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The Fed controls reserves, not net financial assets. The net result from a fiscal injection and a financial composition shift is not the same at all.
by kaonashi 13y ago
The Fed controls reserves, not net financial assets. The net result from a fiscal injection and a financial composition shift is not the same at all.
- colanderman 13y agoExactly how do they differ? My impression is that the net result (depreciation of cash assets) is the same.
- deleted 13y ago[deleted]
- kaonashi 13y agoIncreasing the amount of available reserves doesn't really transmit to inflation as it's constrained by demand for loans. The loanable funds model which says that increases in reserves leads directly to increases in loans doesn't really apply under a floating-rate non-convertible currency regime.
- colanderman 13y agoInteresting, thank you.
- bad-news 13y agoYeah, direct tax is a lot more fair.