U.S. Fed accepts $756B in daily reverse repo operation • Hacker News Board

Re: U.S. Fed accepts $756B in daily reverse repo operation

#121

Post by aazaa » Thu, Jun 17, 2021, 10:47 PM UTC

jcranmer wrote: post #73

aazaa wrote: post #41

It really helps to have a look at the graph: https://fred.stlouisfed.org/series/RRPONTSYD This is clearly the highest level of reverse repo since the program was introduced, by a wide margin. There are three factors behind this: 1. The Treasury has temporarily backed off issuance of short term debt as it drains down an overflowing General Account. https://www.reuters.com/article/us-usa-treasury-liquidity-ex... 2. Ban…

> Such an occurrence would send a very unexpected signal to markets and could result in panic as investors see the value of money market funds shrink for the first time ever. Apparently "ever" covers neither 2008 (where the Lehman Brothers bankruptcy caused the money market to implode) nor 1994, nor 1978.

I stand corrected.

https://en.wikipedia.org/wiki/Money_market_fund#Breaking_the...

That said, I think it's safe to say nobody is prepared for what will happen if this became the norm.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#122

Post by jandrewrogers » Thu, Jun 17, 2021, 10:50 PM UTC

throwawaycities wrote: post #40

enraged_camel wrote: post #14

This might be an unpopular opinion, but the economy we have right now feels quite fake, for lack of a better word, in the sense that the official numbers that are reported don't seem to reflect its actual health. I find it deeply concerning that every warning sign is summarily dismissed as "transitory" and the government and the Fed continue to drive full speed ahead.

Not sure why you are down voted, everyone (when it benefits them) takes credit for the “greatest economy the world has ever seen” and “record stock market”, simultaneously they ignore record wage stagnation, record income gaps, record homelessness, record student loan defaults, record debt defaults of nearly every kind, record young people living at home to record high ages…I’d say record high unemployment, to which…

Canceling debt creates a taxable event for the person with the debt under the tax code. Transferring money to a person and then voiding the liability is indistinguishable from unearned income, and is taxed as such. People aren't going to be very happy when they get hit with an unexpected $10k tax bill due immediately.

Similarly, the people with the largest student loan debt tend to be affluent. Gifting the affluent more money than a poor person who could not afford school may be able to save in their lifetime is a bad look politically, and would be deeply unfair.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#123

Post by selectodude » Thu, Jun 17, 2021, 10:51 PM UTC

notahacker wrote: post #94

MuffinFlavored wrote: post #34

Earlier quoted context omitted.

> they store their cash with the fed (through a repo [repurchase] agreement) temporarily. What does this gain them? Are they paid interest?

Contrary to the other two replies, yes, they are paid interest (it's a reverse of the standard repo where they borrow money from the Fed and pay the interest)

Reading the comments on financial articles on HN makes me question the comments on the stuff I don't actually know something about.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#124

Post by spiralx » Thu, Jun 17, 2021, 10:52 PM UTC

1-6 wrote: post #65

mensetmanusman wrote: post #38

Unprinting the monies

If money is printed, can it ever be destroyed?

Just as bank lending creates money, paying back bank loans destroys money. Money is also created or destroyed by banks purchasing or selling debt assets such as government bonds.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

Re: U.S. Fed accepts $756B in daily reverse repo operation

#125

Post by f38zf5vdt » Thu, Jun 17, 2021, 10:52 PM UTC

andrekandre wrote: post #117

aazaa wrote: post #41

It really helps to have a look at the graph: https://fred.stlouisfed.org/series/RRPONTSYD This is clearly the highest level of reverse repo since the program was introduced, by a wide margin. There are three factors behind this: 1. The Treasury has temporarily backed off issuance of short term debt as it drains down an overflowing General Account. https://www.reuters.com/article/us-usa-treasury-liquidity-ex... 2. Ban…

Reverse repo is when the Fed loans treasuries to banks, typically at very low rate and no more than one day. This avoids the need for the Fed to sell its short term treasuries on the open market. coming from a programmers mindset, my immediate reaction was "this seems like a hack, whats the root cause of the issue, we should fix that instead"... i wonder what us the root cause? or in economics, i guess its never so s…

Whenever I delve into this stuff in depth it feels like people are explaining the world's most complicated PID controller for dealing with the human economy, which is itself a product of human psychology. Since no one understands the latter, it seems like economics is just the constant over-fitting of mathematics to the incomprehensible.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#126

Post by andrekandre » Thu, Jun 17, 2021, 10:52 PM UTC

Geee wrote: post #78

enraged_camel wrote: post #14

This might be an unpopular opinion, but the economy we have right now feels quite fake, for lack of a better word, in the sense that the official numbers that are reported don't seem to reflect its actual health. I find it deeply concerning that every warning sign is summarily dismissed as "transitory" and the government and the Fed continue to drive full speed ahead.

