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The public purpose of the interest charges in that case is to make a private market for them. The ECB buys or sells them to inject or withdraw reserves from the system on an ongoing basis to establish whatever rate its setting. Whether the bonds are initially sold at auction or initially transferred directly to the ECB to be credited to the reserve account doesn't materially affect the amount of bonds that end up held in the private sector if the ECB is being competent at managing its target rate.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Mon Jul 23rd, 2012 at 11:45:20 AM EST
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