Yesterday we were looking at this graph, the same that Noah showed:
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| Graph #1: Total Public Debt as a Percent of GDP |
I want to use this graph instead:
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| Graph #2: Gross Federal Debt as a Percent of GDP |
The two are quite similar, both of them ending near 100% of GDP. The second graph is less jiggy because it uses annual numbers rather than quarterly. Less jiggy? No biggie.
FRED's notes for our Graph #2 here tell me they used the FYGFD data series for the Federal debt. This series. But instead of looking at debt to GDP as they do, first I want to see debt in billions. And instead of looking at the whole Federal debt, I just want to look at the changes from one year to the next. I want to see each year's addition to the total. That will be like looking at Federal deficits. This graph shows the data I want to start with:
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| Graph #3: Annual Change in Gross Federal Debt, billions |
Oh, that's it: Yesterday we were looking at Federal deficits as a percent of GDP. Yeah. As a percent of GDP the deficits were trending down from around 1983 to the year 2000. But as raw numbers, debt in billions sans context, deficits were going up during that same period. Okay. Now I get it.
One other thing about Graph #3: Compare it to the data series that shows the Federal deficit, and the two are similar but not the same. They have the same pattern, and the two lines are very close until 1985. But for 1985 and after, a gap opens up and the numbers are not the same. Looks like they've been doing some creative accounting since that time.
I still want to use the change-in-debt numbers from Graph #3. But I thought you should know about this discrepancy.
Looking at Graph #3 now, each point on the line represents a year, the change in Federal debt for one year. But I was thinking, there was some pretty serious inflation in the 1960s and 1970s. All the numbers since then are higher than the earlier numbers because of the inflation. I can take the inflation out of the numbers and graph the result, and maybe we can see how inflation changed the Federal debt.
Yeah, let's do that. It's the same calculation you'd use to calculate "Real GDP" from "Nominal GDP". Here ya go:
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| Graph #4: Nominal (blue) and Inflation-Adjusted (red) Annual Changes in Gross Federal Debt. |
Now I can take and add them up, and that'll give me a number for the Federal debt with inflation removed. It'll be in 2009 dollars, because the GDP Deflator uses 2009 dollars.
I downloaded the data from Graph #4, and added up the inflation-adjusted changes in Federal debt.
It's funny though. I'm adding up the changes to the Federal debt since 1947. That means I'm not counting any of the World War Two debt or any Federal debt from before that time. We're starting with a low number, for sure.
I can't add up the numbers in a FRED graph, so I used Excel. I put my inflation-adjusted Federal debt numbers on the graph in red. And I put the blue line from Graph #2 on my Excel graph for comparison (but only since 1947. You don't see the wartime increase of the early 1940s). Here's what I got:
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| Graph #5: Nominal (blue) and Inflation Adjusted (red) Gross Federal Debt as Percent of GDP You can view or download the Excel file from Google Drive |
Noah asks Why did rich-world deficits start exploding around 1980?
They didn't, I reply.
It does look like deficits "exploded" around 1980. But when you strip away the effects of inflation, there is no sudden change from downhill to uphill in the early 1980s. So I guess you can say there was a sudden change in the early 1980s but only because the raging inflation came to an end.
Inflation aside, as the red line shows, the Federal debt was increasing as a percent of GDP since the end of the second World War. And I think we can see a more rapid increase starting around 1974. That's not 1980, that's 1974. These things are hidden when we look at the blue line -- which is how everybody looks at Federal debt, by the way -- because inflation and the falling value of the dollar allow us to understate the value of past debts.
Thankfully, we live in a nominal world. If not for the effects of inflation, we would not have seen the Federal debt falling for thirty-plus years after World War Two.
And if not for the effects of inflation, the significant increase in Federal debt growth would have occurred around 1974, not around 1982. And that is a biggie. It is important, because people key in on the date, look at the events of the time, and understand the economy based on what they see.
Noah, for example, says the U.S. Federal deficit had been decreasing since WW2, then suddenly began to trend upward around 1980. He then offers a theory to explain why that happened.
I'm not offering a theory. I'm showing you numbers, and I'm saying it only happened that way because of inflation. Oh, and it's not a theory. It's a fact.
If you don't start with facts, even your best theories are bullshit.
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21 comments:
BTW:
Things we are sure of
are not always facts.
