I'd kindly ask if you could please explain a certain part of the Michael Howell interview from the other day.
When he and you talk of commercial banks (credit providers) increasing liquidity in the system by having their balance sheet expand by absorbing T-bills...I'm not quite clear where on their balance sheet do they go. Asset side? Don't they have to swap reserves for them, which keeps the asset side the same.
He talks of expanding the balance sheet when the banks liability side also expands by rising deposits (checks issued by the government to the depositors), but that isn't the case now like it was in 2020. Or is it, because of the government deficit?
Or is the funding for banks purchases of T-bills coming from repo markets, as Nik implied? If that's so, I still don't understand why does that expand the balance sheet of the banks? Isn't it just a swap?
Finally we have analysts who are not jumping on the stagflation train!
Way too early and not enough data to make that call. Our aim is to keep it balanced, data-driven, and always shoot straight!
I'd kindly ask if you could please explain a certain part of the Michael Howell interview from the other day.
When he and you talk of commercial banks (credit providers) increasing liquidity in the system by having their balance sheet expand by absorbing T-bills...I'm not quite clear where on their balance sheet do they go. Asset side? Don't they have to swap reserves for them, which keeps the asset side the same.
He talks of expanding the balance sheet when the banks liability side also expands by rising deposits (checks issued by the government to the depositors), but that isn't the case now like it was in 2020. Or is it, because of the government deficit?
Or is the funding for banks purchases of T-bills coming from repo markets, as Nik implied? If that's so, I still don't understand why does that expand the balance sheet of the banks? Isn't it just a swap?
MH explainer episode is live!