Wow it is almost like we go back to Capitalism from Crony-Capitalism
Federal Reserve STILL has $7 Trillion of DEBT on its books from its RESCUE of Wall Street WEALTH POOL!
A real shameful period of RESCUING THE RICHESTS and abjectly WRONG of Wall Street 2008-2024.
I believe we need a 1-2% TAX on the GROSS of gross of all wall street transactions or moving money offshore, to FORCE investing, away from money spinning day trading of Wall Street...with FEDERALLY printed money!
explain...Warren Buffett buys like $20,000 of stuff a year(company funds his life sytyle and he is fruggle)....a family of 4 buys $40,000 a year
Who pays more in a FAIR Tax?
Why isn't a TRANSACTION tax of the markets....efficient? TAX avoidance is the key. Europe has a "fair" tax system...a grinding 20-25% VAT tax. IT keeps the poor, poor. And the RICH who buy a tiny fraction of their wealth in goods...RICH!
Things like a special Carried interest tax is absurd! Even a long term capital gain lower tax is absurd...you avoid paying taxes for 10 years...Bonus...you pay a LOWER tax. Idiotic. Love the idea of a TRUST in South Dakota where Hedge Fund Guys can HIDE their wealth and AVOID taxes.
Explain under a Fair Tax...would Goldman Sachs pay anything? The RICH SAVE...the POOR PAY?
The RICHEST man in NJ runs a hedge Fund...he holds stocks/Bonds for a pico second.
EXPLAIN TO ME...how that GROWS the economy? It is just front running, money spinning. The Market is currently a scam of betting on where a stock will be in 1 picosecond. Most of the Market has little to do with INVESTING!
Unequivocally!! If I'm a trader, and I am, my returns have to be adjusted for RISK! the transfer tax on my trades or anyone's trades reduces a return on investment or trade without reducing risk.
Guy, The New York Public Finance Agency, I believe, eliminated the transfer tax in 1981. I just started a hedge fund then. When the idea of reinstating the transfer tax in 1983, The NYSE indicated it would move to NJ where there would be no transfer tax. The issue was dropped and the NYSE still conducts business at 11 Wall Street. I started my career in finance s a market maker on the CBOE in 1976. As the exchange became successful, a transfer tax on all derivative trades was discussed. The founders of the CBOE looked to move to Dallas Texas. In the end money leaves the flame post haste.
Federal TAX. Note the TAX would also HIT Money flows OUT OF THE USA!
I am DISGUSTED at the $30+ Trillion of PRINTED DEBT Wall Street was been REWARDED for the 2008 Financial Crisis. Things now ARE MUCH WORSE!
The Average Family of 4 OWES $500,000 of Federal Debt. Increasing at almost 10% A YEAR!
Hedgefund don't invest...they gamble on the money spin! We need Financial markets for INVESTING! You want a market for Gambling go to VEGAS.
A federal reserve that is there to RESCUE corrupt MAJOR BANKS...in 87, 2000, 2008,2020....is CORRUPT TO THE CORE! Debt piles up....and the WEALTH is accumulated by the FEW...while LARGE swaths of the Country RECEIVE ZERO! WE have Crony Capitalism. PERIOD!
Guy, FYI. Hedge funds invest in startups. Lot of risk they assume there. Still, I see them allocating capital...money... to private growth companies and startups. Several hedge funds are increasing late-stage private funding where enterprises are more operational with better profit opportunities. It's not unusual for a hedge fund manager to invest up to 5% of his portfolio in late-stage private companies. Just sayin!
Great explanation of the dual roles of Treasury and Fed in managing debt, thank you.
As you know I believe the great monetarization in 2020 (Money supplies all-time high in December), when paired with a slowed economy, created the imbalance that led to inflation, mainly in 2022. That's consistent with my regression study over 40 years' data, which shows a direct relationship between M2/GDP and year-over-year inflation lagged about 2 years.
If the Federal Reserve is paying more interest on reserves than it is receiving from its holdings of securities, then the deficit is recorded on the FR's books as "deferred expense" on the asset side of the balance sheet. The Treasury account at the Fed is not impacted by losses that the Fed is booking as a result of IOR > interest revenue, ceteris paribus.
