[CROSSTALK]
So let me say something about this, this,
this, this is a, just an incredibly interesting thing.
I mean, it doesn't sound interesting, does it?
Federal open market committee report of ad hoc
sub-committee on the government securities, November 12th, 1952.
Okay.
So, the date is interesting. It's a long time ago.
and this it turns out there's some preamble
there that says that this was a secret document.
That it was, was internal inside
the Fed and only came to light when there was this congressional investigation.
And what this document is, is the Fed's own internal
judgment about how they're going to be running monetary policy from 1952 on.
Okay.
and, it's incredible, partly because it's, it's quite similar
to some of these money view ideas that we've had.
And not very similar to what showed up in the academic textbooks.
which were written before this document came, became public.
what the academic textbooks picked up was this sort of public version of this.
Okay.
Which isn't exactly what they themselves thought they were doing.
so let me just give you two passages here.
this is from the preamble. Page 2007 here,
we're only going to read part of this and I'll send you some
pages so that you can, you don't have to read the whole thing.
because a lot of it's technical.
but, they say here it's important that the technical operating
procedures and practices conceived in the atmosphere of war finance.
And developed to maintain a fixed pattern of prices and
yields in the government securities market be reviewed to ascertain whether.
Or not they tend to inhibit or paralyse
the development of real depth, breadth and resiliency
in today's market that operates without continuous support.
Okay, that's a long sentence.
What they're, what they're saying there is during the war, war finance, okay.
The fed pegged treasury rates.
It said the treasury bill rate I don't have
it here but let's say it was 1%, okay?
And if it deviates from that you know, if it tends to go up we're buyers.
And it
pegged the ten year rate.
Let's say it's 2%, and said if it deviates from that, we are buyers.
So there was continuous support for the market, you know, the, the Fed
was not the dealer of last resort, it was the dealer of first resort.
It was actually issuing these bonds in a sense, and, and was the underwriter.
Who was saying, we're, we're going to hold these prices here for
the duration of the war and not only that, after the war.
So, when the war was over, bondholders were
assured that the Fed would continue that so
they wouldn't have to take capital loss.
Because of course, if the yields on the long
term bonds rose, you would take a capital loss.
The price would, the price would fall.
So the Fed maintained that fixed price Eventually it got its own authority back.
Okay.
In the famous Fed treasury accord, when it
was allowed to move short term interest rates.
It was allowed to get some authority over moving short term
interest rates and that's the birth of monetary policy after the war.
And this is the document in which the Fed
explains what they intend to do with that new authority.
Okay.
That's what this is all about.
And its secret. Okay, that's one thing.
They talk about this government securities market.
By 1952, the, the, there has been a
development of a dealer market in government securities.
Where there're dealers buying and selling.
They talk about arbitrage on the yield curve.
They talk about this business about
depth, breadth and resiliency. They're, they're talking about liquidity.
Okay. Market liquidity.
They're saying that the government
securities market is now sufficiently liquid
through the, through the involvement of
private dealers, private profit driven dealers.
That the Fed no longer needs to support prices in the way that it, it was doing.
It will continue intervening but around the edges.
and to try to influence the shape of the yield curve and so forth.
So they're very explicitly talking about a world in which there
are treasury securities of various