How I see it:
We have Covert Monetary Financing (CMF) now.
Primary dealers take up all newly-issued Treasuries, and the Fed backstops primary dealers. Ergo, the Fed is *already* directly coordinating with fiscal all day, every day. 1/2
We have Covert Monetary Financing (CMF) now.
Primary dealers take up all newly-issued Treasuries, and the Fed backstops primary dealers. Ergo, the Fed is *already* directly coordinating with fiscal all day, every day. 1/2
Circumventing primary dealers by having the central bank purchase bonds *directly* from Treasury robs PDs of some profiteering but otherwise changes nothing. Just makes it all more transparent so that the covert becomes overt. 2/2
So anyone who says we are "moving toward MMT" or whatever is missing the point entirely. MMT has always been about describing the institutional framework and the monetary operations *as they currently exist.*
Yes, we can move away from our current (opaque) system to a more transparent one, and we have offered many ways to do that (including OMF). The point is that it has been MMT all along, because MMT has been describing how the actual (monetary) system works.
Here's Greenspan explaining it-transparently!-in 1989
1) The federal government can run any deficit it likes simply by 'printing bonds'
2) The Fed is "involved in the process," standing by to ensure the bonds are all taken up
Covert financing via Treas-Fed coordination is reality
1) The federal government can run any deficit it likes simply by 'printing bonds'
2) The Fed is "involved in the process," standing by to ensure the bonds are all taken up
Covert financing via Treas-Fed coordination is reality
