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Yes there are also "genuine" things on the CB's balance sheet. But notice how small they are, except in some weird cases (like the SNB, the Swiss National Bank,

Yes there are also "genuine" things on the CB's balance sheet. But notice how small they are, except in some weird cases (like the SNB, the Swiss National Bank, which hoards a ton of equities). My overall point was that the central bank, the public pensions system and the treasury are all a part of the federal government. When they "trade" with each other and maintain separate balance sheets that really means very little. What's the large scale difference between a tbill and base money if the Fed maintains an open market operations center and guarantees to trade them in unlimited quantities (repo and reverse repo) to keep them priced 1:1 to enforce their monetary policy? I mean I know you cannot take a tbill to a drugstore, but you can trade it back to a spendable private bank account balance in an instant, and you will always be able to.

jollybean 5y ago
Yes, I think I get what you are trying to say and it's a valid point, just the words are a bit confusing. So yes - 'most of the assets that back currency is just government debt' and 'much of that debt is held not just by the Central Bank but also by other government agencies'. Which makes a good chunk of the system just a matter of accounting. But: "balance sheets that really means very little" No, it still means a lot. Both the 'internal accounting' stuff matters, and you can't forget that most TBills are not held by 'other government agencies'. Yes - the fact that the value of currency cay be 'fuzzy' is relevant, but it's not entirely fuzzy. All of that accounting matters still.
- anthony_r 5y ago
  To simplify a bit: the key difference between our thinking is that you think tbills and base money are different things. I think they're the same thing - because they are guaranteed to be always convertible from one into another, at unlimited quantities.

jollybean 5y ago

Yes, I think I get what you are trying to say and it's a valid point, just the words are a bit confusing. So yes - 'most of the assets that back currency is just government debt' and 'much of that debt is held not just by the Central Bank but also by other government agencies'. Which makes a good chunk of the system just a matter of accounting. But: "balance sheets that really means very little" No, it still means a lot. Both the 'internal accounting' stuff matters, and you can't forget that most TBills are not held by 'other government agencies'. Yes - the fact that the value of currency cay be 'fuzzy' is relevant, but it's not entirely fuzzy. All of that accounting matters still.

anthony_r 5y ago
To simplify a bit: the key difference between our thinking is that you think tbills and base money are different things. I think they're the same thing - because they are guaranteed to be always convertible from one into another, at unlimited quantities.