144 – Peter Stella on Debt, Safe Assets, and Central Bank Operations
Macro Musings with David Beckworth
00:00
The Benefits of Offloading Treasuries
Before Lehman, the Fed was selling Treasuries for Trash. The market didn't want bank reserves but wanted to get rid of their Trash collateral. In countries where they have a clear distinction between monetary policy and fiscal policy, such as Norway, the Treasury does it. But when the FOMC wants to unwind the portfolio, they're turning around by opening the vault which we call the SOMO portfolio - system open market portfolio. It's like no degrees of freedom there.
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