Re: Mosler seminar/treasuries/zero bid

[Warren Mosler <mosler@xxxxxxxx>]

At 10:19 AM 3/8/97 -0500, you wrote:
>Gregoire de Nowell (ci-devant) wrote:
>>
>> Mosler reiterated recently that the govt "must" offer T-bills
>> to support the interest rate.  We had a very interesting off-line
>> discussion in which he clarified to me--I don't know if this is
>> still his position--that the "must" is a judgment based on his
>> empirical watching of what the Fed does.  I asked him about
>> why the "zero bid" should be avoided at all costs.
>>
>> To my surprise, he answered that it might be preferable to
>> allow zero bid to occur.
>
>I'm sorry: I thought the empirical evidence was that the real historic
>rate on T-bills has been zero, as close as statistical technology can
>determine.  Is this wrong?

Don't know for sure.  The Fed vores on and sets a nominal
rate, the Fed funds rate.  What happens to real rates, however
defined, is another issue.
>
>Of course that is only the interest rate to people who pay for them in
>US dollars.  People who have spent, e.g., yen for them have received a
>rather different real rate in some periods of interest.  :-)

That too is another issue.  You can't 'pay for them in yen'
exactly.  You can sell your yen for dollars, and then buy
the US bonds with the dollars.  Even if you do buy the
bonds directly from the seller vs yen, implicitly there is
a yen/dollar fx trade involved.

Warren
>
>                                  -dlj.
>
>
>

Warren B. Mosler
Director of Economic Analysis
III Finance

See:

"Soft Currency Economics"
=========================
http://inca.gate.net/~mosler/softecon.html