Macro Musings with David Beckworth
Fed/monetary mechanism deep interview: balance sheet, rate rules, dollar system; figures traceable to the original
47:05The Real Bottleneck in the Treasury Market: It's Not Size, It's Not Enough Intermediaries
Primary dealers' balance sheets have long failed to keep pace with the growth of outstanding Treasuries. Market makers have given way to high-frequency traders, but the latter collectively retreated in March 2020 — that is the core of the Treasury liquidity problem.
50:57Every New Stablecoin Dollar Brings Only Sixty Cents of Treasury Demand
Stablecoins are not a new currency but another return of private money; they bring net new demand for the dollar and for Treasuries, but each stablecoin dollar corresponds to only about sixty cents of Treasury demand, because the money may simply have moved out of a money market fund.
55:16The Fed could shrink its balance sheet by two trillion, but nobody dares touch this constraint
The Fed's balance sheet is over six trillion, of which three trillion is reserves. Miran's menu says that by pushing down reserve demand you can shrink one to two trillion without disturbing short-end markets — provided you admit that regulation is the real constraint.
1:09:02Former Fed Vice Chair: The Biggest Obstacle to Shrinking the Balance Sheet Isn't Economics, It's Politics
Bankers don't avoid the discount window because they fear the penalty rate — they fear that two years from now Congress will publish the borrowing records and their boss will be called to testify.
57:09AI Won't Save the U.S. Fiscal Picture: Longer Lives, Bigger Deficits
The optimism around AI needs to be halved — longer lives, higher rates, low capital taxes, and an arms race are four mechanisms all pushing the fiscal position toward worse.