OK what is REALLY going on here with the Fed and banks??

Discussion in 'Political Issues' started by czsmithGT, Sep 20, 2019.

  1. czsmithGT

    czsmithGT

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  2. bdcochran

    bdcochran

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    Ok. The federally insured banks are required to keep a %, very small, of deposits as cash or ready cash on hand.
     

  3. rj1939

    rj1939

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    "Supposedly" it was triggered by tax payments that had to be made................that were known well ahead of time :dunno:

    And for some reason, banks that had excess liquidity, didn't put it out to the banks that were in trouble. The repo's that have happened over the last few days, have been oversubscribed (more demand, than what the Fed offered up) From what I understand.
     
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  4. czsmithGT

    czsmithGT

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    Well $75 billion a day for what, 20+ days, is how much? Sounds like it dwarfs the last bank bail out. Where is this money coming from?
     
  5. 'Ol Grandad

    'Ol Grandad Director of civil unrest

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    They have printing machines that just make money out of some paper and ink. :crazy:
     
  6. Victor Dubya

    Victor Dubya The Kindly Curmudgeon

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    I heard Beck talking about this this morning. The money comes from the printing press as I understood it. But this is waaaaay above my pay grade. He made it sound like 2007 2.0 is on the way.
     
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  7. bdcochran

    bdcochran

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    Okl. I add to the response. The banks don't have "to balance" or exactly have the required reserves on a daily basis. They have to have it balanced a certain number of days within a time frame.

    Now, suppose your bank loans out more money than expected or has money checks for cash written than expected, then it does not have the required amount of cash reserves in the vault at the end of the day. So one bank will call another bank and borrow funds overnight and pay interest for that one evening. The bank does that only if it calculates that it will have to balance. Now, suppose a whole bunch of banks have to borrow at the same time! It drives up the overnight interest rate. If the fed didn't pump in cash (which gets repaid), then a bunch of banks will have to stop lending or letting depositors withdraw funds for a period of time if they have to meet the legal reserves requirement. So, the fed steps in. Gradually, the banks will ease up on lending then.


    For the leftwingers - it doesn't mean that Mr. Trump made a mistake.

    For the rightwingers - this happens from time to time, particularly when a bunch of taxes cause companies to remit monies to the government in amounts that the banks did not forecast. It doesn't mean that Mr. Trump has made the economy so great that the tax coffers are overflowing.
     
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  8. rj1939

    rj1939

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    There seems to be a job opening at the NY Fed over this.
     
  9. czsmithGT

    czsmithGT

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    So you are saying over a trillion dollars from the Fed to the banks in a 20 day period is not unusual? And what does any of this have to do with Trump?
     
  10. Guss

    Guss

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    Essentially a subsidy to big business. When do the little guys get theirs?
     
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  11. snerd

    snerd Horselover Fat

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  12. rj1939

    rj1939

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    The takeaway from Powell's speech the other day was that QE will be starting again, just not that day.
    The Fed board is very divided over what to do...............probably not a good sign.
     
  13. BBMW

    BBMW

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    Trump is putting a ton of pressure on the Fed to prevent the economy from sliding into a recession before the election, even if one is called for at this point in the economic cycle. And the Fed is caving.
     
  14. bdcochran

    bdcochran

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    My answer to the challenge is to do the research yourself. I gave an answer.
    Do you have a better one?

    Why do I mention Trump? Because there will always be some dingbat saying it is - fill in the blank (George Bush's fault/Trump's fault/Obama's fault).
     
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  15. dubito

    dubito

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    Let's get real. The Fed has been raising and lowering short-term interest rates since its creation in 1913. There's no mystery about Fed monetary creation and destruction. Anyone who's mystified by the Fed's activities should read an elementary macroeconomics text.
     
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  16. czsmithGT

    czsmithGT

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  17. BBMW

    BBMW

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    Apparently a major cause of the cash crunch is the treasury borrowing to cover the deficit.
     
  18. G19 DB

    G19 DB

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    Glad we have these kind of safeguards in place. I know too little of these things. Paging @WeeWilly
     
  19. WeeWilly

    WeeWilly

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    bdcochran has it right.

    Short term lending seized up in the repo market, rates skyrocketed briefly as liquidity demands simulated what happens every time I go to check out at Lowe’s.

    The Fed stepped in and injected liquidity to calm things down and force yields in the repo market back down where they belong.

    The reason the Fed kept going is banking is all about confidence. As long as everyone is confident the Fed is there, panic can’t rule the day.
     
  20. snerd

    snerd Horselover Fat

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    So how did it get to that point? Someone sleeping or normal occurrence?
     
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