RE: Treasury repurchases and interest rates: query to Wray and Mossler

[Christopher Niggle <niggle@xxxxxxxxxxxxxx>]

Randy and Warren:

If I understand the chartalist arguments government deficits should
increase bank reserves and surpluses reduce bank reserves, with the
federal funds rate moving in opposite directions.  What should happen to
reserves and interest rates if the treasury retires securities with the
surpluses?  Nothing right?  The private tax payments go back into the
banking system (its reserves) as the treasury purchases the securities
before they mature on the open market, correct?

Does that imply that such operations are desirable when (if) governments
run surpluses and don't want the surpluses to contract reserves?

Chris


On Mon, 21 Feb 2000, Max Sawicky wrote:

> . . . The Times reports that with the U.S.
> repurchasing Treasury bonds "...the debt securities that remain in the
> shrinking market are expected to be much more prone to wild swings in price
> and therefore riskier to investors".
>
> It took the New York Times almost a year to discover what was obvious to
> Galbraith and myself.
>
> Paul
> >>>>>>>>>>>>>>>
>
> By all means let's have more prophesy, specifically
> in re: two questions:
>
> 1.  Why, in light of the shrinking supply of public debt,
> was the recent Treasury bond sale a "disaster"?
>
> 2.  Why won't Fannie Mae's and similar stuff become the
> new safe harbor?
>
> 3.  Why aren't banks begging me to refinance?
>
> regards,
> max
>
>