Oddbean new post about login | logout My January 2024 newsletter is out now: https://www.lynalden.com/january-2024-newsletter/ Main topics: -Fiscal vs monetary divergence -Why markets and the economy outperformed consensus expectations. -The feedback loop of liquidity, asset prices, and the economy.
FYI nostr verified domain expired and you're no longer verified on their domain. You don't really NEED nip 5 to verify identity, we have your pub... That's the point of keys. But you can remove it from your profile if you want. It's not doing much.
Can you explain how t-bill issuance is pro-liquidity via reverse repo reduction? I understand that as reverse repo is reduced, dollars flow into the market. But if those dollars are used to buy t-bills, doesn't that absorb the dollar flow? Thanks.
Issuing excess tbills rather than bonds allows the Treasury to pull money out of reverse repos (which is basically a void of capital outside of the financial system) and spend that money back into the financial system. If they instead issue more things, reverse repo capital can’t be used for it, so it gets sucked out of the financial system and then spent back into the system.
So, fair to say it has the same effect as money printing to finance deficit spending? Ie, the deficit spending itself is the liquidity injection but whereas normal bond issuance to finance the spending would draw dollars out of the market, these t-bill issuances are bought with dollars that were outside of the market so to speak. Thanks again, Lyn.