Krugman on economy disingenuous - u.s. debt & deficits

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Forums > All Posts > Krugman on economy disingenuous

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01-15-2012, 12:32 PM

John from Las Vegas
Las Vegas, NV
Posts: 1

On Fareed Zakaria GPS Paul Krugman stated that the market isn't worried about U.S. debt based on the current inflow of money to Treasuries. As he well knows, what the market isn't worried about their money over THE INVESTMENT PERIOD to which they're committing it. The market could already view the U.S. as past the tipping point of unsustainable debt, and would still blithely invest money if they thought it was the best investment for the next six or nine months. Shame on Paul Krugman for not honoring us with an honest discussion of this critical issue. Shame on him for aspiring to sound bites instead of educating us.

01-15-2012, 02:16 PM

CARLITOS BAM-BAM
Dallas, TX
Posts: 897

If banks don't take advantage of T-bills to park their overnight deposits, they must be willing accept a non-accumulated interest tax on reserves. Refusal to purchase Treasuries results in a loss in income. That's why they will continue to purchase Treasuries despite what you inflationista/deficit-terrorists have to say.

Shame on you for not having a clue what you are talking about.

01-15-2012, 09:59 PM

CARLITOS BAM-BAM
Dallas, TX
Posts: 897

Whether it is the Treasury or the Federal Reserve, selling bonds has the same net effect of raising interest rates on the interbank/overnight/fed funds market (different words for the same thing). They withdrawal/drain excess reserves. The FED primarily buys and sells on the secondary market with repo swaps, while it acts as the Treasury's banker when "making a market" (i.e., providing bulk buying discounts for primary dealers) for new government debt issuance.

When USG issues a T-bill, net-dollar financial assets increase (with new interest incomes).
How is this borrowing? It's literally adding new dollar financial assets, not taking any away. What's really happening is it is converting some dollars in demand accounts to some dollars in savings accounts. That's one of the many reasons why there is no straight line correlation/causation between money creation and inflation. Increasing M3 does not increase the amount of dollars in the hands of those with a propensity to spend. The Reagan Administration was very clear about this.

04-29-2012, 07:53 PM

gymrat22
Charlotte, NC
Posts: 115

CARLITOS BAM-BAM Wrote: If banks don't take advantage of T-bills to park their overnight deposits, they must be willing accept a non-accumulated interest tax on reserves. Refusal to purchase Treasuries results in a loss in income. That's why they will continue to purchase Treasuries despite what you inflationista/deficit-terrorists have to say.

Shame on you for not having a clue what you are talking about.

You and I agree on a lot of things,some things we agree to disagree on.On this,we agree.LOL at your response!In this poor posters defense,the home town should have given some indication of the monitory policies he is exposed to on a daily basis.Good response,CARLITOS!

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