The Fed’s Reverse Repos Don’t Shrink the Cash Provide

Aug 5, 2021 3:26 p.m. ET

Phil Gramm and Thomas R. Saving present their commentary “How the Fed is hedging its inflation bet“(Aug. 2) by stating a fact:” The growth of the money supply M2 has declined from around 25% in 2020 to around 10% on an annual basis in the first six months of 2021. “They then explain that this The slowdown has occurred because, since April, the Fed has “drawn nearly $ 1 trillion in liquidity from the financial system” through its reverse repurchase facility. Your argument is based on a flawed theory and does not hold water.

The idea that a trillion dollars in reverse repos reduced the money supply by just a dollar is nonsensical. Reverse repos are a Fed liability and an asset of the banks and money market funds (MMMFs) that lend funds to the Fed through reverse repos. Deposit liabilities from both banks and money market funds are part of the money supply. These liabilities are unaffected by the choice of banks and MMMFs whether to invest their assets in the Fed’s reverse repo facility, Treasury bills or elsewhere. In contrast to the gram-saving analysis, the Fed’s reverse repo program has no impact on the money supply.

John Greenwood

Chief Economist, Invesco

London

CDC to reverse indoor masks coverage, saying totally vaccinated folks ought to put on them indoors in Covid scorching spots

The Centers for Disease Control and Prevention is expected to recommend Tuesday that fully vaccinated people return to wearing masks indoors in locations with high Covid-19 transmission rates, according to those familiar with the matter.

According to the sources, federal health officials still believe that fully vaccinated individuals represent a very low level of transmission. Still, some people who were vaccinated could carry higher amounts of the virus than previously thought and potentially pass the virus on to others, they said.

The updated forecast comes before the fall season, when the highly contagious Delta variant is expected cause another increase in new Coronavirus Cases and many large employers are planning to bring workers back into the office.

Continue reading: Americans will need masks indoors as the US is heading for a “dangerous fall” with a surge in Delta Covid cases

Health experts fear that Delta, already the dominant form of the disease in the US, hits states with low vaccination rates and high prevalence of the virus. These states are now being forced to reintroduce mask rules, capacity limits and other public health measures that they have largely withdrawn in recent months.

The Whites’ chief medical advisor, Dr. Anthony Fauci said Sunday the CDC was considering revising mask guidelines for vaccinated Americans, saying it was “in active consideration.”

“It’s a dynamic situation. It’s in the works, it’s developing like so many other areas of the pandemic, “Fauci, also director of the National Institute of Allergies and Infectious Diseases, told CNN. “You need to look at the data.”

The CDC guidelines are just a recommendation, leaving it up to state and local officials to reintroduce their masking rules for specific individuals. But even before the expected guidance from the CDC on Tuesday, some regions were reintroduced Mask mandates and notices.

Several California and Nevada counties are now advising all residents to wear masks in public indoor spaces, regardless of whether they are vaccinated or not. In Massachusetts, Provincetown officials advised everyone to return to wearing masks indoors after the July 4 celebrations resulted in an outbreak of new cases.

Dr. Paul Offit, a pediatrician and vaccine advocate who served on advisory boards for both the CDC and the Food and Drug Administration, told CNBC earlier this month that the US is still “undervaccinated” and about half the population is not fully vaccinated be .

Even people who are fully protected have cause for concern when it comes to variants of Covid, Offit said. While the vaccines protect well against serious illness and death, they may not protect as well against minor illness or the spread of Covid to others, he said. No vaccine is 100% effective, he noted.

“It is not a bold prediction to believe that SARS-CoV-2 will be circulating in two or three years. I mean, there are 195 countries out there, most of which haven’t received a single dose of vaccine. ”“ Offit said. “Will it still be circulating in the United States? I think that would be very, very likely.”

Israel publishes preliminary data Last week showed that the Pfizer vaccine there was only 39% effective against the virus, which officials attributed to the fast-spreading Delta variant. Its effectiveness against serious illness and death remained high, the data showed.

– CNBC’s Meg Tirrell and The Associated Press contributed to this report.

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