“A Country of Long Credits and Long Seasons”: The Federal Reserve Bank of Atlanta and the Agrarian Question

William(Bill) Barnett is an eminent econometrician andmacroeconomist.[...]

Building territorial policies to free lands for national and international corporations to produce large-scale commodities for export, called agro-extractivism is one of the components of the neoliberal agrarian question. In Brazil, in the last thirty years, the agrarian question had two phases: the Neoliberal and the post-neoliberal. These policies intensified the territorial disputes between the agribusiness corporations and the peasant, indigenous and quilombola movements. To better understand these disputes we analyze the new conflicts from the reading of Brazil agrarian and rural Brazil. Through the method of paradigmatic debate, we analyze theoretical and political references for territorial development. Conflictuality is analyzed on a national scale with emphasis on new territory: MATOPIBA, created exclusively for agribusiness, is territorialized and attracts interest from several companies and international financial capital. Another case that we analyze is the conflict between the Landless Rural Workers Movement (MST) and Del Monte Corporation in the territorial dispute in the Apodi plateau in the state of Ceará. We analyze the hegemony of Agrarian capitalism in the neoliberal and post-neoliberal phases and the actions of the peasantry to resist and advance, facing the binomial latifundio-agribusiness. With this article, we contribute to updating the readings on the Brazilian agrarian question.

This paper reassesses aspects of the scholarship of David Mitrany, who first in the 1920s and then in the late 1940s approached the ‘agrarian question’ – whether and if so how socialism is possible in a state where there is only a small manufacturing sector and therefore no significant industrial proletariat – from the perspective of countries in Central and Eastern Europe where, between the two World Wars, political parties representing small-scale agricultural producers won large numbers of votes in democratic elections. His 1951 book Marx against the peasant was his response to the failure of those parties to hold on to power, and their crushing by the Communist governments that took control from 1948 on. Mitrany showed that the populist tradition, the ideology of independent small farmers, came from similar roots to Marxism, and that Marx himself late in his life came close to endorsing it. Whether increased agricultural productivity is feasible without large-scale farming was the subject of intense debate among socialists in Europe from the 1850s onwards. It is on the agenda today in many underdeveloped countries where there are strong disagreements about the role of agriculture and rural development in development strategy.

The main goal of this study is to develop a dynamic equilibrium model of central bank swap lines that helps understand the recent observed behaviors of foreign reserves and to analyze the potential effect of the Federal Reserves foreign exchange swap lines on the determination of international reserves and exchange rates. The model focuses on the issue of moral hazard that can arise with the liquidity provision of the Federal Reserve through its swap lines with other central banks. This study argues that a standard debt contract under asymmetric information between lenders and borrowers may not work to model actual swap lines between the Federal Reserve and foreign central banks because lenders tend to accept credit risks in debt contract models. This study shows that debt contracts between the Federal Reserve and foreign central banks are inferior to swap contracts in the presence of the informational advantage of foreign central banks for local financial institutions in their jurisdictions. Although the proposed model is primarily intended to understand the contractual relation between the Federal Reserve and foreign central banks, it can also serve as a determination model for the nominal exchange rate. A policy implication of this model is that short-run and longrun channels are available through which the expectation formation of agents is affected by the behavior of international reserves and the credible long-term stance of the monetary policy.

The monetary framework developed by Karl Brunner and Allan Meltzer emphasized the interaction between the supply and demand for money and the supply and demand for credit. In a general equilibrium setting, the money market and the credit market jointly determine the short term interest rate and the price level of real assets. Open market operations change the composition of assets and, in turn, the price level of real assets and the interest rate. The effect of monetary policy on real activity depends on both the change in the interest rate and the change in the price level of real assets. The Brunner-Meltzer model therefore emphasizes the role of changes in relative prices of financial and real assets in response to changes in monetary policy. In recent years, the Federal Reserve has moved to a system that uses the interest rate on reserves as the primary tool of monetary policy. In doing so, the Federal Reserve has implicitly accepted the idea that monetary policy is entirely transmitted through the short term nominal interest rate. In this paper, I present Brunner and Meltzer's view of monetary transmission and their critique of monetary models that exclusively focus on the interest rate. In addition, I argue that the lack of evidence in support of the interest rate channel in conjunction with the change in the Federal Reserve's operating procedures presents an opportune time to revisit the Brunner-Meltzer critique.

