QE is an unserious optics game and the Fed is not in control of the money supply. You have been systematically lied to. Please allow me to defend these claims in concrete, literal detail.
great article — just don’t agree that Austrian “bitcoiners” as you called them believe that the Fed is as powerful as mainstream thinks — Bob Murphy is a great example of this.
tyvm sir. I'm familiar with Bob, where has he naysayed the Fed as feckless? everything I hear from austrians hyperfocuses on the Fed as the root of all financial evil and debasement, but I'm painting in broad strokes here.
Well the Fed does “print money” in (at least) one specific way. The Fed raises interest rates by paying a bribe to anyone willing to park funds in the RRP (and they pay to bank reserves as well). This money is genuinely created out of thin air. The Fed is currently running >$100B loss yearly because of these interest rate manipulations
there's no such thing as a 'loss' for the fed. the fed loses money like a scoreboard loses points. it's an accounting fiction that will be touched on in Part 2.
all the IORB/RRP does is increase reserves in the system, which has the same impact of what this piece touches on re: the futility of dumping reserves on banks.
setting the fed funds rate has next to zero impact on collective interest rates. I mean this technically and with historical precedence and reference. this is broken down in hyperdetail in The Fed Part 4, linked here:
Not sure about that. Much of money market funds is put into the RRP, and individuals are free to withdraw these funds, plus interest, and spend them in the real economy.
the fed repo facilities are just range-setters for the FFR. they exist so it's not economically rationale for the interbank lending rate to go outside the range they'd like it to be (the FFR and MMF rates correlate closely).
so the amount of money being "printed" here if MMFs use fed facilities instead of the actual market would not be much. and that money gets sucked out of the system when MMFs use the fed's reverse repo and pay an interest rate (repo puts money into the system on an overnight basis for a loan, and reverse repo sucks it out).
this is not some huge "QE tier" amount. but yes I agree, the Fed can do small, very unsexy things like what we're talking about here that have little actual impact on the amount of money in the world (notice I gave them credit for about 3%).
if the discourse was about this kind of nuance and not zero hedge-style doompoasting that misstates what they do, I would not have felt compelled to write this piece.
great article — just don’t agree that Austrian “bitcoiners” as you called them believe that the Fed is as powerful as mainstream thinks — Bob Murphy is a great example of this.
tyvm sir. I'm familiar with Bob, where has he naysayed the Fed as feckless? everything I hear from austrians hyperfocuses on the Fed as the root of all financial evil and debasement, but I'm painting in broad strokes here.
Well the Fed does “print money” in (at least) one specific way. The Fed raises interest rates by paying a bribe to anyone willing to park funds in the RRP (and they pay to bank reserves as well). This money is genuinely created out of thin air. The Fed is currently running >$100B loss yearly because of these interest rate manipulations
there's no such thing as a 'loss' for the fed. the fed loses money like a scoreboard loses points. it's an accounting fiction that will be touched on in Part 2.
all the IORB/RRP does is increase reserves in the system, which has the same impact of what this piece touches on re: the futility of dumping reserves on banks.
setting the fed funds rate has next to zero impact on collective interest rates. I mean this technically and with historical precedence and reference. this is broken down in hyperdetail in The Fed Part 4, linked here:
https://backthebunny.substack.com/p/the-fed-part-4-the-federal-reserve
Not sure about that. Much of money market funds is put into the RRP, and individuals are free to withdraw these funds, plus interest, and spend them in the real economy.
the fed repo facilities are just range-setters for the FFR. they exist so it's not economically rationale for the interbank lending rate to go outside the range they'd like it to be (the FFR and MMF rates correlate closely).
so the amount of money being "printed" here if MMFs use fed facilities instead of the actual market would not be much. and that money gets sucked out of the system when MMFs use the fed's reverse repo and pay an interest rate (repo puts money into the system on an overnight basis for a loan, and reverse repo sucks it out).
this is not some huge "QE tier" amount. but yes I agree, the Fed can do small, very unsexy things like what we're talking about here that have little actual impact on the amount of money in the world (notice I gave them credit for about 3%).
if the discourse was about this kind of nuance and not zero hedge-style doompoasting that misstates what they do, I would not have felt compelled to write this piece.