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Most of the Federal Reserve's balance sheet is Treasury securities. If the Treasury stops issuing those securities, then the Federal Reserve don't have anything
by sapling-ginger 4y ago
Most of the Federal Reserve's balance sheet is Treasury securities. If the Treasury stops issuing those securities, then the Federal Reserve don't have anything to buy.
Saying that the Fed can arbitrarily create and destroy money misses the point, that they then have to buy SOMETHING with those money, and there are strict rules about what they can buy, and it just happens that the Treasury controls the supply of the primary asset class that the Fed is allowed to buy. Once you clear out all the dance and ceremony, you arrive at the conclusion that the Treasury issues new money by issuing new securities.
- cyberax 4y ago> Most of the Federal Reserve's balance sheet is Treasury securities. That's true, simply because they're the most convenient way to manipulate the monetary supply. Not much else is readily available in the volumes needed. But they are not _essential_. > Saying that the Fed can arbitrarily create and destroy money misses the point, that they then have to buy SOMETHING with those money, and there are strict rules about what they can buy Sure, the invariant: "money goes out, asset goes in" holds. But they can buy quite a lot of different securities if needed. E.g. the Fed directly bought about $3T of MBS: https://www.newyorkfed.org/markets/programs-archive/large-scale-asset-purchases https://www.newyorkfed.org/markets/programs-archive/large-sc...