Open Market Operations Explained

[@richardaurre4840]

great job teaching the proles!

[@Alanisbusinessacademy]

Thank you, Richard!

[@Solingen1000]

I thought the FED only gave the banks "bank reserves" which are not lent out?

[@Melina.folina.123]

How is this different from quantitative easing? Also what happens when the fed owns their own bonds (treasuries) does that mean they don’t pay maturity? Thanks a lot for this

[@apga1998]

My question: what is the danger of a large Fed balance sheet....other than inflation?

[@roxana5706]

If the economy is running above its potential GDP and inflation is accelerating. And the Fed wants to curb the inflationary pressure. How can the Fed do so by using open market operations?

[@rushiljain9423]

One of the most prominent ways is to take away money supply from the Economy using open market operations (selling treasuries and other government assets)

[@chelseagamblin3924]

I thought the federal reserve was separate of the US govt?

[@Alanisbusinessacademy]

+Chelsea Gamblin To an extent Chelsea. The Fed does operate independently on monetary policy issues, however the Fed Chair is appointment by the President and does testify regularly to various congressional committees. The Fed's budget is also supported by taxpayer dollars.

[@chelseagamblin3924]

+Alanis Business Academy oh I see, thank you so much for your response! :)

[@Alanisbusinessacademy]

+Chelsea Gamblin You're very welcome! Thanks for the question.

[@talking2inanimateobjects]

Ily 😎

[@MrTrollBeast]

I thought the government issues the security

[@apga1998]

Yes the govt issues the securities. The Fed, acting an an independent agent, purchases these from banks and individuals. The Fed creates money, electronically, goes out and buys up US govt-issued bonds and sometimes, Mortgage-backed securities. The Fed places these purchased securites in its valuts. It affects the money supply and indirectly, interest rates.