Tooze is as usual brilliant. IMHO however, while this piece does a good job of emphasizing the instability inherent in modern sovereign debt markets, it misdiagnoses the problem. The problem is repo itself as I argue here: tandfonline.com/doi/abs/10.108… 1/

https://twitter.com/adam_tooze/status/1455930847060693005

There's no reason to believe that solutions like Duffie's central clearing proposal are a remedy for the size of the sell-offs that take place in modern repo-based sovereign debt markets (as I argued here: papers.ssrn.com/sol3/papers.cf…) 2/

[New paper] ‘Becoming a Central Bank: the development of the Bank of England’s private sector lending policies’ has just been published at EHR. Uses BoE Directors' minutes to document how the Bank transformed into a nascent central bank in the first decade of the 19th century 1/8 Contributes to three areas of the literature. Shows (i) 18th-19th c English banking was a prototype of modern banking; (ii) the Bank of England deliberately acted as a central bank in 1810; (iii) the Bank directorship itself was divided in the Bullionist controversy. 2/8

My paper, The Collateral Supply Effect on Monetary Policy, argues that (i) transformation since 1990s of financial markets increases use of repo-type collateral & (ii) limits central bank’s policy space. Presentation slides here: syntheticassets.files.wordpress.com/2021/02/sissok… 1/ Limits CB policy space (i) by super-charging standard monetary rate-setting policy, making it hard to raise interest rates & (ii) by generating collateral-driven crises that force the central bank to support long-term debt markets. 2/

Have revised my paper on collateral supply and central banking to incorporate March 2020.
March events raise significant questions abt viability of 'dealer of last resort', CCP for Treasuries, & standing repo facility proposals 1/
cc @PMehrling @dandolfa
papers.ssrn.com/sol3/papers.cf… 1. To stabilize Treasury market, over the course of 18 days, Fed had to purchase 5% of all marketable Ts outstanding: $812 billion. Nobody anticipated that 'safe' assets would require DoLR support to this extent. 2/

It’s not excessive debt, it’s excessively *safe* debt: a thread replying to @martinwolf (& @AtifRMian @ludwigstraub @profsufi)
ft.com/content/2c5ddb… 1/ IMHO “too much debt” is not the correct framing. This is the same problem as arguing that the there is a “savings glut.” As was promptly observed when the term was coined, an “investment famine” is equally correct. 2/

Pleased to announce that my review essay of @KatharinaPistor Code of Capital, "Modern legal practice as the engine of inequality," has now be accepted for publication at @DevandChg. Accepted version is here: papers.ssrn.com/sol3/papers.cf… 1/ First I summarize her argument: (i) aggressively taking advantage of state subsidies is built into the very DNA of how assets are formed, so state protections benefit creditors and owners, while their value to employees, people who have been harmed, and suppliers is minimized. 2/

The latest BIS Bulletin, , confirms my conclusion that in mid-March a fire sale of Treasuries was taking place, justmoney.org/c-sissoko-a-fi…. I question however Schrimpf, @HyunSongShin, and Sushko's description of the role played by "dealers" in markets. 1/ If claims like this are going to be made, then a specific model of the role played by dealers in markets needs to be cited. The classic model of a dealer is Treynor (1987), written back in the day when dealers were capital-constrained, unlimited liability partnerships. 2/

Thread on repo and recent movements in Treasuries. (NB repo is short for repo + derivatives collateral.) Goal is to explain what's going on in this chart: 1/ Chart shows US policy rates (Fed Funds, IoER: green), SOFR repo rate (red), Treasury yields (blue, purple, orange). Decline in T yields means people are buying Ts and price is increasing. Rise = Ts being sold. 2/

Thread on a new paper: "The collateral supply effect on monetary policy" papers.ssrn.com/sol3/papers.cf… Which explains my concerns with the proposal that the Fed adopt a standing repo facility. cc @dandolfa @GeorgeSelgin @DanielaGabor @Frances_Coppola 1/ I argue that the Fed should move slowly and make sure that it has studied very carefully all of the implications of operating in this new world of repo-based money markets before it fully embraces them. 2/

