Re: Zero debt and Monetary Policy

[Greg Nowell <GN842@xxxxxxxxxxxxxxxxx>]

It's fairly simple.  The Fed can open "deposit accounts"
with banks and deposit in them or withdraw from them
depending on the liquidity goals.  If it doesn't want to
appear to be favoring a few banks, it can make these
deposits based on capital (or other) ratios across the
full spectrum of the banking system.

Or it can work like the B of E, and discount commercial
paper.  -gn.



Max Sawicky wrote:

> And Part B of this question concerns not zero
> debt, but negative debt:
>
> suppose the Gov owns 30% of GDP worth of private
> sector financial assets?
>
> This is figured into the baseline projections once
> the debt is either eliminated altogether, or reduced
> to its irreducible minimum (since there will still
> be some types of non-tradable government bonds out
> there, as well as some who will not sell at prices
> the Gov is willing to pay).
>
> mbs
>
> How would monetary policy be conducted in the unlikely
> event that the debt is eliminated?

--
Gregory P. Nowell
Associate Professor
Department of Political Science, Milne 100
State University of New York
135 Western Ave.
Albany, New York 12222

Fax 518-442-5298