19:18:33.009-05:002009-06-13T19:18:33.009-05:00OK. Reading it again, he's might be saying tha...OK. Reading it again, he's <i>might</i> be saying that foreign central banks can cause U.S. deflation. I don't know <i>how</i> they could do that, honestly. For what its worth, central banks aren't known for being return-oriented traders. They aren't trying to make money playing markets. There is no cabal.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-8704671734258911672009-06-13T19:13:16.784-05:002009-06-13T19:13:16.784-05:00That guy isn't making any sense. Here is what ...That guy isn't making any sense. Here is what he seems to be saying.<br /><br />1) Foreign investors buy the long bond because they expect deflation/dollar appreciation.<br /><br />2) Foreign investors can pull their dollar funding and cause US inflation/dollar depreciation.<br /><br />3) You don't want to bet against someone who can cause their bet to win.<br /><br />#1 says foreigners don't want #2 to happen. Thus #3 isn't relevant.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-5712624687921342612009-06-13T18:25:13.683-05:002009-06-13T18:25:13.683-05:00AI,
Can you provide a translation please?
http:...AI, <br /><br />Can you provide a translation please?<br /><br />http://market-ticker.denninger.net/<br />archives/1115-30y-Bond-Results-<br />Beware.htmlIn Debt We Trusthttps://www.blogger.com/profile/05283475872936333396noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-37491111581155061052009-06-13T12:40:08.455-05:002009-06-13T12:40:08.455-05:00Grant's a tattle-tale.
the transactions vel...Grant's a tattle-tale. <br /><br />the transactions velocity is dropping during a normal seasonal increase<br /><br />july should be another trading month (rates fall, prices rise) if the FED doesn't monetize alot more debtSalmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-5749875216339919492009-06-12T23:32:47.861-05:002009-06-12T23:32:47.861-05:00Brilliant...
"I can just imagine Ben Bernank...Brilliant...<br /><br />"I can just imagine Ben Bernanke sitting at home throwing up his hands yelling at his TV. "EXACTLY!!" The idea is to prevent the Great Depression right?"<br /><br />It's like saying after you win a game of basketball, "You didn't miss the basket at the buzzer like we did when we lost last week!" <br /><br />Well durr.. You play to WIN THE GAME!Unknownhttps://www.blogger.com/profile/04685088896131523398noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-68151825183836909142009-06-12T15:08:31.905-05:002009-06-12T15:08:31.905-05:00Okay that is what I thought. Thanks for answering...Okay that is what I thought. Thanks for answering my question. <br /><br />Is that not the crux of the inflation argument? <br /><br />Also, really liked your smack down week postsAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-58533738317033502112009-06-12T14:58:04.405-05:002009-06-12T14:58:04.405-05:00In terms of inflation? I'd say no. It wouldn&#...In terms of inflation? I'd say no. It wouldn't matter at all.<br /><br />But it does reduce the marginal supply of Treasuries, so would have a downward impact on yields, all else being equal.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-60046589107611696152009-06-12T14:50:48.600-05:002009-06-12T14:50:48.600-05:00right..but if that primary dealer does not lend th...right..but if that primary dealer does not lend that money out and it puts it back in reserves..does it matter?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-54009700202860778662009-06-12T14:31:53.450-05:002009-06-12T14:31:53.450-05:00If the Fed buys bonds from a primary dealer, they ...If the Fed buys bonds from a primary dealer, they credit the dealer's account, and take delivery of the bonds. This is, in effect, printing money since the "credit" comes out of thin air.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-29081301053323557582009-06-12T13:53:09.358-05:002009-06-12T13:53:09.358-05:00Despite having the word bank in its name, the Fede...Despite having the word bank in its name, the Federal Reserve Bank is not a bank. It takes deposits but usually, the deposits are not voluntary; banks hold money at the Fed because they are legally required to.<br /><br />The Federal Reserve Bank makes loans, but it is not lending from deposits, it is creating new deposits while adding matching assets on the other side of its balance sheet.<br /><br />In the same way, when it buys Treasuries, it creates new deposits while adding the Treasuries as assets on its balance sheet.<br /><br />Note: Buying Treasuries is routine business for the Fed, the Fed bids at each Treasury auction for securities to hold on its balance sheet; I am not sure why every makes such a fuss about it, especially the tiny amounts that are currently authorized.Advant Guardhttps://www.blogger.com/profile/13724697741711826082noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-64930801800786721022009-06-12T13:40:17.021-05:002009-06-12T13:40:17.021-05:00Sorry about the typo's
Nice post..
I had a que...Sorry about the typo's<br />Nice post..<br />I had a question on the fed purchasing long bonds (10 , 30 year bonds). How does that work via the printing press mechanism?<br />So let us say the treasury sells 10, 30 years and the fed buys it. It does not make much sense to me as it seems like a transaction where in I sell you something and then my father buys it back.<br />Also, lets assume they only buy in the secondary market. They buy long bonds from the primary dealers who because of the excess reserve mechanism just park it back in the fed.<br />Is this right?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-9534788762841185672009-06-12T13:35:27.469-05:002009-06-12T13:35:27.469-05:00Nice post..
I had a question on the fed purchasing...Nice post..<br />I had a question on the fed purchasing long bonds (10 , 30 year bonds). How does that work via the printing press mechanism? <br />So let us the treasury sells 10, 30 years and the fed buys it. It does not make much sense to me as it seems like a transaction where I sell you something and then my father buys it back. <br />Also, lets see they only buy in the secondary market. They buy long bonds from the primary dealers who because of the excess reserve mechanism just park it back in the fed. <br />Is this right?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-33666235839969581312009-06-12T12:09:24.695-05:002009-06-12T12:09:24.695-05:00Depends on your point of view. If the Fed buys an ...Depends on your point of view. If the Fed buys an asset and its, in fact, worthless, then the Fed just printed money, right?<br /><br />If they buy an asset and its pays off, then there is no net impact on money.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-12628304269758558322009-06-12T09:59:48.540-05:002009-06-12T09:59:48.540-05:00Why would it matter if a security the Fed held end...Why would it matter if a security the Fed held ended up being worthless?Andrewhttps://www.blogger.com/profile/04684457897219598798noreply@blogger.com