Distributing Over Markets Alongside Regions: The Federal Reserve, Other Reserves, and SIPI Collaring

Robert C. Hockett ()
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Robert C. Hockett: Cornell University

Chapter Chapter 8 in Spread the Fed, 2024, pp 93-133 from Springer

Abstract: Abstract This Chapter turns from geographical (re-) distribution to broader market distribution of Fed modulatory activity. It first reprises my theory of what I have long called ‘Systemically Important Prices and Indices’—‘SIPIs’—and then shows how a buttressed Fed can modulate non-fundamentals-rooted swings in those markets. It shows that certain foodstuff, fuelstuff, and other commodity market prices are subject to massive volatility rooted in the same sorts of recursive collective action problems and related market failures introduced earlier in the Book rather than fundamentals, and that these instabilities radiate economy-wide owing to the systemic significance of those prices themselves. Since this is the reason for Fed modulatory activity in the money markets themselves, the Chapter argues, the Fed must now employ open market operations in these additional markets along with the money markets Here too, ironically enough, we shall be returning to Fed origins. For the idea of a ‘reserve’ implicit in the Fed’s origin as a liquidity reserve now is as important an idea to recapture and act upon in other markets whose prices are SIPIs as it is in the money markets the Fed presently acts upon. Fortunately, moreover, the Chicago Fed’s new trading desk near the nation’s principal commodities exchange—the MERC—will enable the Fed to do here what it’s long done from its New York trading desk just off of Wall Street. The Chapter shows how to do it.

Keywords: Anks; Bubbles; Busts; Central Banking; Chicago Fed; Chicago Fed Trading Floor; Chicago Mercantile Exchange; Collective Action Problems; Commodities; Commodity Derivatives; Commodity Futures; Commodity Stores; Credit; De-Industrialization; Department of Agriculture; Derivatives; Dollar; Endogenous Money; Exogenous Money; Federal Reserve System; Federal Open Market Committee; Financialization; FOMC; Graham; Graneries; Great Depression; Keynes; Liquidity Reserves; MERC; Monetary Policy; New York Fed Trading Desk; Open Market Operations; Panics; Productivism; Productivist Central Banking; Recursive Collective Action Problems; Secondary Markets; SIPIs; Speculation; Reserves; Strategic Petroleum Reserve; Strategic Reserves; Systemically Important Prices and Indices; Tertiary Markets; Underlying (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-72051-2_8

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DOI: 10.1007/978-3-031-72051-2_8

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