This is what happens when a central authority is controlling the economy. Everyone should know that free markets can allocate resources better than any central planner, but still somehow those economists think that we need central bank policies to control the whole thing. Central planning might be appeling idea especially for those who benefit from it, and provides unlimited avenues for complex economic theories, but…

  Everyone should know that free markets can allocate resources better than any central planner

for the most part yes, but market failure is a thing... 1929 being the best example...

and what the fed is doing is reacting to trends to prevent the system from tilting out of control, not centrally planning things (when the fed starts making 5-year plans then we can talk)

Re: U.S. Fed accepts $756B in daily reverse repo operation

#127

Post by lvs » Thu, Jun 17, 2021, 11:07 PM UTC

f38zf5vdt wrote: post #125

andrekandre wrote: post #117

Earlier quoted context omitted.

Reverse repo is when the Fed loans treasuries to banks, typically at very low rate and no more than one day. This avoids the need for the Fed to sell its short term treasuries on the open market. coming from a programmers mindset, my immediate reaction was "this seems like a hack, whats the root cause of the issue, we should fix that instead"... i wonder what us the root cause? or in economics, i guess its never so s…

Whenever I delve into this stuff in depth it feels like people are explaining the world's most complicated PID controller for dealing with the human economy, which is itself a product of human psychology. Since no one understands the latter, it seems like economics is just the constant over-fitting of mathematics to the incomprehensible.

It is definitely a process with an incredibly long lag. What's amazing is that some of these control loops have only been operational since 2008 and/or 2013.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#128

Post by ProjectArcturis » Thu, Jun 17, 2021, 11:14 PM UTC

AnimalMuppet wrote: post #62

aazaa wrote: post #41

It really helps to have a look at the graph: https://fred.stlouisfed.org/series/RRPONTSYD This is clearly the highest level of reverse repo since the program was introduced, by a wide margin. There are three factors behind this: 1. The Treasury has temporarily backed off issuance of short term debt as it drains down an overflowing General Account. https://www.reuters.com/article/us-usa-treasury-liquidity-ex... 2. Ban…

> Such an occurrence would send a very unexpected signal to markets and could result in panic as investors see the value of money market funds shrink for the first time ever. Not the first time ever. At least two money market funds "broke the buck" (that is, lost value) in 2008, IIRC.

Yes, although the investors were made whole fairly quickly.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#129

Post by cwkoss » Thu, Jun 17, 2021, 11:36 PM UTC

samatman wrote: post #86

csomar wrote: post #77

Earlier quoted context omitted.

> Because they can force the rest of the world to keep using USD at gunpoint? And the alternative? The EUR which is held by an EU that will likely break in the future. The CNY which is held by China (great idea :) ) or Russia's currency which is inflating like there is no tomorrow. Bitcoin/Gold could be a hedge but it's quite volatile to preserve value especially for short/medium term holding periods. There is no alt…

Bitcoin would no longer be volatile if it expanded to represent an appreciable global fraction of liquid value. Which is a huge if! That's the maximalist bet, and I still have trouble believing in it even as I've watched intermediate predictions come true. If the BTC chain became a Schelling point, where all market players see it as their best move to hold some, then eventually a satoshi could be worth about a 2021 U…

The total value of all gold ever mined is just 10.5x greater than Bitcoin's market cap. It was only 6.1x at the peak in April.

From my maximalist perspective, we aren't that far from Bitcoin becoming a viable global reserve currency (El Salvador just made it legal tender, other countries are investigating doing the same).

The moon may not be that far away.

Re: U.S. Fed accepts $756B in daily reverse repo operation

#130

Post by cwkoss » Thu, Jun 17, 2021, 11:40 PM UTC

jandrewrogers wrote: post #122

throwawaycities wrote: post #40

Earlier quoted context omitted.

Not sure why you are down voted, everyone (when it benefits them) takes credit for the “greatest economy the world has ever seen” and “record stock market”, simultaneously they ignore record wage stagnation, record income gaps, record homelessness, record student loan defaults, record debt defaults of nearly every kind, record young people living at home to record high ages…I’d say record high unemployment, to which…

Canceling debt creates a taxable event for the person with the debt under the tax code. Transferring money to a person and then voiding the liability is indistinguishable from unearned income, and is taxed as such. People aren't going to be very happy when they get hit with an unexpected $10k tax bill due immediately. Similarly, the people with the largest student loan debt tend to be affluent. Gifting the affluent m…

> Similarly, the people with the largest student loan debt tend to be affluent.

I question this. I'd assume the largest student loan debts are held by the middle class, because the affluent didn't take out loans because they paid for their education with cash.