tag:blogger.com,1999:blog-5713178645208582139.post1558865256776394255..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: From a Floor System to A Corridor SystemDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5713178645208582139.post-15183861247846640012017-10-16T19:54:57.774-05:002017-10-16T19:54:57.774-05:00Suppose that, for one reason or another, the banks...Suppose that, for one reason or another, the banks holding (excess) reserves with the Fed no longer felt it was the best use of that capital, and began to flood the markets with new loans/other investment. This could happen through a policy change or other means. Wouldn't this huge surge cause massive inflation? I have to think there is serious risk here. Anonymoushttps://www.blogger.com/profile/07255596719303101770noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-17102101435217408052017-10-10T02:00:11.338-05:002017-10-10T02:00:11.338-05:00I don't think the interest payment is a big is...I don't think the interest payment is a big issue, if the FED don't create that much reserves, Treasury will yield more and that would be the same to the sovereign balance sheet.<br /><br />FED is not heading to a standard corridor system or a floor system, more like a binary corridor system, which includes one for cash (reserves) and one for shadow (collaterals).<br /><br />Reserves are Mikkohttps://twitter.com/MikkoArbiternoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-86809525825697246652017-10-09T10:50:45.492-05:002017-10-09T10:50:45.492-05:00"There's always the possibility that anot..."There's always the possibility that another recession comes along, short rates go to ZLB, and a new round of QE starts, which would further postpone any serious decision about corridors vs. floors."<br /><br />Indeed. And if the Fed sticks to its planned schedule of IOER rate increases (which it erroneously identifies with "normalization" simply because it treats a 1% George Selginhttps://www.blogger.com/profile/03106618641653835537noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-20362120695514157522017-10-09T09:45:43.156-05:002017-10-09T09:45:43.156-05:00Given the recently announced "disinvestment&q...Given the recently announced "disinvestment" policy, corridor policy is not a possibility for maybe 5 to 7 years. This depends on the future demand for US currency, in part. The Fed could sell assets, which current FOMC seems strongly opposed to. There's always the possibility that another recession comes along, short rates go to ZLB, and a new round of QE starts, which would Steve Williamsonhttps://www.blogger.com/profile/16629774961390533020noreply@blogger.com