Quantative bursting - a monetary policy tool

Quantative bursting - a monetary policy tool

Quantative bursting is suggested as a new monetary policy tool to address the issues that Quantative easing has created in the market.  Namely macro-economic stress on the ability to wield macro-economic tools.

Issues with quantative easing

A quantative easing policy that used printed money to 'buy-in' debt obligations from the market into an asset account of the central bank created both a change in the cash asset of the central bank and a new line item of owned debt assets.

In many cases the debt assets were obligations from the state itself to pay back coupons and initial capital.  These debt assets were created at some point in the past when cash was bought from the market by the issuance of national debt.

Monetary policy line items (post QE)

  • Cash - a numeric value that is a legacy of the requirement to deliver physical tokens such as gold, coin or paper in order to facilitate transactions.
  • Liabilities as gilts - contractual government debt that promises to repay coupons and principal at some fixed rate, time and end date (where perpetuals are not considered.)
  • Sovereign self-issued debt contracts as assets - previously created debt contracts that contain within them a promised receipt of future coupon and principal payments. Created by the central bank itself.
  • Other entity (e.g. corporate) debt contracts as assets - previously created debt contracts that contain within them a promised receipt of future coupon and principal payments.  Created by third party entities.

Quantative bursting

Quantative bursting is the change in the following line items:
  • Cash - a change that is equivalent to the value of the quantative bursting tranche.
  • Sovereign self-issued debt contracts as assets - cancellation of debt contracts both issued by and owned (as assets) by the central bank.

Comments welcome in the comments section of via email.

SJH / 2018-09-24 (initial version)
sjh.android.2@gmail.com
twitter: @stephenjhunt

Comments

Post a Comment

Popular posts from this blog

Cross stimulus - a whole-economic monetary policy tool

Cross stimulus Cross stimulus is suggested as a whole-economic (as opposed to macro-economic) moneteray policy tool.  It crosses the boundaries of nation state that are typically associated with macro-economic tools to allow confidence in one nation state to stimulate economic growth and infrastructure spending in a second nation state at little or no cost to the first nation state. Monetary policy line items Cash - a numeric value that is a legacy of the requirement to deliver physical tokens such as gold, coin or paper in order to facilitate transactions. Liabilities as gilts - contractual government debt that promises to repay coupons and principal at some fixed rate, time and end date (where perpetuals are not considered.) Sovereign self-issued debt contracts as assets - previously created debt contracts that contain within them a promised receipt of future coupon and principal payments. Created by the central bank itself. Other entity (e.g. corporate) debt co...
Read more