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Bernanke Blames Banks for Slow Recovery - While Patting Them on the Back

Series: DTB3, 3-Month Treasury Bill: Secondary Market Rate
Latest Observations:

2009-11-12 2009-11-13 2009-11-16 2009-11-17 2009-11-18
0.07% 0.06% 0.07% 0.06% 0.04%

The remuneration rate @.25% is a GROSS ERROR. Lower the rate & plug the economy, NOW. Better yet, eliminate IORs. Better yet, get the member banks out of the savings business.

If U.S. Stopped Issuing Treasuries, Would It Go Broke?

As soon as we repudiate our National debt we can let the States handle our business.

If U.S. Stopped Issuing Treasuries, Would It Go Broke?

Wilson SIU: Yes, I have no sense of etiquette. But "Try learning Warren Buffet". Why? Warren Buffet can't pick market tops & bottoms. With my basis views, I have always been able to do so. Hit the books.

Bernanke Blames Banks for Slow Recovery - While Patting Them on the Back

"Bill Gross (PIMCO Bond King), That 0% yield is not a joke. Almost all money market accounts – totaling over $4 trillion dollars, shown in Chart 1 – yield close to nothing, so close to nothing that I mistakenly did a double take when reviewing my monthly portfolio statement. “Yield on cash,” read the buried line on page 15 of the report, “.01%.”

Money Market Accounts = non-banks, shadow banks, or financial intermediaries (intermediaries between saver & borrower). I.e., the FED's technical staff is inducing disintermediation and forcing the economy to contract.

If U.S. Stopped Issuing Treasuries, Would It Go Broke?

good explanation adamson

Bill Gross: Anything But 0.01%

IORs induce non-bank (shadow bank), dis-intermediation. Non-bank's are 80% of the loan-funds market. Economists have been carefully destroying America....i.e, the Gurley-Shaw thesis, Reg Q, the DIDMCA, the Garn-St. Germain, etc.

Comparing Debt-to-GDP Ratios with Presidential Terms

Not true. GDP doesn't finance government budget deficits, the volume of savings offered in the loan-funds market does (and GDP/Savings are inconsistent with, e.g., foreign exchange reserves, etc.).

Velocity of U.S. Money Supply Is Finally Edging Up

You might as well divide GDP by rock concerts. Income velocity is a contrived (fabricated figure). It is the actual money changing hands that is of proper importance (bank debits).

If U.S. Stopped Issuing Treasuries, Would It Go Broke?

But as everyone already knows, federal deficit financing, and our government's debt management practices, are accurately reflected in our financial markets, by the rates-of-change (in the flow of funds).

I.e., the supply & demand for loan-funds, our protracted foreign trade deficits, our entitlement programs, etc., will impact inflation expectations, and the expectations of future economic activity. And it is proper that these projections are pointing to debt repudiation, and the issuance of a new currency (as France did in 1960).

If U.S. Stopped Issuing Treasuries, Would It Go Broke?

No, you are wrong. There is a difference. It should not be confused by the doomsters. In fiat system the volume of currency issued is dictated by the deficit-financing requirements of the issuing government. In a fiat system the volume of currency is not self-regulatory. In a fiat system the more money that is issued, the higher prices will rise. In a fiat system the government's credit is put in jeapordy. I.e., a fiat system eliminates currency as a medium of exchange, and leads to hyperinflation.

In a managed-currency system (our current system), the volume of currency in circulation is determined by the public's desire to hold whatever volume of currency it needs for the exchange of goods & services. This is the cash-drain factor, or the process by which the volume of currency put into circulation, or taken out of circulation, through our banking system.

I.e., the volume the money stock remains the same, but it's composition changes (e.g, currency or demand deposits), depending upon the needs of trade. The currency-deposit ratio typically rises during recessions (it was .73% in June 06 & .85% in November 09). And there is no expansion coefficient associated with an increase in the volume of currency held by the non-bank public, (it is dollar for dollar).

The volume of our money stock is determined by monetary policy objectives, but the level of currency held by the non-bank public is lawfully, and properly, left unregulated.

