tag:blogger.com,1999:blog-5538185165116620726.post7300163034147987596..comments2024-03-27T00:20:00.926-07:00Comments on Understanding the Basics of Banking: Banking Example #6: QE: CB Holds Gov Debt to MaturityTom Brownhttp://www.blogger.com/profile/17654184190478330946noreply@blogger.comBlogger6125tag:blogger.com,1999:blog-5538185165116620726.post-15134403601779012782015-11-04T04:11:57.417-08:002015-11-04T04:11:57.417-08:00Cash is always a liability for the Fed, yes? So wh...Cash is always a liability for the Fed, yes? So when the Fed lends to Bank C, I understand that it has created an asset for itself. However, when Bank C withdraws the $9, there is still and outstanding liability simply because cash is a liability for the Fed...? <a href="http://www.stevenyson.com/" rel="nofollow">cpa torrance ca</a>Richard C. Lamberthttps://www.blogger.com/profile/14766504022599651016noreply@blogger.comtag:blogger.com,1999:blog-5538185165116620726.post-6857789690403000842015-03-14T02:57:42.220-07:002015-03-14T02:57:42.220-07:00This post doesn't really answer that question ...This post doesn't really answer that question directly, but reflects a thought experiment I did at the time, wherein I wondered what would happen if the CB kept purchasing and holding Treasury bonds to maturity.<a href="http://amazingebookstore.com/debt-consolidation-strategies/" rel="nofollow">Debt Consolidation Strategies</a>Anna Schaferhttps://www.blogger.com/profile/09633259957714692411noreply@blogger.comtag:blogger.com,1999:blog-5538185165116620726.post-7717509679652437362014-12-13T04:34:07.522-08:002014-12-13T04:34:07.522-08:00This post doesn't really answer that question ...This post doesn't really answer that question directly, but reflects a thought experiment I did at the time, wherein I wondered what would happen if the CB kept purchasing and holding Treasury bonds to maturity. <a href="http://www.debtasset.com" rel="nofollow">Debt Asset Limited</a>Elizabeth J. Nealhttps://www.blogger.com/profile/01824134730760179008noreply@blogger.comtag:blogger.com,1999:blog-5538185165116620726.post-12873829687481732082014-10-28T05:50:10.036-07:002014-10-28T05:50:10.036-07:00All balance sheets are initially clear (empty). Th...All balance sheets are initially clear (empty). This post was inspired by a question posed in a comment here. <a href="http://www.getsomedosh.com/how-it-works/" rel="nofollow">Get Some Dosh</a>albina N murohttps://www.blogger.com/profile/08139646674252673476noreply@blogger.comtag:blogger.com,1999:blog-5538185165116620726.post-59911351876438018622013-12-03T12:17:31.121-08:002013-12-03T12:17:31.121-08:00Hi Linda G,
Sorry, I'm not spending much tim...Hi Linda G, <br /><br />Sorry, I'm not spending much time on this blog anymore, but I'm glad you found this helpful.<br /><br />I don't think there's any exception. I don't think of the CB as the entity doing the "rolling over" ... I think of the Treasury as doing that in that they sell more bonds to pay the principal on maturing ones. That's really all I know about it! The CB doesn't specifically come into play there. Different countries have different rules, so what I'm writing here applies to the Fed which can't normally buy directly from Treasury. The Bank of Canada lives by different rules and I believe they can buy directly from their treasury.Tom Brownhttps://www.blogger.com/profile/17654184190478330946noreply@blogger.comtag:blogger.com,1999:blog-5538185165116620726.post-89137483145295198862013-12-01T12:19:40.670-08:002013-12-01T12:19:40.670-08:00Hi, Tom.
Nice work. (I've been helped by you...Hi, Tom.<br /><br />Nice work. (I've been helped by your blog considerably lately.)<br /><br />I see pretty well from your example above the basics of what were to happen if the CB held treasuries to maturity. <br /><br />Could you show a basic example of the CB "rolling over" its maturing treasuries?<br /><br />What is not clear to me is the following: would rolling over maturing treasuries on the CB's balance sheet be (or would it not be) one exception to the rule that the CB is not allowed to purchase treasuries directly from the Treasury (and thereby "monetize the debt")?<br /><br />~~~~~<br /><br />When the treasuries mature, and if the CB wishes to "roll over" the maturing treasuries, does it just follow (basically) the example you have outlined above - letting the treasuries mature, and, in that way, start over with 0 assets (essentially extinguishing the payment of reserves from the treasury, because the CB, by definition, does not hold reserves as assets) - and then, simply go about purchasing the same value of treasuries again from the private market?<br /><br />(If the above is correct, then maybe it isn't particularly meaningful to think in terms of "rolling over" maturing treasuries when thinking of the CB. If the CB balance sheet would essentially "start over" at 0 in the case of treasuries, then any further treasury purchases from that point could be thought of as starting over too, but according to the needs of monetary policy at the time... whether or not to purchase more treasuries from the private sector, and to what value - not necessarily to the same value of the maturing treasuries.)<br /><br />Or, at the point of maturity of the CBs treasury holdings, would the CB be allowed to work directly with the Treasury? Would the CB be allowed to renew its current treasury assets and, in turn, newly credit the Treasury's general account (along with renewing the same set of treasury liabilities in the Treasury's account), thereby "rolling over" the maturing treasuries in that way?<br /><br />~~~~~<br /><br />I've searched the internet for an answer about that possible exception of direct purchasing of treasuries by the CB (in the case of "rolling over" already owned maturing treasuries), but I haven't found a definitive answer.<br /><br />I was hoping you might have better luck.<br /><br />Linda GAnonymousnoreply@blogger.com