Debt/GDP is a defined ratio that means something. It bothers me - a lot - that your red line in graph 5 shows a different current debt/GDP ratio than what we actually have.
Your resultant does not correspond to the actual reality. You have inflation making the debt burden larger over time, but the real effect of inflation is to make the debt burden easier to bear. Inflation favors creditors and disfavors lenders. That's why the Fed only takes half of it's alleged dual mandate seriously - they're bankers.
I think something is wrong with your algorithm.
Part of it is the 2009 base year. If the base year were 2015, then the two lines would converge now. But that would disguise what I think is a more serious underlying problem.
You can mathematically accumulate a stock of inflation adjusted debt as a concept; but I don't think it has any kind of real world analog.
I'm stumbling with this explanation, but I really think there is a flaw in the concept.
Cheers!
JzB
> I think something is wrong with your algorithm.
I laid it out pretty neatly: For annual increments of money, It's the same calculation you'd use to calculate "Real GDP" from "Nominal GDP". After that, all I did was total up the deficit numbers, as anyone might.
But you don't really object to my arithmetic. You object to the idea that lies behind my arithmetic:
> I don't think it has any kind of real world analog.
And again:
> Your resultant does not correspond to the actual reality.
But it does correspond to actual reality! Paul Volcker's success in reducing inflation changed the path of the debt/GDP ratio and sent debt sharply uphill.
My calculation shows that we would have seen the same uptrend all through the 1960s and 1970s if we had not had the Great Inflation. Really, the uptrend that my calculation shows is much the same as the uptrend that started in the early 1980s, the one Noah was looking at.
> You have inflation making the debt burden larger over time, but the real effect of inflation is to make the debt burden easier to bear.
Yes, the real effect of inflation is to make the debt burden easier to bear. And when I remove inflation from the numbers, the debt becomes more of a burden. My calculation shows exactly what you say it should show!
Since TSY securities are nothing but dollar savings deposits at the Fed, and are misnamed "debt" because of mainstream A) ignorance or B) malice why are we talking about this?
Is people having a growing amount of financial wealth on deposit at the world's largest and safest bank (the Fed) a problem? Do we think that people and institutions should have less financial wealth that is debt free for the private sector? Is that really the argument, that there is too much debt free money out there?
Auburn Parks said...
"Since TSY securities are nothing but dollar savings deposits at the Fed"
Somewhat of a over simplification where exactly on the FEDs balance sheet do these liabilities show up.
Oilfield-
They are not technically liabilities of the Fed because they are liabilities of the TSY. However, as the Fed and Tsy make perfectly clear, all TSY securities are kept in strictly digital form, on one of two central ledgers, either A) the national book entry system operated by the Fed for all commercial banks through which TSY securities are "purchased" or a smaller electronic ledger system maintained by the TSY for securities purchased through the TSY direct online platform. Either way, all clearing of purchases and sales of TSY securities happens via the Fed as the Central bank, because the Govt only makes payments and accepts payments from\for TSY securities transactions w US currency aka reserves (fed liabilities).
The relevant source material:
"At the top tier of CBES is the National Book-Entry System (NBES), which is operated by the Federal Reserve Banks. For Treasury securities, the Federal Reserve operates NBES in their capacity as the fiscal agent of the U.S. Treasury. The Federal Reserve Banks maintain book-entry accounts for depository institutions, the U.S. Treasury, foreign central banks, and most government sponsored enterprises (GSEs)."
https://www.treasurydirect.gov/instit/auctfund/held/cbes/cbes.htm
"Do I have a choice as to where my Treasury securities are kept?
All Treasury securities are issued in what is called "book-entry" form - an entry in a central electronic ledger. You can hold your Treasury securities in one of three systems: TreasuryDirect, Legacy Treasury Direct (existing accounts only), or the Commercial Book-Entry System. TreasuryDirect and Legacy Treasury Direct are direct holding systems where you have a direct relationship with us. (NOTE: Legacy Treasury Direct is being phased out.)