I'm pleased to announce that my macroeconomic theory paper "The nature of money in a convertible currency world" papers.ssrn.com/sol3/papers.cf… has been accepted for publication in the Review of Economic Analysis. 1/ This paper uses the tools of the search model of money literature to model banks in a novel way: banks are a way of institutionalizing in an economy the naked shorting of the unit of account. That is, banks issue "efficient" *negative* quantities of the unit of account, -M. 2/

What does MMT add to the economic discourse? (Some thoughts stimulated by this article: afr.com/wealth/persona… h/t @tymoignee)
IMHO MMT recognizes that money has network effects. As a result there is often space for the money supply to increase without causing inflation. 1/6 NB: this is *not* a point about growth rates over time. Instead of focusing on the well-established fact that when g > r, debt is sustainable, this is a point about the economy *today.* In a network effects model a single r is consistent with many levels of the money supply. 2/6

So I learned this week that some people actually believe that mainstream macroeconomists believe that "banks create money" in a way that is *substantively the same* as the claim that "banks create money" made by heterodox economists. 1/ (Given that there are raging debates *between* heterodox economists about the substance of what it means to say that "banks create money" the idea that there are no substantive differences with an outside group is hard to understand, but let's not go there.) 2/

@teasri @dandolfa @MacRoweNick @farmerrf @1954swilliamson Won't hv good internet connection for several hours (&will then have other tasks to do) so will take me a while to address those references. But knowing this literature generally am very doubtful tht they hv the implications for the role of banking in the economy that I model: 0/ @teasri @dandolfa @MacRoweNick @farmerrf @1954swilliamson Banking is the mechanism that induces the true revelation of types that makes price formation possible on neoclassical markets (i.e. Walrasian markets). Models that use Walrasian market clearing implicitly assume banking. (@MacRoweNick explains Woodford model using -ve money.) 1/

@dandolfa @MacRoweNick @farmerrf @1954swilliamson Let me try to explain my view of this argument in a long thread. Basic point: (bank) lending is a more important form of money than central bank money. CBs job is not to mess it up. 1/ @dandolfa @MacRoweNick @farmerrf @1954swilliamson Consider a bilateral matching endowment economy where each agent is endowed with one of 3 perishable goods, a, b, or c. And consumes a different good, b, c, or a. Also some agents are rich and have high endowments and some are poor and have low endowments (half as much). 2/

Thread
1/ On how repurchase agreements can cause liquidity to dry up

https://twitter.com/csissoko/status/1159614950576283648

2/ Note: I use a very loose definition of “repurchase agreements” that includes the derivatives collateral that is exchangeable for repo collateral under Master Agreemts. Since the financial crisis the shift towards repo & away from traditional interbank markets has bn pronounced

Where does one even begin to critique @JohnHCochrane's critique of MMT? The lack of introspection about the actual state of macroeconomic research is astounding. 1/

https://twitter.com/dandolfa/status/1126212602625953793

He writes: "But monetary economics is a well established field, &nature of money, tax backing of money, interaction of monetary &fiscal policy, govt budget constrts &c. is well within range that current intellectual instns debate knowledgeably." Debate, yes. But knowledgeably? 2/

Do you have any idea how aggressively macroeconomists police the boundaries of macroeconomics to prevent the introduction of a formal model with a bank-based money supply? I have been working on that for 20 years on and off. Here are five models: 1/6

https://twitter.com/Noahpinion/status/1113901857548554240

From my dissertation, rejected JME and others: Short-term credit: A monetary channel linking finance to growth 2/6 papers.ssrn.com/sol3/papers.cf…

MMT is really a lesson in the poverty of modern macroeconomics (which tbh post-crisis macroeconomists acknowledge to varying degrees, e.g. piie.com/commentary/spe…)

https://twitter.com/FTAlphaville/status/1101422360152993792

1/ Macro aggregates aren't just informative, but also misleading: "assessing how underutilised our existing resources are ... requires detailed, expert analysis from a range of industry analysts; not just statistical regressions on aggregate economic data by macroeconomists." 2/

.@M_C_Klein and @martinwolf_ don't understand what's wrong with Vollgeld and related proposals, because they aren't working with a good model of money. The claim is that the financial system "unnecessarily" and "by accident" links essential public services to private risk-taking. That's a strong claim. And it's wrong.