Suppose the Reserve Bank sells $50 million of government securities to Bank A. Explain and show the effect of this action on the balance sheets of...

In what is called open market operations, the Federal Reserve can effectively create or destroy money by buying or selling bonds to banks. If they create money, this is called expansionary monetary policy; if they destroy money, this is called contractionary.

If they sell bonds to a bank, they are effectively removing that bank's money from the system. The bank is willing to do this because they get an asset---the Treasury bonds---that is worth as much to them as the money they lose. Eventually that bond will mature and pay out to the bank, but until then that money is not in the system.

Using this example, if the Fed sells $50 million in Treasury bonds to Bank A, the bank's balance sheet will show the loss of one asset---the cash reserves of $50 million---and the gain of another asset of equal market value---the Treasury bonds. Since the banks now have less reserves than they wanted, they will have less money to lend, and will raise interest rates. Based on the reserve requirement, they may be forced to cut back their lending, simply to ensure that they have enough reserves to meet the requirement.

The Fed's balance sheet will show the loss of the Treasury bonds asset---but it will record the cash quite differently. Instead of showing a gain of an asset, the Fed's balance sheet will show the loss of a liability---all monetary base in circulation is recorded as a liability to the Federal Reserve.

Thus, while the total balance of the Federal Reserve is constant (zero), the actual amount of assets and liabilities can vary by literally trillions of dollars, as the Fed has the unique power to create and destroy monetary assets and liabilities at will. Put another way, A - L = 0 always, but A + L can be whatever the Fed wants it to be (and is essentially a measure of our monetary base).

The lower the reserve requirement, the larger the decrease in money supply from selling Treasury bonds will be. This is because the reserve requirement creates a multiplier effect---the money multiplier---inverse to the reserve requirement. So for example, a 5% reserve requirement is a multiplier of 1/0.05 = 20, while a 10% reserve requirement is a multiplier of 1/0.10 = 10. The Fed also modifies the reserve requirements sometimes to reach a target level of money supply and interest rates.

Is there a word/phrase for "unperformant"?

As a software engineer, I need to sometimes describe a piece of code as something that lacks performance or was not written with performance in mind. Example: This kind of coding style leads to unmaintainable and unperformant code. Based on my Google searches, this isn't a real word. What is the correct way to describe this? EDIT My usage of "performance" here is in regard to speed and efficiency. For example, the better the performance of code the faster the application runs. My question and example target the negative definition, which is in reference to preventing inefficient coding practices. Answer This kind of coding style leads to unmaintainable and unperformant code. In my opinion, reads more easily as: This coding style leads to unmaintainable and poorly performing code. The key to well-written documentation and reports lies in ease of understanding. Adding poorly understood words such as performant decreases that ease. In addressing the use of such a poorly ...

nouns - what do you call the person who passes the trophies to the prize giver/presenter?

The person who gives out the trophies to the winners are called award presenters. So what do u call the person who passes the trophies to the presenter? Thanks!

Is 'efficate' a word in English?

I routinely hear the word "efficate" being used. For example, "The most powerful way to efficate a change in the system is to participate." I do not find entries for this word in common English dictionaries, but I do not have an unabridged dictionary. I have checked the OED (I'm not sure if it is considered unabridged), and it has no entry for "efficate". It does have an entry for "efficiate", which is used in the same way. Wordnik has an entry for "efficate" with over 1800 hits, thus providing some evidence for the frequency of use. I personally like the word and find the meaning very clear and obvious when others use it. If it's not currently an "officially documented" word, perhaps its continued use will result in it being better documented.

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