The Commercial Book-Entry System is an indirect holding system where you hold your securities with your financial institution, government securities broker, or dealer. The Commercial Book-Entry System is a multilevel arrangement that involves the Treasury, the Federal Reserve System (acting as Treasury's agent), banks, brokers, dealers, and other financial institutions. So, in the Commercial Book-Entry System, there can be one or more entities between you and the Treasury."
http://www.treasurydirect.gov/instit/research/faqs/faqs_basics.htm
And plenty more pertinent information can be found at the US Govt publishing office:
http://www.ecfr.gov/cgi-bin/text-idx?node=31:2.1.1.1.53&rgn=div5
Either way both US Currency (reserves) and TSY securities are IOUs of the federal Govt (the Fed is a dept of the US Govt after all). SO either you have reserves and GOvt owes you tax credits or Govt services or you have TSY securities and the GOvt owes you reserves, it doesnt make much of a difference. Its just the operational reality of the monetary system.
Since TSY securities are nothing but dollar savings deposits at the Fed, and are misnamed "debt" ... why are we talking about this?
Auburn, maybe you should read the post again. If you think it is about the Federal debt you are a fool.
Auburn Parks said...
“They are not technically liabilities of the Fed because they are liabilities of the TSY”
Yes, so technically they are not dollar savings deposits at the Fed.
Auburn Parks said...
“TSY securities are IOUs of the federal Govt”
Yes, so technically TSY are debt instruments, and not misnamed "debt" because of mainstream A) ignorance or B) malice.
Auburn Parks said...
“Either way both US Currency (reserves) and TSY securities are IOUs of the federal Govt (the Fed is a dept of the US Govt after all). SO either you have reserves and GOvt owes you tax credits or Govt services or you have TSY securities and the GOvt owes you reserves, it doesnt make much of a difference. Its just the operational reality of the monetary system. “
Ok if you want to make the argument that the Treasury and FEDs balance sheet should be view on a consolidated basis this make sense, but the relationship between Fed and Treasury is such that the two are not consolidated.
The Treasury cannot ask the Fed to credit its account, nor can the Treasury print up a bond and give it to the Fed in exchange for spending power. The only way the Treasury can spend is by moving previously acquired funds that are held in the private banking system into its Federal Reserve account—and the only way it can acquire these funds is through taxes and bond issues.
Implying that there is little difference between reserves and TSY is not accurate operational reality of our monetary system.
Oilfield-
Sorry, but TSY securities are nothing but savings deposits on a central electronic ledger maintained by the Fed. That is just about the exact definition of a savings account.
If debt = IOUs than reserves are also Federal Debt even though they are not counted as such. The reason for the contradictory definitions (TSY securities aka savings deposits = debt and reserves aka checking deposits =/= debt) is either mainstream A) ignorance or B) malice.
So you are 0 for 2 thus far, but I will give you one thing. You are right that the TSY cannot order the Fed to credit its account without any other corresponding action. The reason for that is simple, the TSY is not the boss. The TSY has limited authority to tell the FEd what to as the TSY is just another Govt agency. However, COngress is the Fed's boss, and as the Fed's creator can instruct the Fed to do whatever the will of the people happens to be. So any lines drawn between the Fed and TSY are self-made by Congress and as such are not binding in any meaningful sense. The only reasons the operations are as convoluted as they are currently comes from the mainstream's A) ignornace or B) malice. In order to confuse good people like yourself as to the operations and nature of the monetary system
Art-
Your entire piece was about the ratio of one specific type of Govt IOU to the combined spending of the entire Dollar economy, an utterly meaningless concept. In that light, I think its you who is foolish
So I'm not an economist and I'm not intimately familiar with FRED data. You can take my opinion with as much salt as needed.
It struck me as very, very odd that you could have a negative real debt-to-GDP ratio in 1947, regardless of how big an "inflation adjustment" you make. What does that mean? How can you square a negative burden of debt on the economy with the fact that, in nominal terms, debt is over 100% of GDP?
So I took a look at the excel sheet that you posted. The way that the red line is calculated is to take the accumulated change in inflation-adjusted debt (i.e., the accumulated inflation-adjusted deficit), and then divide by the real GDP. The accumulation starts at 1947, with a negative number, because there was a surplus. So the first data point on the red line is the 1947 surplus divided by the 1947 real GDP. That makes little sense to me, as it uses a flow as a proxy for a stock.
This is a major zero-point problem with the graph, and it makes it look dramatically different from every other graph of this kind of data.
As an attempted fix, I replaced the accumulation starting point (assumed to be zero, but demonstrably not zero) with the actual nominal debt amount in 1947. Cell H21 currently reads "=E21". Replace that with "=(K21/100)*L21". Now the lines both start at the same place with the debt burden at 102% of 1947 GDP.