Last week, we witnessed one of the most exciting developments in monetary policymaking since the 1930s. The Japanese central bank staged an honest-to-goodness regime shift. The Bank of Japan went beyond vague promises and cheap talk. As I will describe in more detail later, it took dramatic actions and pledged convincingly to do whatever it takes to end deflation in Japan. The theoretical reasons why this regime shift may be important are well understood by economists. Persistent deflation and anemic growth suggest that Japan continues to suffer from a shortfall of demand. But their policy interest rate is already at the zero lower bound. Furthermore, riskier, long-term rates are also very low— suggesting that unconventional policies such as large-scale asset purchases are unlikely to do much to further reduce nominal rates. As discussed by Paul Krugman, Gauti Eggertsson and Michael Woodford, and others, if unconventional monetary policy can raise expected inflation, this can push down real interest rates even though nominal rates cannot fall. 1 This, in turn, can raise aggregate demand by stimulating interest

IN a recent article in this REVIEW 2 Mr. Robert V. Rosa refers to discussions of relation of bank supervision to by E. A. Goldenweiser, G. L. Bach, and a Subcommittee of Joint Committee on Economic Report. supervision is one of intangibles of control that has attracted considerable attention. . . Although none of writers would appear to believe that supervision can practicably serve as an active arm of and credit policy, Bach does rightly stress great importance of preventing bank supervision from going counter to in periods. 3 Bank supervisory has probably accentuated deflationary tendencies at times; and at other times relaxation of supervisory standards has tended to remove restraints on bank credit expansion. However, assumption of Bach, which seems to be prevalent, that in critical periods influence of bank supervision was directly counter to policy needs mnore scrutiny than has been given to it. This article is an examination of this assurmption period of late I920'S and I930's.' XVhether bank supervisory has been in conflict with depends in part on meaning attached to term monetary poticy. If is defined as government and central bank actions designed to influence rates of interest, or certain specific rates such as Federal Reserve discount rates, it can of course be said that supervisory during at least a portion of I929-33 period was in conflict with monetary policy. However, such a narrow interpretation of misses heart of problem of relation of to business activity and degree of full employment. Manipulation of or pressure on interest rates is not only method, and past decades has not been principal method, of influencing quantity of money or circulating medium, of which by far greater part now consists of obligations of banks in form of deposits. Under fractional reserve system as it developed in United States in nineteenth century, banks tended to expand their earning assets and deposits to limit permitted by reserves, as defined by law, available to them. This practice continued after establishment of Federal Reserve System, and in fact still continues. That is to say, Federal Reserve member banks do not as a general practice maintain more (reserves in of those required by law) than are needed use as clearing balances at Federal Reserve banks. special circumstances of period from I934 to I942, when this practice was interrupted or only partially followed and excess reserves were abnormally large, are discussed below. On June 30, I 9I7, legal of banks which were members of Federal Reserve System were fully concentrated in Federal Reserve banks. Since that date of member banks have consisted solely of deposit balances in Federal Reserve banks. aggregate amount of these balances depends on volume of assets held by Federal Reserve banks in of other liabilities, including capital accounts, of Federal Reserve banks. Consequently, since I9I7 most important influence on money supply-and during most of period since that date dominant influence is volume of assets held by Federal Reserve banks. It is not an exaggeration to say that has consisted primarily of asset acquisition and relinauishment Dolicies of Federal Reserve f' e opinions expressed in this article represent personal views only. 2 Robert V. Rosa, The Revival of Monetary Policy, this REVIEW, XXXIII (February 1951), 29-37. 'Ibid., p. 35. 'In Federal Reserve Policy-Making (New York, I950), which is work of Professor Bach to which Mr. Rosa refers, specific mention is made of I929-I933 period (p. 251). Reference is also made to cognizance for at least last decade or two of the cross-implications of banksupervisory and policies (p. 250).

