Peter Stella

Former Head of the IMF Central Banking Division

[Peter Stella @Stellar_Consult]

@dandolfa What Japan should do is swap floating rate JGBs for existing holdings to avoid the accounting losses when interest on reserves rise. Bernanke suggested this back on May 31, 2003. Too bad US did not do this. Could have avoided the $800 billion mark to market loss Fed made in 2022.

[Peter Stella @Stellar_Consult]

@dandolfa September 2023 BOJ balance sheet = 126% of GDP, Holdings of JGBs, 99.7 % GDP. "Equity" 2.5% of GDP. So write off all the JGBs, you get negative equity of 97.2 % of GDP. If someone were worried about that then MoF could recap BOJ with JGBs. All nets out in sovereign consolidation.

[Peter Stella @Stellar_Consult]

There was a time in the early 21st century when JPMorgan Chase's equity claim on the Fed was larger than its total deposits at the Fed ($ 2.2 billion in 2006). Since 2014, JPM's total deposits at central banks have been in the $450 - $500 billion range.

[Peter Stella @Stellar_Consult]

A central bank exchange of reserves for private or foreign assets or vice versa is both a liability management operation and an asset management operation changing not only the composition of sovereign assets and liabilities but also the size of the sovereign balance sheet

[Peter Stella @Stellar_Consult]

A central bank exchange of treasury securities for reserves or vice versa is a sovereign liability management operation pure and simple.

[Peter Stella @Stellar_Consult]

The reason "QE" and "QT" are terrible terms is that they lump two very different sovereign asset liability management operations under one rubric.

[Peter Stella @Stellar_Consult]

@dandolfa @IvanTheK This assumes the market value of the firm is less than or equal to the value of cash assets on hand. Rather unlikely. It would mean the market is placing a negative pdv on the stream of future net income.

[Peter Stella @Stellar_Consult]

@dandolfa cash assets decrease, share capital liabilities decrease, balance sheet decreases

[Peter Stella @Stellar_Consult]

https://t.co/cQyDCtZYC9

[Peter Stella @Stellar_Consult]

Some Incredible Monetarist Arithmetic. When Interpreting Modern Monetary Facts Don't Start with the Quantity Theory of Money as your Anchor. https://t.co/SL8f5LSUPM

[Peter Stella @Stellar_Consult]

Though the cost of settlement via p-o-w cryptocurrencies such as bitcoin may seem small at about 1 % of transactions value, this is roughly 100,000X more expensive than settlement in TARGET2 & other major RTGS https://t.co/XjBQXhFYDv

[Peter Stella @Stellar_Consult]

Toward changing our mental representation of the relation between conventional money measures and consumer inflation:
US M1 average annual growth rate during the 8 years prior to Paul Volcker becoming Fed Chair = 5.8 percent. During his 8 years as chair = 8.8 percent.
🧐_QTM

[St. Louis Fed Economic Research @STLFedResearch]

A new Review article from our economist @dandolfa uses a model to explain how low inflation, low interest rates, and high primary budget deficits can coexist and why it’s easier for a central bank to lower inflation than to raise it https://t.co/odHysObZ8C

[Peter Stella @Stellar_Consult]

Brazil, Chile, Peru, Israel been there tried that and lived through hyperinflation in 80s. They responded by constructing liquid domestic debt markets in 90s and 00s and now are issuing long term domestic debt in local currency. They got there the hard way & are not going back

[Peter Stella @Stellar_Consult]

Ironic to be arguing for monetary finance when $17 trillion in sov debt is trading at negative yields.

[Project Syndicate @ProSyn]

Faced with the examples of Venezuela and Zimbabwe, #MMT proponents hold up the case of Japan; but Japan has neither embraced MMT nor delivered enviable macroeconomic outcomes, writes @EconTodd. https://t.co/kFRONW0H0k

[Peter Stella @Stellar_Consult]

At the chronosynclastic-infundibulum where both Trump and Powell are right about negative rates. Lowering deposit rate into negative territory is worse than pointless while lowering lending rates below zero is a powerful signal.

[Peter Stella @Stellar_Consult]

The US Treasury has no equity in the Fed. The equity interest in each FR Bank is owned by member commercial banks in their respective district proportional to their capital. So JPM is largest shareholder in FRB NY. No change since 1913 FRA.

[AbrahamLinkedIn @Etzko]

@R_Perli @GeorgeSelgin @PeterContiBrown @PotomacRC @norbertjmichel @DanAwrey @DavidBeckworth @ProfKateJudge @MorganRicks1 @Stellar_Consult If the Fed’s portfolio of risky assets makes losses sufficient to wipe out Fed profits and Treasury’s equity tranche I’m afraid we have WAY bigger problems on our hands.

[Peter Stella @Stellar_Consult]

The Quadrillion Dollar Helium Coin
https://t.co/AliCFTtmmu

[Peter Stella @Stellar_Consult]

Using the US CPI weights to help assess the macroeconomic impact of the COVID 19 response or: "What happens to the CPI when there is no toilet paper?"
https://t.co/AliCFTtmmu