What the hell is going on.#reverserepo data from @aRishisays feed.
— Dave Loves Carnage (@dapstats) May 26, 2021
ht @DiMartinoBooth @tyillc @TheBondFreak @bondstrategist @MotherCabriniNY @homerixy32 @kimgits1 @VlanciPictures pic.twitter.com/DMVvUaocxm
This is funny you have all these people (finally, we’ve been covering this here for years) talking about this but NOOOOOOBODY is asking why the Fed is doing this in the first place... it’s as if all these people think the reserve balance accounting abstractions are real and they are flying in from Mars or something...
WHERE is the technical criticism of this policy? (Other than here...). Where??? Where is it???
DOES... NOT... EXIST... ANYWHERE... ELSE...
You have the Fed creating/issuing $120B per month of reserve balances for over a year to the point where they have eliminated the ability of their DEPOSITORIES (yo key syllable here being ‘DEPOSIT’) to accept deposits. Why? Why would anyone want to do that?
Then having just created/issued them in the system, they now have to take them out or redeem them... having just put them in.... why? Why not just don’t put them in in the first place?
All this is doing is creating another LARGE account of reserve balances in the system that can for whatever reason (rates are reduced further and MMMFs close to new investors?) for whatever reason doesn’t matter...these balances, as long as they exist, can come rushing back in to the depositories and cause another crash in risk asset prices like they always do... when the FRA charges them with “stable prices”...
It’s a BAD POLICY ... and dangerous ... that directly conflicts with other regulatory constructs... its impairing the ability of their own depositories to perform their function within the system... and btw it’s Monetarist at core ... with the people there thinking these regulatory accounting abstractions are real and they have to “be there” so depositories can lend them out.. if not then what is the reason? What?
All the people there need to be CANNED...
7 comments:
Reassign them to the Pentagon.
Ha the Military people would figure it out...
These are the (at BEST) C students we have working in this area...
These are the (at BEST) C students we have working in this area...
Can I get a 3rd?
So when the 450 or whatever the amount they end up doing, is put back into the depositaries we will have contractions in risk asset again (assuming they do it in big chunks that force depositaries to sell risk assets). But until then it's all systems go right because the RRP frees up depositaries ability to lend.
That looks like what they are perhaps thinking... seems to be stabilizing things for now....
Have to see if the Funds that they are diverting the deposits to can accept the projected amounts at the zero rate... the funds have expenses too..
Some conjecture that the Fed can increase the RRP rate a bit above current 0%... to get the funds a little yield to work off... maybe increase the RRP rate to the IOR rate of 0.1%.or so...
Have to see how it works out... in any case it is still a Rube Goldberg lash up..
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