Comment

1. INTRODUCTION In December 2008, the Federal Open Market Committee (FOMC) lowered the target for the federal funds rate to a range of 0 to 25 basis points. With its traditional policy instrument set as low as possible, the Federal Reserve faced the challenge of how to further ease the stance of monetary policy as the economic outlook deteriorated. The Federal Reserve responded in part by purchasing substantial quantities of assets with medium and long maturities in an effort to drive down private borrowing rates, particularly at longer maturities. These large-scale asset purchases (LSAPs) have greatly increased the size of the Federal Reserve's balance sheet, and the additional assets may remain in place for years to come. To be sure, the Federal Reserve undertook other important initiatives to combat the financial crisis. It launched a number of facilities to relieve financial strains at specific types of institutions and in specific In addition, in an attempt to even more stimulus, it used public communications about its policy intentions to lower market expectations of the federal funds rate in the future. All of these strategies were designed to ease financial conditions and to support a sustained economic recovery. Over time, though, the credit extended by the liquidity facilities has declined, and the dominant component of the Federal Reserve's balance sheet has become the assets accumulated through the LSAP programs. The decision to purchase large volumes of assets through March 2010 came in two steps. In November 2008, the Federal Reserve announced purchases of housing agency debt and agency mortgage-backed securities (MBS) of up to $600 billion. In March 2009, the FOMC decided to substantially expand its purchases of agency-related securities and to purchase longer term Treasury securities as well, with total asset purchases of up to $1.75 trillion, an amount twice the magnitude of total Federal Reserve assets prior to 2008. (1) The FOMC stated that the increased purchases of agency-related securities should provide greater support to mortgage lending and housing markets and that purchases of longer term Treasury securities should help improve conditions in private credit markets. In this paper, we review the Federal Reserve's experience with implementing the LSAPs through March 2010 and describe some of the challenges raised by such large purchases in a relatively short time. In addition, we discuss the economic mechanisms through which LSAPs may be expected to stimulate the economy and present some empirical evidence on those effects. In particular, LSAPs reduce the supply to the private sector of assets with long duration (and, in the case of mortgage securities, highly negative convexity) and increase the supply of assets (bank reserves) with zero duration and convexity. (2) To the extent that private investors do not view these assets as perfect substitutes, the reduction in supply of the riskier longer term assets reduces the risk premiums required to hold them and thus reduces their yields. We assess the extent to which LSAPs had the desired effects on market interest rates using two different approaches and find that the purchases resulted in economically meaningful and long-lasting reductions in longer term interest rates on a range of securities, including securities that were not included in the purchase programs. We show that these reductions in interest rates primarily reflect lower risk premiums rather than lower expectations of future short-term interest rates. (3) We conclude with a discussion of issues raised by these policies and potential lessons for implementing monetary policy at the zero bound in the future. 2. HOW LSAPS AFFECT THE ECONOMY The primary channel through which LSAPs appear to work is by affecting the risk premium on the asset being purchased. By purchasing a particular asset, a central bank reduces the amount of the security that the private sector holds, displacing some investors and reducing the holdings of others, while simultaneously increasing the amount of short-term, risk-free bank reserves held by the private sector. …

This paper starts from the theoretical observation that simple rules-based monetary policy will result in good economic performance in a globalized world economy and the historical observation that this occurred during the Great Moderation period of the 1980s and 1990s.It tries to answer a question posed by Paul Volcker in 2014 about the global repercussions of monetary policies pursued by advanced economy central banks in recent years.I start by explaining the basic theoretical framework, its policy implications, and its historical relevance.I then review the empirical evidence on the size of the international spillovers caused by deviations from rules-based monetary policy, and explore the many ways in which these spillovers affect and interfere with policy decisions globally.Finally, I consider ways in which individual monetary authorities and the world monetary system as a whole could adhere better to rules-based policies in the future and whether this would be enough to achieve the goal of stability in the globalized world economy.

