Excess reserves still dropping

At the very end, hard to see, a tiny drop in reserves at the Fed.  Short term interest charges still rising a bit, so reserves chase the better yielding overnight and short term treasury.  The Fed though that had stabilized, it did for a quarter. It is now dropping again.



The counter balance is, all things being equal, the Fed still keeps all treasuries on the balance sheet, and they get an implicit rate cut via returned gains.  That is, fewer deposits, smaller payouts on interest, more rebates back to Treasury.

Think about that loop, it is the 'right to coin' loop, via the gain clause.  Congress really makes no money, it really means: before Treasury acts like a normal lender, it will confer with Fed. It seems innocuous, until it isn't.

The extra step is required for 'right to coin', and that is why I distinguish between the currency banker and central banker. I can do the currency banker, in pure sandbox, as two color.  For two years I wanted to avoid the three color issue, but central banks requires the loop. The right to coin has an equivalent insurance value, it lets government get first choice at the commutative property machine. Now Keynesians write equations about the symmetry of G. But it cycles.