It bothers me when, at various times, the rate paid on IOR exceeds the 1-month t-bill, and often also the 3-month and even 6-month t-bill. This even when the curve on Ts has been upward sloping. At those times (the majority of the last 17 years), how can the payment of IOR not cost more than if there were no IOR?
In Keynesian National Income Accounting procedures, savings = investment providing there are no offsetting government surpluses or deficits. By definition this rules out all unspent savings. But all bank-held savings are frozen until their owners so decide.
Dr. Philip George's "The Riddle of Money Finally Solved" confirms this.
The proper monetary policy is the 1966 Interest Rate Adjustment Act, which tightened reserves and drove the banks out of the savings business (which doesn't reduce the size of the payment's system)>
The problem with the FED began in the late 1950's to early 1960's with the influx of Keynesian economists at the FED. The Chairman of the Board of Governors "thinks that banks actually pick up savings and pass them out the window, that they are intermediaries in the true sense of the word" Lester V. Chandler. "Should Commercial Banks Accept Savings Deposits?" Part III, Proceedings of the 1961 Conference on Savings and Residential Financing, May 11 and 12, 1961, pp. 40-48 - reprinted by permission of the United States Savings and Loan League.
Not only due banks not lend money, but all monetary savings are derived from a shift in demand deposits. I.e., loans/investments = deposits as anybody who has applied double-entry bookkeeping on a national scale should already know.
The distributed lag effect of monetary flows, the volume and velocity of money, the proxy for inflation, was textbook in C-19. Nothing's changed in 100 + years.
PS - at the very least, if the Fed wants to pay IOR above market rates, it should offer accounts to the general public.
It bothers me when, at various times, the rate paid on IOR exceeds the 1-month t-bill, and often also the 3-month and even 6-month t-bill. This even when the curve on Ts has been upward sloping. At those times (the majority of the last 17 years), how can the payment of IOR not cost more than if there were no IOR?
Savings are not synonymous with the money supply.
In Keynesian National Income Accounting procedures, savings = investment providing there are no offsetting government surpluses or deficits. By definition this rules out all unspent savings. But all bank-held savings are frozen until their owners so decide.
Dr. Philip George's "The Riddle of Money Finally Solved" confirms this.
The proper monetary policy is the 1966 Interest Rate Adjustment Act, which tightened reserves and drove the banks out of the savings business (which doesn't reduce the size of the payment's system)>
AD = M*Vt where N-gDp is a subset and proxy. N-gDp was too high by the 4th qtr. of 2020.
The problem with the FED began in the late 1950's to early 1960's with the influx of Keynesian economists at the FED. The Chairman of the Board of Governors "thinks that banks actually pick up savings and pass them out the window, that they are intermediaries in the true sense of the word" Lester V. Chandler. "Should Commercial Banks Accept Savings Deposits?" Part III, Proceedings of the 1961 Conference on Savings and Residential Financing, May 11 and 12, 1961, pp. 40-48 - reprinted by permission of the United States Savings and Loan League.
Not only due banks not lend money, but all monetary savings are derived from a shift in demand deposits. I.e., loans/investments = deposits as anybody who has applied double-entry bookkeeping on a national scale should already know.
The distributed lag effect of monetary flows, the volume and velocity of money, the proxy for inflation, was textbook in C-19. Nothing's changed in 100 + years.