In recent days, discussions have intensified around the need for the Federal Reserve to stop paying interest on reserves (IOR) (same discussion in UK, by the way).
Exactly :-)) My only concern is that a political (monetary) restructuring - à la Ted Cruz - could be far more dysfunctional than simply continuing with an IOR.
But the immediate pain, would at the end allow the system to move forward, but the longer we play pretend-and-extend, the more severe the consequences will be once these artificial constructs start to unravel. But with no political will in sight to deal with the issue it's just something we have to accept and prepare ourselves for.
That’s true as well. But at the end of the day, if we were to go back, I’d rather see it done in a neutral, technical manner, not a political one. Monetary policy isn’t easy to grasp, especially for politicians.
If they had said they wanted to return to the old model, with reserve scarcity, and backed it up with sound technical reasoning - showing clearly how their decision wouldn’t disrupt markets - I would’ve been supportive. But when the explanation boils down to reducing the deficit by cutting payments to banks, without any consideration of the broader implications, I start to pull back. Anyway, I think we are on the same page, this is another political maneuver to gain additional votes.
endless fine tuning in avoidance of proper restructuring
Exactly :-)) My only concern is that a political (monetary) restructuring - à la Ted Cruz - could be far more dysfunctional than simply continuing with an IOR.
But the immediate pain, would at the end allow the system to move forward, but the longer we play pretend-and-extend, the more severe the consequences will be once these artificial constructs start to unravel. But with no political will in sight to deal with the issue it's just something we have to accept and prepare ourselves for.
That’s true as well. But at the end of the day, if we were to go back, I’d rather see it done in a neutral, technical manner, not a political one. Monetary policy isn’t easy to grasp, especially for politicians.
If they had said they wanted to return to the old model, with reserve scarcity, and backed it up with sound technical reasoning - showing clearly how their decision wouldn’t disrupt markets - I would’ve been supportive. But when the explanation boils down to reducing the deficit by cutting payments to banks, without any consideration of the broader implications, I start to pull back. Anyway, I think we are on the same page, this is another political maneuver to gain additional votes.