The political economy of land and the agrarian question in an era of neoliberal globalization

We study the U.S. Coin Supply Chain from both the demand and supply side perspectives to improve coin circulation in the economy. More specifically, we provide an operating policy for Depository Institutions (DIs) to improve their efficiency in packaging, distributing, coordinating, and managing the inventory of coins. We further propose a new policy (via a Rewards Program) to increase coin circulation in the economy and optimally determine a reward price, which, if implemented by the Federal Reserve System (FRS), can incentivize DIs to process the coins themselves and/or frequently deposit excess coins at the FRS. We identify the structures of DIs’ best response to the reward price and FRS’s optimal pricing policy. The results and insights developed in this study can be beneficial to both the FRS and DIs in increasing the efficiency of the nation’s coin circulation and thereby reducing their operating costs. Additionally, to estimate the societal benefit from the Rewards Program, we formulate the coin flow for an entire FRS region as an optimization problem from the supply side perspective and quantify the societal costs (and benefits) with and without the reward. We show via numerical experiments that both the FRS and Dis reduce their operating costs as a result of the program and produce a surplus benefit for the society. The reward price that maximizes this surplus is determined optimally. We also propose a robust optimization framework to help DIs and the FRS to manage their inventory under uncertain demand while attaining their cost reduction goals.

How were the Federal Reserve Bank locations selected?

Determinants of Federal Reserve lending to failed banks

The full-scale financial crisis in 2008–2009 years caused serious challenges for governments and central banks responsible for general economic policies and especially monetary policy measures. The Federal Reserve System of USA (or Fed) turned out to be among the most successful players who reacted adequately to the crisis. That’s why the evolution of monetary policy approaches in the USA during the last decades is of great theoretical and practical interest. The grounds of monetary policy in the USA can be studied within the analysis of the federal funds market, where the interaction of demand for and supply of reserves determines the federal funds rate. Since 1989 Federal Reserve used federal funds rate targeting, keeping this rate lower than the discount rate. In those times the main monetary tools of Fed were represented by open market operations, required reserves changes and discount rate changes. In January 2003 the role of discount rate had changed substantially. Since then Federal Reserve has kept the discount rate higher than the target for federal funds rate and treats it as a tool for limiting federal funds rate fluctuations and means of liquidity providing. The next important change was dated by October 2008, when the Fed decided to pay interest on reserve balances held by banks. The rate on reserves became an efficient low bound for the federal funds rate. By this Federal Reserve to a great extent copied the channel/corridor system for its basic short-term interest rate used earlier in Canada and some other countries. Under such conditions, the role of reserve requirements declined as the central bank received alternative means for controlling federal funds rate fluctuations. Summarizing the dynamics of monetary tools application by Federal Reserve we can conclude that during the last 30 years the situation has changed dramatically. Only open market operations are still used as a primary tool of monetary policy in the USA, because of their full control by Fed, flexibility, and quickness in implementation. Changes in reserve requirements are no used more. The role of discount rate evolved and together with the newly created tool – the interest rate on reserves paid by Federal Reserve – it is used today to determine the bounds for federal funds rate fluctuations. From the other hand, discount lending enables the Fed to perform its role of lender of last resort efficiently. During the year 2008 as crisis exploded, Federal Reserve used all the potential for interest rate decrease and faced the so-called zero-lower-bound problem. As a result, some nonconventional monetary policy tools such as quantitative easing (massive asset purchase programs) and forward guidance (management of economic agents’ expectations using commitments to future monetary policy actions) were proposed. Such measures turned out to became efficient enough to stabilize the economy of the United States. Key words: monetary policy, Federal Reserve, federal funds market, federal funds rate, open market operations, discount rate, reserve requirements, the rate on reserves.