The relationship between The Treasury and the Federal Reserve. Revised from original.
**CHALLENGE QUESTIONS:
1) What are the only two financial monetary transactions that directly increase aggregate demand?
2) What is the difference between Treasury selling bonds into the market, and The Fed selling bonds into the market?
3) The national debt is the liabilities of Treasury, but if we consolidate their balance sheet with The Fed, then Notes, Coins, and Reserves are also part of the national "debt". What is the difference between a Reserve Deposit paying 0.25%, and a Securities Deposit paying 0.25%?
*CLARIFICATIONS*
At 2:40, i mention that The Fed rolls-over principle and pays interest to treasury for a net zero affect. @bertiefigueres pointed out that this is not a legal requirement and the The Fed may decide to allow Treasury debt to expire as part of monetary policy during a tightening cycle. Its a good point, worth mentioning here. For more information on the Fed's rollover facility: www.newyorkfed...
*ERRORS*
At 10:46 the treasury's balance sheet does not balance. This is because I forgot to enter the real asset purchased from the defense contractor. In the example, Treasury purchases a $100 asset, which is should have been entered into the Asset side of the Treasury's balance sheet.
20 окт 2024