"What happens next is that they buy and sell government bonds in the open market."
This describes how central banks operated in the U.S. before 2008 and in Canada before the 1990s. The Federal Reserve and the Bank of Canada both set a target for the overnight interest rate, and then they hit that target by doing open market purchases (or sales) of bonds, effectively adding funds to (or draining funds away from) the overnight lending market. By changing the quantity of funds, they influenced the interest rate.
What changed is that both central banks introduced interest payments on balances that banks hold at the central bank. Previously, these balances earned 0%. With this new tool, they could directly set the overnight interest rate by adjusting the rate paid on these reserves, eliminating the need for regular open market operations.
The Fed still does purchases and sales, but not for the purpose of driving the overnight interest rates towards its target. The level of the overnight rate is not affected of any purchases or sales that the Fed does.
If the Fed makes or receives a loan at specific interest rates (even if only overnight), that's pretty much economicaly equivalent to buying or selling bonds.
The Grit Daily article cited in the linked-to tweet is fake news. It alleges that PayPal's proposed misinformation clause and associated $2500 penalty, which was cancelled by PayPal earlier this month, has been quietly "added back into the terms of service with equally ambiguous language."
This can be proven wrong with a quick check of PayPal's acceptable use policy in the WayBack Machine. The $2500 fine that the article alleges has been added back after "criticism on social media died down" has been there since 2021. [https://web.archive.org/web/20211013092233/https://www.paypa...]
So there is no justification to the article's allegation that the clauses have been quietly added back to PayPal acceptable use policy.
Furthermore, in building its argument that the misinformation clause was sneakily "added back into the terms of service," the article erroneously makes the assumption that a prohibition on intolerance equates to a prohibition on misinformation. This doesn't follow.
I'm not trying to support PayPal's acceptable use policy. But if you're going to attack it, at least use facts.
The US military has had some innovative payments ideas.
An occupying force prefers to use a money that 1) doesn't dollarize the nation they are occupying 2) can be tracked, thus thwarting black marketeers 3) is lightweight 4) if they lose, the enemy can't reuse it
Unfortunately, dollar bills are bulky, infiltrate local economies, and aren't enemy-resistant.
So we get innovations like EagleCash, which solves a lot of these problems.
That's right. In the US's case, if it was protecting a weakened friendly country or trying to rebuild a not-so-friendly one, dollarizing the economy would have undermined the occupied government and interfered with the US's overall goals. Using cancellable paper certificates like MPC or a closed loop electronic system like EagleCash prevented leakage of US dollars into the local economy.
The US Army shipped 12 _BILLION_ dollar in cash, multiple cargo flights to Iraq filled with pallets of nice fresh stacks of cash.
but they care to avoid dollarizing conquered countries? LOL.
They just want control over soldiers finances, so that there are no black markets, no soldiers buying drugs and paying hookers, becoming targets for petty crime, or selling weapons/ammo/info.
Dollarization of other nations is in the US national interest, read up some congressional transcripts.
Those cash shipments to Iraq were the Iraqi central bank withdrawing funds from accounts in the US. The money was Iraqi money, mostly from oil sales. They asked for it back. The US handed it over to the Iraqi central bank officials. Most of it was used to pay Iraqi government employees during reconstruction.
Yes. Very much so. In the beginning of my first deployment, the provisional government of Iraq rejected the BSA, so we pulled out and I redeployed to Afghanistan. During my second deployment, the Karzai government significantly reduced the BSA, and all regular forces pulled out around me. Both times, one of the biggest issues was dollars coming into the economy through US contracts and on-base merchants. This is good for them at first, but it turns the country into an import economy, and kills internal business. You can see this effect visually in the buildup of trash from imports replacing sustainable practices. 1000-year-old family farms gone fallow and covered in trash mixed with human waste. We tried to fix this with teams of Americans going around teaching Afghans how to do all the things they used to do before the onset of foreign aid.
There are a couple of things. The simplest one is that dollars leave the economy as soon as you deposit them in a bank because they get lent internationally versus local currency loans that stay local. The other is that imports are generally preferred in developing economies. It’s also hard for the government to tax transactions made in a foreign currency because they only really see local bank transactions and foreign exchanges.
I don’t really buy that. USD is still sufficiently used (in cash) in high denominations. Reducing that usage to the point that it deters counterfeiting would presumably reduce the impact of the dollar globally, which is likely against the US’s national interest.
Most regular folks don't think like to think about banking, just like how they don't like to think about how their car engine works.
But if you ask them to describe how banking works, they'll inevitably resort to the some version of the "giant vault" analogy. Of course, that's the wrong way to think about banking. Which the article rightly attempts to dispel.
This describes how central banks operated in the U.S. before 2008 and in Canada before the 1990s. The Federal Reserve and the Bank of Canada both set a target for the overnight interest rate, and then they hit that target by doing open market purchases (or sales) of bonds, effectively adding funds to (or draining funds away from) the overnight lending market. By changing the quantity of funds, they influenced the interest rate.
What changed is that both central banks introduced interest payments on balances that banks hold at the central bank. Previously, these balances earned 0%. With this new tool, they could directly set the overnight interest rate by adjusting the rate paid on these reserves, eliminating the need for regular open market operations.