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Articles by James L. Caton
Last June, the FRED Blog identified something that has emerged in discussions I have had with other macroeconomists: the standard macroeconomics textbook no longer adequately explains monetary policy at the Federal Reserve. Before the crisis in t …
The Federal Reserve is subsidizing the Treasury. The apparent trouble in overnight markets appears to have provided an excuse to quietly reengage in the now decade-old program of support.
In the first stage, it removes a significant amount of base money from circulation by paying interest on excess reserves. In the second stage, it manipulates other accounts at the Federal Reserve that influence the quantity of base money in circulation.
The greater the unwinding of the balance sheet, the greater will be the difficulty of servicing federal debt. This problem is on the horizon. It will be met by a combination of dollar devaluation, reduction of the budget, or default.
It is the perfect time for Powell to set right the financial sector and establish a return to normalcy.
Money creation was far from excessive in the 1920s. More significant factors leading to the Great Depression include the monetary contraction that began in 1929 and the French repatriation of gold that started in 1927.