Comments for Alt-M http://www.alt-m.org Ideas for an Alternative Monetary Future Tue, 05 May 2015 19:00:31 +0000 hourly 1 http://wordpress.org/?v=4.1.1 Comment on What You Should Know About Free Banking History by What You Should Know About Free Banking History – Alt-M « Economics Info http://www.alt-m.org/2015/04/28/what-you-should-know-about-free-banking-history/#comment-15344 Tue, 05 May 2015 19:00:31 +0000 http://www.alt-m.org/?p=7719#comment-15344 […] Source […]

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Comment on What You Should Know About Free Banking History by Some Links http://www.alt-m.org/2015/04/28/what-you-should-know-about-free-banking-history/#comment-15343 Tue, 05 May 2015 12:45:27 +0000 http://www.alt-m.org/?p=7719#comment-15343 […] My colleague Larry White summarizes, in this splendid essay at Alt-M, what you should know about the….  Here’s Larry’s conclusion: […]

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Comment on None of the Fed’s Business by Juan Castaneda http://www.alt-m.org/2015/04/30/none-of-the-feds-business/#comment-15342 Mon, 04 May 2015 21:12:00 +0000 http://www.alt-m.org/?p=7879#comment-15342 Very good post on the dilemma facing the Fed, but not only, in the quarters (if not years) to come.

As to “The defects are partly traceable to policies–including some of the Fed’s own–that discourage banks from making certain kinds of worthwhile loans, while encouraging them to hold massive excess reserves.”, George wouldn’t you attribute a significant offsetting factor to broad money growth to the implementation of the Basel III tighter capital and liquidity regulations? In 2008 and 2009, on the one hand, central banks were injecting extraordinary liquidity into money markets and, on the other, regulators were announcing a calendar to force banks to adopt tighter capital to assets ratios? How could banks comply with it, if not by shrinking their balance sheets as indeed happened in quite many EU countries? The contractionary effects in terms of money growth was somehow predictable, even at the time.

As to the Fed’s policy to pay an interest on banks’ reserves, I agree it is not advisable; however the ECB started to charge a negative rate on banks’ reserves in the eurozone a year ago (https://www.ecb.europa.eu/press/pr/date/2014/html/pr140605_3.en.html ) and as far as I remember the picture didn’t change that much and broad money indicators didn’t grow much if at all, at least until the announcement of open and systematic QE policies in early 2015. It seems that in times of high uncertainty and tighter regulations banks rather deposit their funds in ‘their bank’ rather than in risky assets (public bonds included).

Excellent post!

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Comment on What You Should Know About Free Banking History by Federal Reserve Easy-Money Policies: Impoverishing Savers and Endangering Investors | International Liberty http://www.alt-m.org/2015/04/28/what-you-should-know-about-free-banking-history/#comment-15341 Mon, 04 May 2015 18:21:37 +0000 http://www.alt-m.org/?p=7719#comment-15341 […] Larry White has a must-read historical review of what happened before governments monopolized currency […]

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Comment on How the Fed Ended Up Fueling a Subprime Boom by rlindwallloitte.com.au http://www.alt-m.org/2015/04/17/how-the-fed-ended-up-fueling-a-subprime-boom/#comment-15340 Mon, 04 May 2015 06:49:00 +0000 http://www.alt-m.org/?p=7771#comment-15340 George, I’m wondering if this is easily replicable for other countries, specifically Australia which itself is going through a housing boom (concentrated in two states and primarily in existing housing stock) in the midst of a collapse in commodity prices, collapse in its Terms of Trade and household net debt at c.154%. Really I would just try to replicate Figure 2 and Figure 5. Great work by the way.

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Comment on None of the Fed’s Business by Max http://www.alt-m.org/2015/04/30/none-of-the-feds-business/#comment-15339 Mon, 04 May 2015 03:16:00 +0000 http://www.alt-m.org/?p=7879#comment-15339 I should add, I think it’s monumentally stupid for the Fed to pay an above-market interest rate on reserves, as it has since 2008. But the Fed wouldn’t have to shrink its balance sheet to correct this problem. It only needs to offer reserves or reserve-like assets to non-banks.

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Comment on None of the Fed’s Business by Max http://www.alt-m.org/2015/04/30/none-of-the-feds-business/#comment-15338 Mon, 04 May 2015 02:42:00 +0000 http://www.alt-m.org/?p=7879#comment-15338 I disagree that cash displaces bank loans. What it displaces is maturity transformation. Which it seems to me is not the core competency of banks; credit analysis is.

Also, each bank holds only as much cash as it wants to. Each bank is free to decide how to fund itself, with deposits or otherwise. So your argument has to be that it’s impractical for any bank, not just some subset of banks (e.g. small ones), to fund themselves with non-deposits.

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Comment on Was Monetary Policy Loose During the Housing Boom? by TheMoneyIllusion » Short takes http://www.alt-m.org/2015/04/25/was-monetary-policy-loose-during-the-housing-boom/#comment-15337 Sun, 03 May 2015 19:32:09 +0000 http://www.alt-m.org/?p=7834#comment-15337 […]  David Beckworth says Fed policy contributed to the housing boom.  My view is that a counterfactual of 5% NGDP […]

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Comment on None of the Fed’s Business by George Selgin http://www.alt-m.org/2015/04/30/none-of-the-feds-business/#comment-15336 Sun, 03 May 2015 11:44:00 +0000 http://www.alt-m.org/?p=7879#comment-15336 It is a question of a limited variety of asset types, not a limited quantity of assets of a particular type. On bank lending, my point is that you have banks holding cash instead of loans. This is the equivalent of having the Fed take over intermediation, while limiting its assets to government securities and such.

Bank loans are a very distinct form of credit, upon which many firms depend. Non-banks are ill-equipped to supply them, and so is the Fed. Nor is it practical to fund them except using relatively stable demand deposits. Policies that encourage banks to hold high cash reserves against such deposits, which effectively are the same as ones that increase the Fed’s size relative to that of deposit-taking banks, therefore tend to constrain the supply of bank loans.

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Comment on None of the Fed’s Business by Max http://www.alt-m.org/2015/04/30/none-of-the-feds-business/#comment-15335 Sun, 03 May 2015 04:03:00 +0000 http://www.alt-m.org/?p=7879#comment-15335 Why, if banks held more cash, would bank lending be wiped out? What is stopping banks from lending?

My point about the size of the bond market is that the “limited set of assets” isn’t very limited. It’s huge.

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