I'm not really convinced that this shows anything at all, but the graph looks more intelligble like this.
Anonymous 2:09 here.
I gave a little further reflection to this. By zeroing the "inflation adjusted" debt-to-GDP ratio in 1947, the graph you created subtracts the 1947 debt (in 2009 dollars, I think) from all future data points. That subtraction component starts off dominating the data (giving you zero or less on the y-axis), but is inflated away as the data series progresses. Once you get into the 80s and 90s, the data is dominated by the debt levels you're trying to graph, and the two lines track each other.
If you re-set the starting point of the data as I recommend in my comment, what you see is that they "inflation adjusted" burden of debt is always greater than what you call the "nominal" burden of debt. The two measures diverge, and pretty strongly. If you subtract the blue line from the corrected red line, you get what I would call an "inflation dividend"--the benefit to the government of having its debts denominated in dollars that are becoming less valuable. That benefit goes up from zero to about 18% of GDP in 1947-1957. It then levels off until 1969, and increases to about 40% of GDP in 1981 before leveling off again.
So what does this show us? It looks to me like it's just tracking periods of higher inflation. The post-war period had higher inflation, relieving debt pressure on the USG. Then it leveled off until the eve of the late 60s through the 70s, when inflation occurred again. If you adjust the nominal debt of the government for inflation, removing the benefit it gained from those depreciated debts, the governmental debt looks bigger. No profound insight hidden within.
I note the irony of chiding Noah for confusing stocks and flows (in your "They Didn't" post) and then relabeling a one-year flow an accumulated stock.
Blogger Auburn Parks said...
“Sorry, but TSY securities are nothing but savings deposits on a central electronic ledger maintained by the Fed. That is just about the exact definition of a savings account. “
Give me a reference on point (not your interpretation) where something maintained on an electronic ledger at a bank not accounted for as a liability and is classified as a savings deposit on the balance sheet.
Blogger Auburn Parks said
If debt = IOUs than reserves are also Federal Debt even though they are not counted as such. The reason for the contradictory definitions (TSY securities aka savings deposits = debt and reserves aka checking deposits =/= debt) is either mainstream A) ignorance or B) malice.
This answer is crazy? Reserves are FED liabilities, and are accounted on their balance sheet as such (loans/debt for banks are carried on the asset side of the balance sheet).
Who and when exactly does the FED owe reserves to?
Reserves are not a debt instrument (not an IOU) they have no predetermined duration or settlement and exist until they are removed from the system by the FED.
TSY are a debt instrument that defines a specific duration for settlement (the when) and are paid to the entity who owns them (the who) in dollars (IOU).
Blogger Auburn Parks said
“COngress is the Fed's boss, and as the Fed's creator can instruct the Fed to do whatever the will of the people happens to be. So any lines drawn between the Fed and TSY are self-made by Congress and as such are not binding in any meaningful sense.”
You have to be kidding right? Most of the lines we are talking about between Congress and the FED and Congress and the Treasury are written on paper, which are called laws.
So laws to you are more of a suggestion, which is not binding in any meaningful sense.
You can also conjure up any operational connections you want and say if the congress just does what I say then my definition of how things work is correct.
Why should your sets of values be the paradigm for the rest of us just because you say so?
We are all born ignorant, but one must work hard to remain stupid. (Benjamin Franklin)
Stop working so hard.
First things first.
Auburn, I am often foolish. Some things can't be helped.
In Catch-22, the catch was "You have flies in your eyes, but you can't see them because you have flies in your eyes." That's what I want to tell you sometimes when you object to what I write.
When I read Noah's post, I saw a smart guy misinterpreting a graph -- interpreting it the way everyone does, which is in error. If my interpretation of the graph is right, if others are in error, and if I can make a correction to general thinking on this issue, it will change everything.
That is what my post is about.
If you have a problem with what Noah's graph shows, you should take it up with Noah. But he will have heard it a million times before, as I have.
Anonymous... Anonymous 2:09 that is,
(I'm not an economist either. FRED is great.) Thank you so much for your thoughts. I cannot do them justice in a quick reply...
I wrestled with the "major zero-point problem" you describe. I considered using for an initial value the whole debt of that first year, rather than just the one-year increment. That would have raised the starting level, and raised the whole graph along with it. It also might have resolved your problem with the first value being a flow value rather than a stock value.
