tag:blogger.com,1999:blog-5713178645208582139.post4711069571115548150..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: Pushback on the IOER DebateDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-5713178645208582139.post-75864509757745688322012-09-01T15:21:06.853-05:002012-09-01T15:21:06.853-05:00I'm guessing I was unable to prove I am not a ...I'm guessing I was unable to prove I am not a robot ... <br /><br />(I've had trouble posting my comments)<br /><br />Ed, I misunderstood your comment, as I think you were making the same argument the NY Fed was making. The banks in aggregate can't reduce total reserves held at the Fed, but they can reduce excess reserves. In doing so, the velocity increases. Scott Sumner responded Dan Carrollhttps://www.blogger.com/profile/01263502310806035736noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-15181562477687684732012-08-13T08:06:20.037-05:002012-08-13T08:06:20.037-05:00Thanks Cardiff for the comments. Yes, this is a co...Thanks Cardiff for the comments. Yes, this is a complicated matter with a lot of moving parts. My view after our previous conversation is that we should not do IOER change by itself. I am afraid for the reasons Cardiff lines out that by itself a IOER change may be too incremental and thus costly. It would need to be part of a bigger shock and awe package, like introducing open-ended QE tied David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-46513232409936345312012-08-11T07:28:56.811-05:002012-08-11T07:28:56.811-05:00Dan,
I am talking about reserves plus excess rese...Dan,<br /><br />I am talking about reserves plus excess reserves so I am talking total reserves. Banks in aggregate can do little to change how much they hold. <br /><br />Flow5,<br /><br />One bank can make that choice, but banks in aggregate won't be able to do anything about it.Ednoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-59699499795913866952012-08-11T06:53:27.243-05:002012-08-11T06:53:27.243-05:00The banks won't continue to hold excess reserv...The banks won't continue to hold excess reserve balances. They will buy close substitutes (the MMMF's governments). I.e., just turn back the clock to the time when savers made more indirect investments (as opposed to direct investments).Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-852595100178089772012-08-10T18:20:15.918-05:002012-08-10T18:20:15.918-05:00Hi David, thanks for keeping the conversation goin...Hi David, thanks for keeping the conversation going. This is a more difficult topic than many realize, and certainly reasonable minds will disagree. <br /><br />I'll respond to Dan in full over at FTAV soon. But I'll make two quick points here. <br /><br />One is that I've been very careful to note the uncertainty of what *could* happen if IOER were to be eliminated rather than Anonymoushttps://www.blogger.com/profile/05926869732176727584noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-17264086167349178322012-08-10T17:32:59.312-05:002012-08-10T17:32:59.312-05:00I'm flattered that you posted this. Thanks.
E...I'm flattered that you posted this. Thanks.<br /><br />Ed,<br />I believe the function you are describing is related to net reserves, not gross reserves (the Fed's assets and liabilities netted out).Dan Carrollhttps://www.blogger.com/profile/01263502310806035736noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-86391179840517166102012-08-10T12:39:58.742-05:002012-08-10T12:39:58.742-05:00No matter what interest rate the Fed pays on reser...No matter what interest rate the Fed pays on reserves, the amount placed with the Fed (or kept on the bank's own books) won't change. That amount is simply a function of the Fed's balance sheet. <br /><br />The banking system as a whole cannot meaningfully reduce excess reserves. One bank's attempt at reducing the excess reserves it holds pushes it to another bank. This processEdnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-59481232656778826842012-08-10T11:08:49.258-05:002012-08-10T11:08:49.258-05:00I do not understand why the FT Alphaville folks (w...I do not understand why the FT Alphaville folks (who are terrific at their jobs) are so apoplectic about disruptions in the MMF industry. Even if all the envisioned disruptions in eliminating IOER come to pass, why is this so catastrophic? The MMF industry is broken. We need to fix it. Blowing it up is one way to do that. The parking of excess reserves at the Fed is hurting the economy so it Anonymousnoreply@blogger.com