BONUS: George Selgin on the Fed Taper and Shrinking the Fed’s Balance Sheet
Macro Musings with David Beckworth
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The Floor System Kills the Interbank Market
The floor system effectively kills off the unsecured overnight inner bank market. It's killed the interbank fed funds market, killed the monitoring that went along. There is no first resort any more. The money market funds and the banks are all lending to the fed. Most of the stuff they lend to the fed sits as a first-resort borrower. This is not the way things should be working.
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