hi thanks for doing these videos. I did not quite understand what are the treasury bills that banks sell to the Fed to increase money supply? Has the bank previously bought the bills? Does the bank pay an interest for the money obtained? thanks Antonio
How did the institutions that sold the Securities to the Fed, get the securities they sold? They obviously had to buy them first, before selling them to the Fed. What did the institutions that sold the securities to the Fed use in order to buy the securities from the Treasury and other government agencies? They either used their existing "loanable" capital, in which case, they did not need the Fed's OMO to supply them with "loanable funds". Or, they created a balance sheet entry as payment for the securities, in which case, they created a balance sheet liability, which was backed by the purchased security. This would mean that the institutions that sold the securities to the Fed would have to use the proceeds to clear the liability of their books. (From thin air, back to thin air.) Of course, this is all predicated upon the false assertion that banks lend from their reserves and as documented by both the Fed and the BoE, they do not. In any case, there is no factual basis supporting the theory that the Fed's Open Market Operations either increases or decreases the usable money supply.
This only explains what Fed does not the OMO itself. I mean on which basis banks buy or sell the bonds from/to the fed, and which banks get to make it?
More or less accurate explanation up until 1:26. No bank has ever loaned out any reserve, not for going back at least a 100 years. The non-bank entities can’t hold reserves. You need a reserve account for the with the central bank (I.e the FED). Banks create deposits when making loans, it’s not coming out of anyone’s bank account or bank reserves. The reserves are for inter bank settlements, e.g when a fresh mortgage is wired to the seller who happens to have an account with a different bank.
By increasing the money supply and incentivising the granting of more loans, ask yourself who would be receiving these loans. By definition, they would be people the banks would otherwise have rejected as the risk was assessed to be too high. So the Federal Reserve's interventions meant that lending standards were essentially being lowered. This hit the fan when many of these people defaulted on loans that they should never have been granted to begin with. But that's only part of the story (e.g., one could argue the low rates disincentivised saving and pushed people into dubious investments).
Thanks for explanation. The monetary system should afford every citizen nothing less than a middle-class standard of living. My video - poverty eradication worldwide/michael samuel - can be viewed on youtube.
This information is outdated. Please take down this video. Lowering the fed funds rate does not increase the money supply since reserves do not have any effect on the amount of loans that banks make. Please see the "credit theory of money" wiki
This has made more sense than a 2 hour lecture
Like actually tho
It’s true
I agree with you !
God bless you all what you do for dummies like me!
Please don't stop making videos.
I love your videos! Thank you for putting quality material on your platform.
the pictures helped, I don't like words
Fabulous... Cleared all my doubts and very to the point video.... Amazing keep it up
Thankyou so much for making this concept so easy
Neat explanation.. Was very useful
this is incredible
hi thanks for doing these videos. I did not quite understand what are the treasury bills that banks sell to the Fed to increase money supply? Has the bank previously bought the bills? Does the bank pay an interest for the money obtained? thanks Antonio
Thank you!
Amazing. Thanks a ton
How did the institutions that sold the Securities to the Fed, get the securities they sold? They obviously had to buy them first, before selling them to the Fed. What did the institutions that sold the securities to the Fed use in order to buy the securities from the Treasury and other government agencies? They either used their existing "loanable" capital, in which case, they did not need the Fed's OMO to supply them with "loanable funds". Or, they created a balance sheet entry as payment for the securities, in which case, they created a balance sheet liability, which was backed by the purchased security. This would mean that the institutions that sold the securities to the Fed would have to use the proceeds to clear the liability of their books. (From thin air, back to thin air.) Of course, this is all predicated upon the false assertion that banks lend from their reserves and as documented by both the Fed and the BoE, they do not. In any case, there is no factual basis supporting the theory that the Fed's Open Market Operations either increases or decreases the usable money supply.
This only explains what Fed does not the OMO itself. I mean on which basis banks buy or sell the bonds from/to the fed, and which banks get to make it?
Just a question, What happens if banks don't want to sell/buy it's T-Bils to The Fed?
Love from India❤️❤️🙏🙏
Any idea what Libor is? (green bar graph)? or was this just a typo
Thank you was to clear
Thank you so much that was really helpful!
Thanks!
am I wrong? I thought at 0:37 this is called the discount rate
More or less accurate explanation up until 1:26. No bank has ever loaned out any reserve, not for going back at least a 100 years. The non-bank entities can’t hold reserves. You need a reserve account for the with the central bank (I.e the FED). Banks create deposits when making loans, it’s not coming out of anyone’s bank account or bank reserves. The reserves are for inter bank settlements, e.g when a fresh mortgage is wired to the seller who happens to have an account with a different bank.
Thank jesus
1:09 isn't there a big argument that banks cannot lend reserves though? Steve Keen etc.?
think it means reserves as money it can loan after the change in interest rate, not the unloanable kind that prevents the bank from failing
Federal Reserves played a major role in causing the 2008 recession
Please explain, if you can.
Yeah true, by reducing the interest rate to 1%
By increasing the money supply and incentivising the granting of more loans, ask yourself who would be receiving these loans. By definition, they would be people the banks would otherwise have rejected as the risk was assessed to be too high. So the Federal Reserve's interventions meant that lending standards were essentially being lowered. This hit the fan when many of these people defaulted on loans that they should never have been granted to begin with. But that's only part of the story (e.g., one could argue the low rates disincentivised saving and pushed people into dubious investments).
money printer go burrrrrr
Volume very very low
1st up in this beach
This view of money creation is outdated.
Higher reserves do not lead to more loans. What increases the number of loans is the demand for new loans.
Thanks for explanation. The monetary system should afford every citizen nothing less than a middle-class standard of living. My video - poverty eradication worldwide/michael samuel - can be viewed on youtube.
okay
If the bare minimum was middle class wouldn’t that make it lower-class.?
This information is outdated. Please take down this video. Lowering the fed funds rate does not increase the money supply since reserves do not have any effect on the amount of loans that banks make. Please see the "credit theory of money" wiki
OMO is still in the Fed's toolkit, however, we agree that there are newer tools. We cover those here: ua-cam.com/video/dTivWJvGYtI/v-deo.html
Thank you 🎉