For simplicity and clarity of presentation I decided to use the one-year increment for all the values, including the first. But I am glad my decision troubles you. It means you really understand what I was up to. And that is most satisfying.
You wrote:
By zeroing the "inflation adjusted" debt-to-GDP ratio in 1947, the graph you created subtracts the 1947 debt (in 2009 dollars, I think) from all future data points...
From all future data points: exactly. But one would have to take the 1947 debt and "process" it the same way one processes the most recent year's debt: Split off the most recent year's addition to debt (to be adjusted by the most recent year's price factor) and then repeat the process for the debt that remains, working your way back to the beginning of the accumulation.
I was hindered by FRED's GDP Deflator which goes back only as far as 1947. That's what determined my start-year for the adjusted data.
That subtraction component starts off dominating the data (giving you zero or less on the y-axis), but is inflated away as the data series progresses. Once you get into the 80s and 90s, the data is dominated by the debt levels you're trying to graph, and the two lines track each other.
That's interesting. I was thinking that if the raging inflation of the 1970s had continued in the 1980s and 1990s, debt-to-GDP in the latter decades would have been flat as it was in the 1960s and 1970s. That's my ground zero notion, and that's why I am so quick to respond when someone like Noah or Scott Sumner looks at a debt/GDP ratio and ignores what inflation does to it.
My God! People misunderstand the economy because inflation changes the patterns on graphs!
If you re-set the starting point of the data as I recommend in my comment, what you see is that they "inflation adjusted" burden of debt is always greater than what you call the "nominal" burden of debt.
Yes indeed. Because inflation increases income (or it did, in the 1970s) and new borrowing also, but not existing debt. Or we can say that if inflation eases the burden of debt, then taking inflation out of the numbers increases the burden. (See the green line on Graph #2.)
So what does this show us? It looks to me like it's just tracking periods of higher inflation.
Important question. If you look at Noah's graph or at the blue line on my Graph #5 here, you see debt going down until the early 1980s, and then a sudden increase. And you want to explain that, as Noah does. But if you look at the red line on my #5, you can see that debt was increasing all along -- that new borrowing was growing all along, and that inflation hid the fact from us.
So then, if you know this, you don't do what Noah did. You don't look at the blue line and try to explain the early-1980s change in terms of some theory, like Noah was trying to do. Maybe I'm not saying this well, I don't know. But this is huge. Many people blame Reagan (or the Democratic Congress of Reagan's time) for the sudden increase in the blue line, but that is just totally wrong.
That's what the calculation shows.
Keep in touch, 209.
"See the green line on Graph #2" here:
http://newarthurianeconomics.blogspot.com/2012/05/debt-and-inflation-4-recalculating.html
Oilfield-
"Give me a reference on point (not your interpretation) where something maintained on an electronic ledger at a bank not accounted for as a liability and is classified as a savings deposit on the balance sheet. "
You dont need a reference, all you need is some common sense and a little bit of logic. What is the difference between a 6-month CD at Chase and a 6-month T-bill? The answer is, not much, one is marketable and the other is not. Both are effectively guaranteed by the federal Govt (up to $250K for a CD). With a private CD the bank owes you its financial assets whereas with a 6-month T-bill the Govt promises only to repay one of its liabilities with another one of its liabilities (Govt is the only institution that gets to do this btw, pay off its liabilities with its own liabilities).
"This answer is crazy? Reserves are FED liabilities, and are accounted on their balance sheet as such (loans/debt for banks are carried on the asset side of the balance sheet).
Who and when exactly does the FED owe reserves to?"
First of all, regular people cannot hold digital reserves at the Fed because only banks and Govts are allowed to have reserve accounts, so the whole concept is a little murky. But if you have $100 in cash (reserves) the Govt owes you either that amount of tax credit or that amount of Govt services (assuming the office accepts cash of course:), like passports etc.
"Reserves are not a debt instrument (not an IOU) they have no predetermined duration or settlement and exist until they are removed from the system by the FED."
LOL, you literally just admitted that Reserves are FEd liabilities, and liabilities are literally defined as IOUs.
"TSY are a debt instrument that defines a specific duration for settlement (the when) and are paid to the entity who owns them (the who) in dollars (IOU)."
Reserves are a specific duration (no maturity), and pay a specific iinterest rate (digital reserves at the Fed pay .25% and cash pays 0%). so you are simply wrong about this stuff.
