Peter Stella on the Fiscal Theory of the Price Level
Macro Musings with David Beckworth
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Fed Policy and Fiscal Policy - The Importance of Fiscal Policy
In 2007 the fed was lending through repo operations twenty billion dollars all us banks were holding sixteen billion dollars at the fed. Now these days it's not what is it borrowing so we have to think of deposits at the fed as lending to the fed just like when you make a deposit the bank is lending your money on that's borrowing. The Fed went from a net lender of four billion dollars in 2007 it is now a net borrower of six trillion dollars it is paying interest on that’s 25 percent of GDP 25 percent of US debt and now the fed has to raise interest rates by 25 basis points 50 basis points 1 percent of hundred basis points that has a real fiscal impact.
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