This LSE talk is all about reserves held by the British Treasury—the Bank of England being nationalized.
Doesn’t this structural difference (versus Fed reserves) substantially/significantly color “the importance of central bank reserves,” if not their very nature?
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I deem the concept of the consolidated Treasury/CB a glib way to cover up what is (at the very least arguably) a substantive structural difference between US central banking and nationalized central banks. That said, I have learned to live with what I perceive as conceptual MMT finesses. Some misconceptions are contagiously convenient, rendering long-term nit-picking resistance exhausting, ostracizing, even futile.
Recently, in upholding the novel funding of the CFPB, the Supreme Court presumptively (i.e. without discussion) announced that “the combined earnings of the Federal Reserve System” were a “specified source of public money”, “drawn from the Treasury.” See 22-448 Consumer Financial Protection Bureau v. Community Financial Services Assn. of America, Ltd. (05/16/2024) (supremecourt.gov). In other parts, the majority opinion awkwardly hinted that this might not be not exactly true, citing as analogously expansive such exceptions as the original authorizations for fee-based funding of Customs and of US mail by private clients.
I concur with the decision, but (IMHO) to be rigorous I would affirm a ground not contemplated in the decision, but better covered by these analogies, construing the Fed’s member banks as clients for which the CFPB provides a service necessary in the public interest. This is how the OCC and FDIC are funded. The new nuance is that the CFPB’s financial cap is set per a very much fluffier formula, intended to avoid the pitfalls of capture that have plagued those agencies—especially the OCC.
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Intellectually consolidating the Central Bank and Treasury simply glibly removes their mutual claims on each other from the financial analysis. This finesse makes it obvious simple to claim, e.g., that the Congress sets the spend, tax, and credit policies of the United States;…etc.
I’m all for consolidating the Fed and the Treasury--actually.
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I propose one further amendment, to the phrase “mutual claims.” Third parties (the public demand for cash, the law requiring the Fed to ordinarily purchase Treasuries on the secondary market, …) muddy the monetary policy and mutual claims picture, as I perceive them. Perhaps you perceive the two entities as consolidated in a de facto sense? Or that a consolidation is merely a valid accounting artifice/perspective? (I don’t think the regular returns of Fed profits to the Treasury renders the entities de facto consolidated/governmental, though that goes a long way in that direction.)
If the Fed’s balance sheet were an authentic component of the federal government’s balance sheet, I would not quarrel with you. And adopting that position what I mean by yielding to MMT’s prevalent perspectives. If the Supreme Court can play along, I can (and maybe I am bound) to play along.
Intellectually consolidating the Central Bank and Treasury simply glibly removes their mutual complex claims on each other from the financial analysis. This finesse makes it obvious simple to claim, e.g., that the Congress sets the spend, tax, and credit policies of the United States;…etc.
I’m all for consolidating the Fed and the Treasury--actually.
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