All currency gets into circulation, directly or indirectly, through the liquidation of time deposits, by the cashing of demand deposits. There is one exception in demand deposit creation; those rare instances when the U.S. Treasury borrows from the Federal Reserve Banks. However it cannot be said, as of time deposits, that increases in the public’s holdings of currency reflect prior commercial bank credit creation. It is more appropriate to say that expansions of currency are accompanied by concurrent expansions of reserve bank credit.

And any expansion or contraction of the monetary base [sic], is neither proof that the Fed intends to follow an expansive, nor a contractive monetary policy. Furthermore any expansion of the non-bank public’s holdings of currency merely changes the composition, (but not the total volume), of the money supply. There is a shift out of demand deposits, NOW or ATS accounts, into currency. But this shift does reduce member bank legal (required), reserves by an equal, or approximately equal, amount.

An expansion of the non-bank public’s holdings of currency will cause a MULTIPLE CONTRACTION OF BANK CREDIT and checking accounts (relative to the increase in currency outflows from the banks) ceteris paribus.

To avoid such a contraction the Fed typically offsets currency withdrawals by open market operations of the buying type (e.g., purchases of governments for the portfolios of the Reserve Banks). The reverse is true if there is a return flow of currency to the banks. Since the trend of the non-bank public’s holdings of currency is up (ever since 1930), return flows are purely seasonal and cannot therefore provide a permanent basis for bank credit and money expansion....&more

Short-Term Economic Boost from Fiscal Stimulus Outweighed by Long-Term Output Loss

GDP doesn't fund deficits, savings fund deficits. The Federal Deficit to gross savings is the correct ratio.

Still the Worst Deflation in U.S. History

IOR's induced widespread disintermediation (decline in Vt), among the non-banks (82% of the lending market - Z.1 release). Economists don't know the difference between member banks (18% of lending market), & financial intermediaries (It was Keynes's fault).

Why Does the Fed Feel Powerless to Identify Bubbles in Real Time?

gabe borenstein: Volcker did not pursue a "tight" monetary policy by any metric. Total reserves increased at a 18% annual rate of change coincident with the DIDMCA of March 31st 1980. Inflation killed itself (just as in hyperinflation). (the data was also killed by Anderson & Rasche's reconstruction).

MACRO MAN: Of course you can identify bubbles. It's mathematically impossible to miss economic projections (MVt=PT). MVt = bank debits, PT = nominal GDP.

I.e, the lag for nominal GDP varies widely, but the lags for both real growth & inflation are always exactly the same length.

Bernanke Blames Banks for Slow Recovery - While Patting Them on the Back

First point: The interest paid on excess reserves (IOR's) has induced disintermediation in the non-banks (financial intermediaries). Note: IOR's are paid for by the taxpayers (as determined by the FOMC).

The non-banks lost upwards of one trillion dollars in deposits (as evidenced by the growth in excess reserves). I.e., interest-bearing deposits at the financial intermediares were siphoned out of the non-banks (via redemptions), and siphoned out of the economy (in the form of loans and investments at the non-banks (mortgages, etc.). I.e., net debt (or velocity), has contracted (but not net new money).

Non-banks (contrary to Lord Keynes), are not in competition with member commercial banks. Savers never transfer their savings out of the banking system (unless they are hoarding currency). This applies to all investments made directly or indirectly through intermediaries.

Shifts from time/savings deposits to other deposit types within the CBs (and the transfer of the ownership of these deposits to the thrifts/non-banks), involves a shift in the form of bank liabilities (and a shift in the ownership of (existing) deposits (from savers to thrifts, et al).

The utilization of these savings by the thrifts has no effect on the volume of deposits held by the CBs, or the volume of their earnings assets. I.e., the non-banks are customers of the member, money creating, depository banks.

Second point: The BOG increased reserve-deposit ratios by increasing the volume of inter-bank deposits held in the District Reserve Banks, owned by the member banks (in the form of IORs).

I.e., the FED has followed a downward spiraling contractionary policy in the midst of a recession/depression.

Fed Reduction of Loans Term Is Beginning of Support Withdrawal - Northern Trust

There goes the balance sheet.