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New York Fed Again Upsizes Liquidity Plans for Turn of the Year

wsj.com

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Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#31

Post by ww520 »

gulikoza wrote: post #26
funemployed wrote: post #13

If I lend my friend $10 every day for lunch and he pays me back the next day and this happens 5 days in a row in what context would it make sense to say I have lent him $50 dollars? The linked discussion about cumulative liquidity seems completely full of FUD and designed to obfuscate rather than illuminate its readers. Less of this and more links to Matt Levine please.

What if he doesn't pay back because ₿TC went down instead of up and he doesn't have it anymore? Ofc he needs the next $10 because now it will go up for sure and he'll make the other $10 back as well... :)

The loans are backed by assets. They will be seized if the loans were not paid back.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#33

Post by qroshan »

AnimalMuppet wrote: post #16

> The $2.93 trillion that the New York Fed will funnel to Wall Street over the next month consists of up to $120 billion each weekday in overnight loans through January 14 and $440 billion in term loans ranging from 3-days to 32 days. We're talking about an overnight loan of $120 billion (that is, a loan that is paid back the next morning, lent again the next night, paid back in the morning, etc. This article is trea…

Welcome to HN, where the articles are never about hacking, but raging, virtue signaling and pitch-forking in a filter bubble they have created.

Look at all the articles on the front page today. How many are improving your true hacker skills and how many are brain-washing your way of thinking?

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#34

Post by ww520 »

harmmonica wrote: post #19

Here is my admittedly ignorant question about this: is it possible that the institutions borrowing these funds are actually using those funds not for relatively low-risk purposes (e.g., paying taxes), but instead to trade "overnight"? Similar to how a high-net-worth individual can borrow against their assets for a very low rate and then turn around and invest those cheap-interest-rate funds into higher-return (i.e.,…

There’s speculation that the negative yield in euro zone causes people to borrow euro to buy dollars to do currency carry trade. This in turn soaks up all the dollars out there.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#35

Post by PeterStuer »

In case like me you wondered "Why would anyone need money overnight? (or just for a second, actually)" EDIT: As the commenter below points out, it is actually over very short periods to even out a 2 week average period, but the mechanic is indeed as explained

AFAIK the "overnight loans" are a vehicle to dodge the reserve requirements for banks. In theory the bank is not allowed to fall below a certain reserve threshold because they would be too fragile towards bank-runs. This is needed because left to their own devices banks would just leverage to the max regardless of their cash position.

The crucial point is that the reserve is only measured at the end of day, so a bank can dip below the safety thresholds as long as they make it up by the evening. Overnight loans allow them to ignore the safeties since they just loan the cash for a brief moment to be in the clear with regulation come the daily measuring, but just return the money straight after the measurement has taken place.

It is an organized method by which the Fed facilitates regulation dodging for the financial sector.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#36

Post by funemployed »

SilasX wrote: post #29
funemployed wrote: post #13

If I lend my friend $10 every day for lunch and he pays me back the next day and this happens 5 days in a row in what context would it make sense to say I have lent him $50 dollars? The linked discussion about cumulative liquidity seems completely full of FUD and designed to obfuscate rather than illuminate its readers. Less of this and more links to Matt Levine please.

>If I lend my friend $10 every day for lunch and he pays me back the next day and this happens 5 days in a row in what context would it make sense to say I have lent him $50 dollars? In a sense, kind of. If your friend is expected to be able to pay for his own lunch (because it's costly to keep covering for him) and only very sporadically need to borrow from you (because e.g. he forgot his wallet), and suddenly you f…

> The daily amount borrowed, by itself, understates the significance.

If someone tells me that the NY Fed is looking to significantly (>25%) increase its overnight and short-term liquidity operations and the necessary increases are in the range of tens of billions of dollars then that already sounds pretty important. I don't see how anything you said is an argument that cumulative liquidity is an appropriate measure here. Instead we both seem to agree that if someone had said - the loans are only $150 billion (because that seems to be the one day aggregate limit) then that person would also be misleading.

My point is not that this isn't an important issue but rather that it is an important issue and as such it deserves serious coverage and the linked article is not it.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#38

Post by cheald »

corporate_shi11 wrote: post #23
AnimalMuppet wrote: post #16

> The $2.93 trillion that the New York Fed will funnel to Wall Street over the next month consists of up to $120 billion each weekday in overnight loans through January 14 and $440 billion in term loans ranging from 3-days to 32 days. We're talking about an overnight loan of $120 billion (that is, a loan that is paid back the next morning, lent again the next night, paid back in the morning, etc. This article is trea…

Except it's not all overnight now. >"The $2.93 trillion that the New York Fed will funnel to Wall Street over the next month consists of up to $120 billion each weekday in overnight loans through January 14 and $440 billion in term loans ranging from 3-days to 32 days. "

The point, more broadly, is that these are loans with a quick expiry baked in. The money comes into and poofs out of existence on a relatively short timescale (ranging from overnight to a couple of weeks); we aren't going to see an extra ~$3T in circulation. They're providing lubrication in the repo markets, they aren't just shoveling cash into the banks' vaults.

Most people misunderstand this point when discussing repo operations, so it's worth emphasizing.

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#39

Post by SilasX »

funemployed wrote: post #36
SilasX wrote: post #29

Earlier quoted context omitted.

>If I lend my friend $10 every day for lunch and he pays me back the next day and this happens 5 days in a row in what context would it make sense to say I have lent him $50 dollars? In a sense, kind of. If your friend is expected to be able to pay for his own lunch (because it's costly to keep covering for him) and only very sporadically need to borrow from you (because e.g. he forgot his wallet), and suddenly you f…

> The daily amount borrowed, by itself, understates the significance. If someone tells me that the NY Fed is looking to significantly (>25%) increase its overnight and short-term liquidity operations and the necessary increases are in the range of tens of billions of dollars then that already sounds pretty important. I don't see how anything you said is an argument that cumulative liquidity is an appropriate measure…

>I don't see how anything you said is an argument that cumulative liquidity is an appropriate measure here.

I agreed that accumulating the entire amount is also the wrong way to account for it (but was pointing out that the daily amount is also an error in the other direction):

>>even if it's not as bad as him having a $50 shortfall (esp since he does pay you back).

Re: New York Fed Again Upsizes Liquidity Plans for Turn of the Year

#40

Post by jstewartmobile »

AnimalMuppet wrote: post #16

> The $2.93 trillion that the New York Fed will funnel to Wall Street over the next month consists of up to $120 billion each weekday in overnight loans through January 14 and $440 billion in term loans ranging from 3-days to 32 days. We're talking about an overnight loan of $120 billion (that is, a loan that is paid back the next morning, lent again the next night, paid back in the morning, etc. This article is trea…

If it is propaganda, who does it serve?

And BTW, where's my $120B overnight loan?

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