At the close of each period, if the Fed's accumulated surplus is greater than a legislatively specified threshold value, then the Fed credits the Treasury's account by the difference between the accumulated surplus and the threshold value. If the Fed records a deficit in the period, the deficit is booked as an increase in the deferred expense account. The Treasury's account at the Fed is unaffected. Which is to say, that the Treasury does not absorb the Fed's losses from its IOR policy.
In terms of 2020-2021, the Fed's policy of buying municipal and state bonds addressed a market failure during that period. The monetized debt, if you will allow that term in this context, provided an orderly market for the issuance of munis and state bonds to avoid crippling the municipal and state funding during a unique event -- the pandemic shutdown that gripped the nation and prevented the flow of capital investment in the ordinary course of events. Liken it to a state of war in its impact at the state and municipal government operations.
As to Warsh, his views are all over the map. There is a level of incoherence in his views that defies definition of where his policy preferences will lie if and when his nomination for the chairmanship of the Federal Reserve System Board of Governors is confirmed by the Senate.
Your narrative implicitly treats government liabilities as the settlement asset whose valuation absorbs fiscal expectations when interest rates are pegged or otherwise non-informative. In that sense, inflation in 1951 looks less like a Phillips-curve or policy reaction story and more like a one-time revaluation of a fixed nominal settlement base under a change in expected future real claims. You don’t need a monetary policy rule to get the result, it falls straight out of a valuation identity once the settlement base is taken as exogenous. Under fixed supply and growing real activity, the default drift is deflation unless fiscal news intervenes (which seems consistent with the way output growth enters your 1951 interpretation)
I don't understand why the Fed needs a new accord to do all that you desire. The Treasury was not obligating the Fed to act as a credit allocator or support asset markets. It could just refrain from what you do not prefer on its own. The 1951 accord was an agreement to let the Fed refrain from having to do something it did not want to do. But what has the Fed been forced to do that it needs an accord from the Treasury to get out of doing?
Thanks but a new accord now (no matter of what significance) might actually normalise this practice, and every new administration might be tempted to do a new one - especially if that is the way to circumvent the existing laws and the much disputed dual-mandate (it might be expanded by a new accord …)
And I think that the analogy with the family’s decision is somewhat weak. The wife decided to get a fixed rate mortgage and the husband went to prod the bank for a lower rate - that is why FED was buying long-term bonds. Eventually that lead to higher rates but that’s “eventually. “The 10 year bonds issued at the time when Warsh was at the Fed and complaining with the policy are already repaid. And that QE didn’t lead to higher inflation. I know that printing money and higher deficits will eventually lead to higher inflation but it took a virus and 4 or 5 rounds of QE to bring it back. And yet, interest rates are not that high.
Federal debt isn't the only problem. States like Illinois and California are in huge state debt. Counties in many states, primarily Democratic run, are in debt. There is going to be pressure to federalize it all. It shouldn't happen and we ought to let governments declare bankruptcy
"By doing less, in less political areas, the Fed can retain and strengthen its independence."
Would designating certain uses of monetary instruments "political" rather not weaken the Fed? Maximum strenght would seem rather to buy or sell whatever it takes to achieve its inflation target.
And the objective of shrinking the balance sheet seems like adding a third objective as if targeting inflation to achiev stable prices and maximum employment was not hard enough as it is.
The easiest way to target inflation is to give people money when the Fed wants more inflation and to take their money when it wants to lower inflation. The main levers to increase employment include better schools, reducing labor laws, regulations and taxes. I think there are obvious reasons why a politically independent institution is denied the most powerful tools to those objectives.
In the long run, yes and of course the Fed does and shold not have those levers. But when some marekts are not clearing on account of sticky prices a bit of inflation can increase employment. Why else would central banks targer a non-zero rate?
Any new Federal Reserve Accord should be an agreement with the Congressional Budget Office, since fiscal policy is NOT made by the Secretary of the Treasury, in spite of apparent (mis)understanding since the Woodrow Wilson Administration, compounded by the FDR Administration(s).
Wow it is almost like we go back to Capitalism from Crony-Capitalism
Federal Reserve STILL has $7 Trillion of DEBT on its books from its RESCUE of Wall Street WEALTH POOL!
A real shameful period of RESCUING THE RICHESTS and abjectly WRONG of Wall Street 2008-2024.
