Trond says: The only reason to uphold a certain "buffer" of outstanding gvt. bonds then
seems for the gvt./CB to have an additional and fast economic control
instrument (through sales or purchases of same) in addition to the much more
sluggish control instrument of the gvt. budget. Gvt. bonds are not needed to
finance gvt. "deficits".
Wray: this is the only part of the comment i didn't follow. the CB
sets the overnight interest rate target. in a country like the usa
bond sales/purchases by fed or treas are used to maintain that target.
however, bonds are not needed to do so. canada and oz simply do it
by paying the target rate on reserves (and charging the target rate
plus a few bp on overdrafts). so govt bonds aren't even needed
to do what trond suggests--using monetary policy (adjusting overnight
rates) to control the economy. (i will leave aside my doubts that
this would be desirable, in any case)
otherwise i agree with trond.
(ps: note i have put hard carriage returns in this post
but i think that 25 years on into the high tech new economy
computerized and digitized world, we ought to be able to use our computers
as if they were more advanced than 19th century typewriters)
randy
Received on Thu Jan 30 21:09:27 2003
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