Thread by @rohangrey

This piece has four major errors.

1. Prates claims Fed only purchases Tsy securities. But that’s incorrect. The Fed buys both notes & coins from Tsy today, and then sells them onto commercial banks and others, who sell excess coins back to the Fed.

newyorkfed.org/aboutthefed/fe…

https://twitter.com/MarceloMPrates/status/1445126494402011142

2. The Fed is also legally the Tsy’s fiscal agent, and is required to accept monies deposited by the Tsy. There’s no indication that excludes coins and the law is quite clear if Tsy and Fed disagree on scope of that authority, the law sides with Tsy Sec.

rohangrey.net/files/coinage.…

3. Prates argues the Tsy cannot deposit the coin in its regular account because "Fed accounts only receive reserves". But this is a category error, reserves are a *liability* of the Fed. The coin would be an asset, like tsys and other acquired assets.

4. Prates argues that even if the Fed kept the coin, it would be "acting like a vault only, returning the coin whenever the Tsy asked for it". But so what? That's also functionally what it does with Tsy securities.

Hard to take a critique based on incorrect facts seriously.

Dunno why the screenshot was weird but this is what I was referring to.