I believe we need a 1-2% TAX on the GROSS of gross of all wall street transactions or moving money offshore, to FORCE investing, away from money spinning day trading of Wall Street...with FEDERALLY printed money!
transaction tax will not work, nor is it economically efficient. fairtax.org is
explain...Warren Buffett buys like $20,000 of stuff a year(company funds his life sytyle and he is fruggle)....a family of 4 buys $40,000 a year
Who pays more in a FAIR Tax?
Why isn't a TRANSACTION tax of the markets....efficient? TAX avoidance is the key. Europe has a "fair" tax system...a grinding 20-25% VAT tax. IT keeps the poor, poor. And the RICH who buy a tiny fraction of their wealth in goods...RICH!
Things like a special Carried interest tax is absurd! Even a long term capital gain lower tax is absurd...you avoid paying taxes for 10 years...Bonus...you pay a LOWER tax. Idiotic. Love the idea of a TRUST in South Dakota where Hedge Fund Guys can HIDE their wealth and AVOID taxes.
Explain under a Fair Tax...would Goldman Sachs pay anything? The RICH SAVE...the POOR PAY?
The RICHEST man in NJ runs a hedge Fund...he holds stocks/Bonds for a pico second.
EXPLAIN TO ME...how that GROWS the economy? It is just front running, money spinning. The Market is currently a scam of betting on where a stock will be in 1 picosecond. Most of the Market has little to do with INVESTING!
Unequivocally!! If I'm a trader, and I am, my returns have to be adjusted for RISK! the transfer tax on my trades or anyone's trades reduces a return on investment or trade without reducing risk.
Guy, The New York Public Finance Agency, I believe, eliminated the transfer tax in 1981. I just started a hedge fund then. When the idea of reinstating the transfer tax in 1983, The NYSE indicated it would move to NJ where there would be no transfer tax. The issue was dropped and the NYSE still conducts business at 11 Wall Street. I started my career in finance s a market maker on the CBOE in 1976. As the exchange became successful, a transfer tax on all derivative trades was discussed. The founders of the CBOE looked to move to Dallas Texas. In the end money leaves the flame post haste.
Federal TAX. Note the TAX would also HIT Money flows OUT OF THE USA!
I am DISGUSTED at the $30+ Trillion of PRINTED DEBT Wall Street was been REWARDED for the 2008 Financial Crisis. Things now ARE MUCH WORSE!
The Average Family of 4 OWES $500,000 of Federal Debt. Increasing at almost 10% A YEAR!
Hedgefund don't invest...they gamble on the money spin! We need Financial markets for INVESTING! You want a market for Gambling go to VEGAS.
A federal reserve that is there to RESCUE corrupt MAJOR BANKS...in 87, 2000, 2008,2020....is CORRUPT TO THE CORE! Debt piles up....and the WEALTH is accumulated by the FEW...while LARGE swaths of the Country RECEIVE ZERO! WE have Crony Capitalism. PERIOD!
Guy, FYI. Hedge funds invest in startups. Lot of risk they assume there. Still, I see them allocating capital...money... to private growth companies and startups. Several hedge funds are increasing late-stage private funding where enterprises are more operational with better profit opportunities. It's not unusual for a hedge fund manager to invest up to 5% of his portfolio in late-stage private companies. Just sayin!
Great explanation of the dual roles of Treasury and Fed in managing debt, thank you.
As you know I believe the great monetarization in 2020 (Money supplies all-time high in December), when paired with a slowed economy, created the imbalance that led to inflation, mainly in 2022. That's consistent with my regression study over 40 years' data, which shows a direct relationship between M2/GDP and year-over-year inflation lagged about 2 years.
If the Federal Reserve is paying more interest on reserves than it is receiving from its holdings of securities, then the deficit is recorded on the FR's books as "deferred expense" on the asset side of the balance sheet. The Treasury account at the Fed is not impacted by losses that the Fed is booking as a result of IOR > interest revenue, ceteris paribus.
At the close of each period, if the Fed's accumulated surplus is greater than a legislatively specified threshold value, then the Fed credits the Treasury's account by the difference between the accumulated surplus and the threshold value. If the Fed records a deficit in the period, the deficit is booked as an increase in the deferred expense account. The Treasury's account at the Fed is unaffected. Which is to say, that the Treasury does not absorb the Fed's losses from its IOR policy.
