The Israeli central bank has been pumping money into the economy by buying government bonds and US dollars. It expanded its balance sheet by 60% in the last year.
I’ve been going back and forth with the bank’s spokesman regarding the bank not complying with its legal disclosure, finally when that issue was settled, I asked him how were they “sterilizing” the money pumps (they stated in their announcements, in bold letters, that any increases of the money supply will be “sterilized”), as I didn’t see any increases in the short term debt bills the central bank regularly issues.
Then, the spokeman wrote me that “the increases (in money supply) are sterilized via the increased commercial bank reserves at the central bank”. Is he kidding me? how should I reply? I’m getting desperate with this sham
I could ask him that, but he would reply that it doesn’t matter how, as long as the money doesn’t reach the economy and stays within the central bank’s liabilities. He would also feel that he “got me” with that one. I’m not looking to see how ignorant he is (and he is, despite/because of his econ. PhD), I’m looking for a KO answer so to speak…
I think I’ll ask him “if the bank’s policy was not to “sterilize” the increases of money supply, would the balance sheet / required reserve ratio be different than they are now?”
So basically I’ll be saying, if you are “sterilizing”, how come it doesn’t show anywhere?, because now it seems like you’re just inflating and covering it up with fictitious statements…
