Wednesday, January 28, 2009

A new Fed record!

This is likely a FIRST for an FOMC statement (and I only say "likely" because I am not planning to sift through each and every meeting announcement since Volcker):
Voting against was Jeffrey M. Lacker, who preferred to expand the monetary base at this time by purchasing U.S. Treasury securities rather than through targeted credit programs.
Put it another way: Voting against was Jeffrey M. Lacker, who preferred to directly monetize the government debt, rather than expand the monetary base through targeted credit programs.

Rebecca Wilder


  1. I'm confused about why it might be a first. Doesn't the Fed always monetize the debt through its Open Market Operations when it expands the monetary base? Sure it buys Bills rather than Notes, but isn't that still monetizing the debt?

  2. Both (1) an increase in the volume of currency held by the non-bank public, and (2) an increase in the volume of idle, inactive, unused, excess reserves will force bank credit contraction unless offset by the expansion reserve bank credit on the Fed's balance sheet.

    Milton Friedman's monetary base [sic] is an anachronism.


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