Thursday, August 27, 2009

Treasury sales will eventually decline



With Fed now paying interest on reserves the sale of Treasuries will eventually decline because public debt sales will not be needed for rate setting anymore.

The Treasury will still need to sell debt, however, because it is precluded from running an overdraft in its account at the Fed, even though operationally there is nothing stopping it from doing so.

Month-to-date (August) public debt sales are running below the same period in July.

Personally, I think the Treasury should stop selling Treasuries altogether because that would finally end one gigantic fallacy--that the gov't needs to sell debt to "fund" the deficit. The gov't spends by crediting bank accounts and the sale of debt has functioned only to sustain an interest rate and/or to meet an artificially imposed constraint on overdrafts.

2 comments:

googleheim said...

THANK YOU FOR DIFFERENTIATING CREDITING BANKS AND SELLING DEBT TO CHINA.

WOULD LIKE TO POINT THAT KRUGMAN FULLY EMBRACED PITBULL ECONOMICS IN HIS TODAY NYTIMES COLUMN.

HOWEVER TAMNY CAME BACK ( SEE FINANCE.YAHOO.COM ) WITH
Krugman Is 100% Wrong" About Deficits and Govt. Spending, RCM's Tamny Says

IT IS WORTH NOTING THAT TAMNY SAYS THAT CREATIVE DESTRUCTION VIA AUSTRIAN NAZI ECONOMICS WOULD AND IS TAKING CARE OF BUSINESS, AND THAT KRUGMAN'S KEYNESIAN ECONOMICS IS OF COURSE KRASS AND STIFFLING THE PRIVATE ENTERPRISE AS BAILOUTS REWARD UNPRODUCTIVE ZOMBIE BANKS.

HOWEVER YOU ONLY LEARN WITH MIKE NORMAN, THE RICHARD FEYNMAN OF MACRO ECONOMICS, THAT THE DIFFERENTIAL IS THAT THE BANKS SHOULD NOT HAVE GOTTEN THE MONEY AS MUCH AS THE MULTIPLIERS OF MONEY LIKE MEDICAID, FOOD STAMPS AND SO FORTH WHICH AMPLIFY GREATLY THE INPUT.

MIKE COVERED THIS LAST YEAR !!

Mike Norman said...

Tamny is beyond imbecilic. His comments are retarded.