Tax avoidance

Excess reserves finally popped after the Fed began buying treasuries again. The depository institutions are collecting IOER that otherwise would return to Treasury as seigniorage.

It responds suddenly, like it has inertia. It does, it is set along the longer route, from primary dealers back into the regulated banking side. There is a loop, and the sudden spike is a classic sloshing effect.

The Fed raised taxes on the repo market, in the greedy monpsony model. Under the model the delay is explainable, the loop discovered. The tax model should be as valid as any other model in snooping out the loop. The deja vu effect is Fed bankers discover the central banks are not a monopoly. They should drive that seigniorage fee to the long term share of a dominant monopsony, maybe a quarter to half point, close the loop.