Monday, November 4, 2013

Central Bank News Link List - Nov 4, 2013: Fed in no rush to cut bond buys, top policymakers say

Here's today's Central Bank News' link list, click through if you missed the previous link list. The list comprises news about central banks that is not covered by Central Bank News. The list is updated during the day with the latest developments so readers don't miss any important news.
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1 comment:

  1. joebhedNovember 5, 2013 at 5:42 AM

    What are we doing here?
    Maintaining monetary aggregates in consort with GDP-potential?
    Maintaining the purchasing power of the currency (no inflation/deflation) ?
    Surely neither.
    The reason to stop swapping CB reserves for securities is the "gross ineffectiveness" of this policy.
    The banking system has a couple of Trillion in 'excess' reserves, meaning reserves that have no relation to bank lending, which IS an economic action that DOES contribute to changes in monetary aggregates. So, no transmission from more FED asset swaps to new bank credits, demand, employment.
    Given that the CB ineffectively and theoretically controls the money supply through interest rate targeting, with rates as near to zero as they can get, and 'guidance' indicating "more of the same" for the long term, these swaps cannot affect interest rates.
    A grossly ineffective policy mechanism is one that deserves an immediate end.
    If they just stop buying, and do not sell, there would be minimal negatives about in the economy.
    But, should the Fed decide to sell, THEN the market will re-set the price on securities.
    No prob for the Tsy's really. They sell every day.
    But those agency MBS and others will inevitably seek market value, bringing about the great re-settlement of B/S accounts.
    This is a needed process if the economy is to ever again be breathing clean air - in the sense of ending the financial crisis of the last decade.
    Thanks.

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