Aus dem Haus Goldman Sachs wird man als Journalist stets gut mit Einschätzungen versorgt. Sei es über die Wall Street oder die Konjunktur im Allgemeinen. Die jüngste von heute fand ich so interessant, dass ich sie einfach mal hier aufzeigen will. Sie zeigt sehr gut das Thema “US-Notenbank und deren Strategie” auf.

Die Fragen in diesem Interview, welches ich nur zum Teil hier aufzeige, werden von Mr. McKelvey beantwortet, Senior Economist bei Goldman Sachs. Der offizielle Titel des Beitrages heißt übrigens: „A Trillion Dollars in Excess Reserves –Why We’re Not Worried“

Many market participants and economists worry about the large volume of excess reserves in the US banking system, which just crossed the $1trn mark on the way to $1.3-$1.4trn by next March. Some see this as evidence that the banking system is not lending enough while others worry about inflation implications. In our view, excess reserves are not the best indicator for adequacy of bank lending; more direct data are available from bank balance sheets and from the senior bank loan officers’ survey. Both of these sources confirm that bank lending is weak. As for the inflation risk, we remain deeply unconcerned given the huge amount of spare capacity in the US economy. This gives Chairman Bernanke and his colleagues plenty of time to manage excess reserves, and they appear to be working on the tools to accomplish this. The surge in excess reserves in the US banking system continues to worry and confuse many participants in the financial markets. In this comment, we explain the mechanics behind this surge and offer our interpretations about whether it is something to worry about. Our one-word answer is „no.“ We also outline the circumstances that would change this judgment and review and update our thinking on the tools the Fed has to manage the situation.

Q: What is the history of excess reserves?

Until September 2008, excess reserves were quite low – virtually zero by latter day standards. During the preceding 12 months they averaged $1.9bn, or about 4% of total reserves, and they never exceeded $4.6bn (in mid-March, during the Bear Stearns phase of the financial crisis). This was in keeping with the longer-term history of excess reserves. Except for unusual circumstances – in the wake of 9/11, for example – excess reserves were routinely only 1%-2% of total reserves. In the most recent two-week reserve accounting period that ended on November 4, excess reserves were $1.06 trillion (trn). Most of this increase occurred between early September 2008 and year-end 2008, when excess reserves reached nearly $800bn. They fluctuated between $800bn and $900bn during most of 2009 with no clear direction. Lately they have moved up again. Absent offsetting transactions, we expect excess reserves to reach about $1.3-$1.4trn by March 2010 as the Federal Reserve completes its program of purchasing agency debt and MBS.

Q: What’s behind the sudden change?

The surge in excess reserves is a byproduct of a surge in the Fed’s balance sheet, from about $900bn prior to mid-September 2008 to about $2.2trn today. When the Fed decides to boost the volume of assets it holds, via expansion of an existing facility (e.g., making more loans in the discount window), creation of a new one (from the Term Auction Facility created in late 2007 to those created in the wake of the Lehman bankruptcy to support the commercial paper market), or direct purchases of assets (Treasury securities, agency debt, or agency MBS), its liabilities must go up by a similar amount. The Fed’s two main liabilities are currency (Federal Reserve Notes) and bank reserves, which together constitute the monetary base. The Fed has other liabilities – for example, deposit accounts for foreign central banks and the Treasury Department. However, these items are not under the Fed’s control, and they do not move predictably in response to its other balancesheet operations. Thus, a decision by the Fed to expand its assets typically results in a parallel increase in the monetary base. In cases where the Fed’s counterparty is not a bank (another financial institution selling securities to the Fed, for example) the transaction will increase bank reserves as the seller deposits the proceeds at the bank where it does business. Conceivably, though, the Fed’s purchase of securities could result in an increase in currency instead.

The reason behind the latest increase in excess reserves, from about $850bn in mid September to more than $1trn currently, is a bit different. In late September the US Treasury Department announced that it would allow balances in its Supplemental Financing Program (SFP) to run down from $200bn to $15bn to provide more flexibility to finance ongoing operations as the it approaches the statutory debt limit. The SFP had been introduced a year earlier as a device to permit the Fed to shield the monetary base from its balance-sheet expansion; to do so the Treasury sold special cash management bills, effectively draining reserves in the process and holding the proceeds on deposit at the Fed. As the Treasury more recently paid down most of the remaining $200bn in bills that had financed this program, reserves were put back into the banking system. This increase in reserves was thus due to a reduction in one of those other liabilities that the Fed does not directly influence – Treasury deposits – rather than an outright expansion of its balance sheet.

Q: Is it therefore correct to say that the Fed determines the volume of excess reserves in the banking system?

Technically, the Fed’s balance-sheet operations determine the size of the monetary base, as indicated in the preceding answer, rather than excess reserves, which are just one component of the monetary base. The other two components are: (1) currency in circulation (which includes coin issued by the Treasury as well as Federal Reserve Notes) and (2) required reserves, which are a function of the size and compositions of deposits held at banks. However, the public’s demand for currency and coin has been quite stable in recent years, even during periods of extreme uncertainty, and required reserves are a function of the size and composition of deposits held at banks that are members of the Federal Reserve System. They also tend to move slowly over time. Thus, it is reasonably accurate to say that the Fed’s balance-sheet operations also determine excess reserves in the short run, but it is important to keep the other two components in mind when working through the mechanics of how changes in the monetary base can ultimately affect financial transactions, the economy, and inflation.

Ich finde, das sagt einiges aus. Und ich hoffe an dieser Stelle, dass die Jungs von Goldman Sachs mir nicht böse sind, was die Veröpffentlichung angeht. Aber es steht ausnahmsweise nichts im Disclaimer drin. 🙂

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