Talk:Open market operations

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I don't see what's the point of the narrow banknote focus of this article. From the figures below it looks like "physical cash" is only about 11% of M2. When the Fed talks about open market operations they talk about M2 or M1, not about banknotes.

The "monetary targeting" part is confused. Targeting the money supply was done under Volker. Now we seem to be targeting interest rates. The Fed could also target inflation. These are not the same thing!

What's gold got to do with it? This is not the 1920's. Let's please bring this article up to date.

Also "has stated famously" and similar phrasing seems POV. What's wrong with just having "stated"?

from Money supply

In the U.S., as of July 28, 2005, M1 was about $1.4 trillion, M2 about $6.5 trillion, and M3 about $9.7 trillion. If you split all of the money equally per person in the United States, each person would end up with roughly $30,000 ($9,700,000M/300M). The amount of actual physical cash M0 was $688 billion in 2004,

Gold is relevant to this article for two reasons. Firstly central banks own a lot of gold. Secondly many of the articles that discuss the gold standard reference this article about Open Market Operations. This article needs to be general enough to remain meaningful in the context of all types of monetary policy not just "inflation targeting". Terjepetersen 11:33, 25 January 2006 (UTC)

As to the recent edits. They don't reduce clarity and make the topic less accessible. I am about to roll them back again but I am open to discussion on why the changes are seen as necessary. Terjepetersen 11:33, 25 January 2006 (UTC)

[edit] Please check Fed references (on the page)

This article should be about actual open market operations, not about some theoretical ideal open market operations that you'd like to see. The Fed refences are very clear (if a bit long): the securities purchased are T-bills and T-bonds, US agencies, and mortgage backed securities. There are very clear records of how much was done on what day and rate. Foreign currencies are transacted occasionally but they are dealt with via a different mechanism (involving the Treasury along with the Fed) and records kept elsewhere.

Gold is not involved these days. Neither are banksnotes! Everything is done by crediting or debiting a "reserves" account - i.e. it's all electronic. By focusing on banknotes and gold, this article is just plain wrong, as it relates to current Fed practice.

That said, I'd be very open to see how the Bank of England does it, the ECB, etc. or even some historical info (but the Fed started in the early 1920's, which really wasn't a proper gold standard).

I'll ask some economists to check this if you don't mind. Edit by Smallbones

I think that the section on other possible goals and targets for open market operations are essentially OK -- it just needs to be made clear that those are historical or theoretical considerations and that "Open market operation" is not usually used to refer to these kinds of adjustment, but to instruments that central banks use to smooth/adjust interest rates. -- Marcika 18:58, 25 January 2006 (UTC)

You seem determined to narrow the article to how "open market operations" occur in the USA in the year 2006. Why? I for one don't live in the USA. I also have an interest in history. So whilst the conduct of the US Federal Reserve is interesting it is merely one of many examples of central banks that use open market opertions. The article should be general in nature. Open market operations were used in the past in different ways and in lots of places besides the USA. To try and limit the scope of the article to how things are today or how they are in the USA is too narrow. Terjepetersen 21:21, 25 January 2006 (UTC)

If you look at my edit, you'll find that all the information I added refers to the European Central Bank. I looked that information up because I thought that the article was too US-focused as well. Nonetheless I think that the most relevant definition of open market operations are the current ones -- and since the Fed and the ECB govern the world's largest economies, I think their approaches deserve a prominent place (although not necessarily in the intro section).

On another point, I noticed that you added "included in M0 is money held by private banks in an account with the central bank" and that therefore M0 would change through open market operations. I strongly doubt these statements. Could you provide a citation for them? -- Marcika 23:25, 25 January 2006 (UTC)

I too think history and other countries should have a place here. I'd especially like to see Bank of England and Bank of Japan procedures added. About the only things I know about US Fed history are 1923 start(?), and intro of reverse repos (vs. matched sales) in 2003 (minor - but an interesting legal dance).

Marcika, my apology. My comment was intended for Smallbones. As to a citation of M0 including central bank deposits try the definition of M0 at the following link. http://www.snb.ch/e/welt/glossary/m.html Terjepetersen 10:12, 26 January 2006 (UTC)

Does anyone have a link on where to find relevant information on the open market operations? For example, if someone wants to find out how much money is created through open market operations in a given year, how will they find out? Also, how much is typically destroyed? ", it may permanently create money by the outright purchase of securities. Very rarely will it permanently destroy money by the outright sale of securities." How much is created and how much is destroyed per year? —The preceding unsigned comment was added by 68.100.18.27 (talk) 03:41, 6 December 2006 (UTC).