1. Hi George,

    One point that Steve Williamson made on twitter is that the ON RRP has pretty much ended anyways. (See my chart here). So in a sense, the the Fed's present operating system has already unraveled.

    Who will bother using TNB if there is no interest rate differential to be exploited? I'm not entirely sure, but they seem intent on pressing on. If TNB did receive the Fed's approval, do you think any MMMF would bother using it?

    1. Yes, J.P.: I saw your post a moment ago–too late to take account of its implications in my own. I wonder how long it will take before the Fed stops announcing a policy rate target "range" with ON-RRP as its lower bound. I'm planning to write next about the meaningless of the Fed's target range–not just now, but from the start.

      In the meantime, we should all contemplate what it would mean to have not just banks but other financial intermediaries gain access to interest-earning Fed balances, bearing in mind that the floor system works only provided that the marginal opportunity cost of holding such balances is trivial.

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