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Lysander72's avatar

How does this work? When the Fed lets a million dollars in notes mature, don't they get a million from the Treasury? Wouldn't this show up on the balance sheet as "cash"? Isn't cash an asset for them? Do they send the million back to the Treasury? Or does the Fed just say we're good now, forget about it?

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Rudy Havenstein's avatar

That's a great question. Where does this money go? (I can hear in the background "No, it's not money - it's just bank reserves!!!") The US Treasury? To pay thousands of overpaid DC Fed staffers huge salaries, bonuses and benefits? Does it go to money heaven? Since I'm not a PhD economist I'm not sure what the wrong answer is. Here's the WSJ's take. Note that it's written by Nick T. who basically is a Fed publicist. https://archive.ph/RL3jH

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DogEars's avatar

Perfect Friday post!

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The Rational Walk's avatar

By the St. Louis Fed’s own definition, the Fed has absolutely monetized the debt. For some reason, few reporters have noticed. From 2013: https://research.stlouisfed.org/publications/economic-synopses/2013/02/01/is-the-fed-monetizing-government-debt/

I recently finished Kelton’s “The Deficit Myth” promoting MMT. Although full blown MMT promoted by Kelton is far more expansive than the monetization we have seen so far, I’d say we are adopting much of her playbook without anyone wanting to acknowledge it.

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Rudy Havenstein's avatar

A related question I sometimes hear--which bears also on the relationship between monetary and fiscal policy, is this: By buying securities, are you "monetizing the debt"--printing money for the government to use--and will that inevitably lead to higher inflation? No, that's not what is happening, and that will not happen. Monetizing the debt means using money creation as a permanent source of financing for government spending." - Bernanke, October 1, 2012 https://www.federalreserve.gov/newsevents/speech/bernanke20121001a.htm

Now check this out https://www.reddit.com/r/RudyHavenstein/comments/vuoh9l/citadel_ben_bernanke_june_3_2009_the_federal/

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Doug Ketterling's avatar

Great stuff. Still awaiting your return to Twitter.

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Rudy Havenstein's avatar

Talk to Elon :)

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Spek's avatar

Enjoy the weekend you crazy a$$ 80million plus followers of Rudy H!

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Dennis's avatar

"I guess I will never own a legal gun in New York." my wife just asked me what's so funny,

enjoy your weekend,

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Diarmuid Roche's avatar

Great read, as always. After Boris Johnson getting his dues, hopefully there'll be a few more reckonings as the world wide shitshow gets worse. Enjoy the weekend first though!

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Bitcoin Fortress's avatar

👍👍👍

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Sybren van der Horn's avatar

Thank you Rudy. Have a good weekend.

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PamelaDrew's avatar

"I no longer have a big Twitter following - although my 81 million Substack subscribers RULE! "

Awesome.. past your window for acclimating to see the interaction & energy here is way better! :~)

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Rudy Havenstein's avatar

It's not really 81 million, but soon.

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Jul 9, 2022
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Rudy Havenstein's avatar

They do look alike.

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