"You have to be kidding right? Most of the lines we are talking about between Congress and the FED and Congress and the Treasury are written on paper, which are called laws."
Right, laws that Congress made and can change at any time it likes. Thats how congress works after all, it makes the rules.
"So laws to you are more of a suggestion, which is not binding in any meaningful sense."
Not for Congress, when you make the rules, the dynamic is completely different for you.
"You can also conjure up any operational connections you want and say if the congress just does what I say then my definition of how things work is correct."
Nothing I've said requires any law changes by Congress, I've only described the system as it is currently constituted, that you dont understand or know the operations is your fault and has nothing to do with anything I've said.
Auburn
You dont need a reference, all you need is some common sense and a little bit of logic. What is the difference between a 6-month CD at Chase and a 6-month T-bill? The answer is, not much, one is marketable and the other is not. Both are effectively guaranteed by the federal Govt (up to $250K for a CD). With a private CD the bank owes you its financial assets whereas with a 6-month T-bill the Govt promises only to repay one of its liabilities with another one of its liabilities (Govt is the only institution that gets to do this btw, pay off its liabilities with its own liabilities).
It seems you are arguing with yourself, you ask what the difference is, then say not much, and then provide two significant differences. You cannot take things that are similar and say they are the same if you just ignore what is different about them.
First of all, regular people cannot hold digital reserves at the Fed because only banks and Govts are allowed to have reserve accounts, so the whole concept is a little murky. But if you have $100 in cash (reserves) the Govt owes you either that amount of tax credit or that amount of Govt services (assuming the office accepts cash of course:), like passports etc.
I really do not have a clue on this one. Are you saying that if I hold cash I can demand from the government tax credits, or services in exchange for my cash?
LOL, you literally just admitted that Reserves are FEd liabilities, and liabilities are literally defined as IOUs.
Liabilities are not literally defined as IOU’s. Debt is literally defined as IOU, but while all debt are liabilities not all liabilities are debt.
The definition of a liability is much broader than that of a debt.
A liability is any economic obligation. Debt is a liability, and of course borrowers are obligated to repay their loans. But liabilities regularly arise from things besides borrowing. FED reserves are a prime example of a liability which occurs without borrowing?
Reserves are a specific duration (no maturity), and pay a specific iinterest rate (digital reserves at the Fed pay .25% and cash pays 0%). so you are simply wrong about this stuff.
Do you have a clue what duration is? Let me help you.
In finance, the duration of a financial asset that consists of fixed cash flows, for example a bond, is the weighted average of the times until those fixed cash flows are received. When an asset is considered as a function of yield, duration also measures the price sensitivity to yield, the rate of change of price with respect to yield or the percentage change in price for a parallel shift in yields.
You cannot calculate any of this if maturity is infinite.
The FED does not pay interest on all reserves. Pay attention here I am going to us another technical term. They pay interest on excess reserves and do not pay interest on required reserves. So the IOR is compensating banks for holding reserves that are in excess of what they are legally required to hold. Not because Reserves are debt.
On the rest of your comments it seems you are still working very hard.
Oilfield-
Sorry but this is going nowhere.
Tsy securities are effectively term savings accounts that are on an electronic ledger maintained by the Fed. The fact that they are nominal liabilities of the TSY is pretty much irrelevant. TSY securities and reserves are both IOUs aka liabilities of the US Govt.
And of course the Govt owes things for your cash (reserves). The Govt promises to accept your cash in exchange for extinguishing your tax liabilities and it accepts your cash in exchange for Govt services, Im not sure how this obvious fact can be controversial in your mind.
And you are wrong, the Fed pays interest on all reserves:
"The Federal Reserve Banks pay interest on balances maintained to satisfy reserve balance requirements and on excess balances. The Board of Governors has prescribed rules governing the payment of interest by Federal Reserve Banks in Regulation D (Reserve Requirements of Depository Institutions, 12 CFR Part 204)."
http://www.federalreserve.gov/monetarypolicy/reqresbalances.htm
Auburn
And you are wrong, the Fed pays interest on all reserves:
You are correct in my haste I posted a draft response incorrectly.
However it does not change the point that interest on reserves do not make Reserves debt.
OIlfield-
All Govt IOUs are a debt aka financial liability of the Govt. Reserves are checking accounts at the Fed and securities accounts are functionally term savings accounts at the Fed and Tsy more like a CD than a mortgage.
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