In terms of 2020-2021, the Fed's policy of buying municipal and state bonds addressed a market failure during that period. The monetized debt, if you will allow that term in this context, provided an orderly market for the issuance of munis and state bonds to avoid crippling the municipal and state funding during a unique event -- the pandemic shutdown that gripped the nation and prevented the flow of capital investment in the ordinary course of events. Liken it to a state of war in its impact at the state and municipal government operations.
As to Warsh, his views are all over the map. There is a level of incoherence in his views that defies definition of where his policy preferences will lie if and when his nomination for the chairmanship of the Federal Reserve System Board of Governors is confirmed by the Senate.
Your narrative implicitly treats government liabilities as the settlement asset whose valuation absorbs fiscal expectations when interest rates are pegged or otherwise non-informative. In that sense, inflation in 1951 looks less like a Phillips-curve or policy reaction story and more like a one-time revaluation of a fixed nominal settlement base under a change in expected future real claims. You don’t need a monetary policy rule to get the result, it falls straight out of a valuation identity once the settlement base is taken as exogenous. Under fixed supply and growing real activity, the default drift is deflation unless fiscal news intervenes (which seems consistent with the way output growth enters your 1951 interpretation)
I don't understand why the Fed needs a new accord to do all that you desire. The Treasury was not obligating the Fed to act as a credit allocator or support asset markets. It could just refrain from what you do not prefer on its own. The 1951 accord was an agreement to let the Fed refrain from having to do something it did not want to do. But what has the Fed been forced to do that it needs an accord from the Treasury to get out of doing?
Fes Balance sheet management is here as transmission from short term rates to long-end will increasing fade
Thanks but a new accord now (no matter of what significance) might actually normalise this practice, and every new administration might be tempted to do a new one - especially if that is the way to circumvent the existing laws and the much disputed dual-mandate (it might be expanded by a new accord …)
And I think that the analogy with the family’s decision is somewhat weak. The wife decided to get a fixed rate mortgage and the husband went to prod the bank for a lower rate - that is why FED was buying long-term bonds. Eventually that lead to higher rates but that’s “eventually. “The 10 year bonds issued at the time when Warsh was at the Fed and complaining with the policy are already repaid. And that QE didn’t lead to higher inflation. I know that printing money and higher deficits will eventually lead to higher inflation but it took a virus and 4 or 5 rounds of QE to bring it back. And yet, interest rates are not that high.
Federal debt isn't the only problem. States like Illinois and California are in huge state debt. Counties in many states, primarily Democratic run, are in debt. There is going to be pressure to federalize it all. It shouldn't happen and we ought to let governments declare bankruptcy
John, again you make a complex issue clear. I suspect if you were the Fed Chair you could convince the Fed governors as well.
You seem to place a considerable amount of confidence that Marsh will not be a disastrous Chair of the Board of Governors of the Federal Reserve.
Let me ask you a question: If President Donald Trump offered you that position would you accept?
"By doing less, in less political areas, the Fed can retain and strengthen its independence."
Would designating certain uses of monetary instruments "political" rather not weaken the Fed? Maximum strenght would seem rather to buy or sell whatever it takes to achieve its inflation target.
And the objective of shrinking the balance sheet seems like adding a third objective as if targeting inflation to achiev stable prices and maximum employment was not hard enough as it is.
The easiest way to target inflation is to give people money when the Fed wants more inflation and to take their money when it wants to lower inflation. The main levers to increase employment include better schools, reducing labor laws, regulations and taxes. I think there are obvious reasons why a politically independent institution is denied the most powerful tools to those objectives.
In the long run, yes and of course the Fed does and shold not have those levers. But when some marekts are not clearing on account of sticky prices a bit of inflation can increase employment. Why else would central banks targer a non-zero rate?
People really focus on policy shifts, elections, Fed speeches, geopolitics.
In systematic trading, none of it matters.
When you build on 25 years of price history, every regime, crisis, war, hike, cut, and panic is already in the data.
You just trade the system.
Any new Federal Reserve Accord should be an agreement with the Congressional Budget Office, since fiscal policy is NOT made by the Secretary of the Treasury, in spite of apparent (mis)understanding since the Woodrow Wilson Administration, compounded by the FDR Administration(s).