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

reuters.com

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

#171

Post by jgalt212 »

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…

> 3. Banks can't simply accept cash from depositors and be done with it. They need to convert that cash into an asset of some kind. And right now, the asset of choice is short term treasuries (exactly the thing in short supply).

When interest rates are 0% there's nothing stopping them from doing this.

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

#172

Post by 8note »

imtringued wrote: post #158
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.

When interest rates hit 0% your money is fake and you haven't realized it yet. This isn't the fault of the Fed.

As long as you can use it to buy things and pay taxes, your money is real.

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

#173

Post by edgyquant »

imtringued wrote: post #154
edgyquant wrote: post #92

Earlier quoted context omitted.

Deflation would be a good thing (as the cash would be worth more.) Cash is a depreciating asset due to inflation (it isn’t a liability.)

If nobody spends their money then your economy will end earlier than it should have. People advocating for deflation say they will still spend their money but what they really mean is that they will spend the money on basic living expenses and that is it. They will save the rest. How else would they benefit from deflation? If they spent all their money they wouldn't benefit from deflation as their incomes stagnate or…

I don’t advocate for deflation there’s a reason why we have targeted inflation I was just clarifying that deflation doesn’t make cash lose money (except for in the meta way you’ve described) while inflation does.

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

#174

Post by thu2111 »

imtringued wrote: post #157
thu2111 wrote: post #153

Earlier quoted context omitted.

That seems backwards: people at the end of their life aren't saving, they're spending the money they saved via pensions earlier in their life.

>people at the end of their life aren't saving, >they're spending the money they saved via pensions earlier in their life. I'm confused. You are contradicting yourself. Saving isn't just the accumulation of money. Saving is the act of keeping money in your bank account. Unless you spend the entirety of your pension, the money you haven't spent is saved until you die.

By that definition anyone with a bank balance above zero is saving money, but that's not the normal definition of the term. Saving money does normally mean the accumulation of money.

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

#175

Post by conanbatt »

new_realist wrote: post #145
conanbatt wrote: post #115

Earlier quoted context omitted.

If inflation goes up and ratings go up, mortgages get expensive, and then housing more unaffordable. Your debt is liquified but your house value also goes into the crapper.

Over 30 years, though, your salary will go up with inflation, but your fixed rate mortgage payments will not.

And what happens to the 30% house value down at 5x leverage?

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

#176

Post by mlac »

jkhdigital wrote: post #72
Zelphyr wrote: post #2

Can someone provide a ELI5 for this?

At a very high level, this is one among many Rube Goldberg-esque interventions in financial markets that the Fed uses to try and whip markets into behaving how it wants. In more concrete terms, banks (i.e. members of the Federal Reserve System) keep USD reserves on deposit at the Fed. The only thing they can do with these reserves is loan them overnight to other member banks at a market-determined interest rate--the…

Can you check my understanding here? So all this money builds up, they have no one to lend it to (except the Fed), which they have to because of the SLR.

The Fed raises rates in two years, and banks can lend out, but people a) can't afford the monthly payments for current prices at higher interest rates or b) have extra money from QE and don't need debt. Prices fall for things that require debt (cars, houses, college), but go up for things that people can pay for in cash? Less total is lended out due to the falling prices of things and increased interest rates? The whole volume of money moving around the economy decreases.

The Fed can inject more money, but there will already be too much (at large banks and corporations) on the market that is already not allocated effectively.

I guess... I'd be interested to hear your thoughts on what happens next?

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

#177

Post by xxpor »

sschueller wrote: post #146
new_realist wrote: post #58

Earlier quoted context omitted.

The bankers are not the ultimate buyers of mortgage bonds. The Fed is. So, these low interest rates are not a predictor of lack of inflation, but a reflection of policy. The government is taking this risk.

"The government is taking this risk" meaning the Tax payer. Which is you and me but not people like Bezos or Musk.

That's not how a sovereign budget works.

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

#178

Post by thesagan »

iudqnolq wrote: post #116
thesagan wrote: post #26

Earlier quoted context omitted.

Although you're being downvoted, this is a growing sentiment among researchers and others near the field. There are calls to improve measurements of a society's wealth, as well as individual. Current headlines use the broad statistics, such as the most exclusive unemployment stats, that don't really capture what's happening on Main Street. The reporting on the economy barely pokes at issues and are generally just loo…

> Current headlines use the broad statistics, such as the most exclusive unemployment stats, that don't really capture what's happening on Main Street. You probably know this, but just to clarify economics has many more complicated statistics than those that make it into newspaper headlines. For example, the "unemployment number" is technically U1. U2, U3, U4, etc. capture different nuances.

Yep, that's exactly what I was hinting at.

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

#179

Post by foogazi »

rrss wrote: post #59
foogazi wrote: post #49

Earlier quoted context omitted.

> 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. opinion - feels - seems ? Do you have any sources for your unpopular opinion?

you don't need to have sources to state an opinion on how things feel

You need sources/facts to form an opinion. Otherwise you are pulling opinions out of thin air.

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

#180

Post by alfiedotwtf »

OldHand2018 wrote: post #144
aazaa wrote: post #121

Earlier quoted context omitted.

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.

A significant number of US money market funds have been operating under fee waivers to keep yields positive since last year. One of my retirement accounts sent me an email stating that their fee waiver expires June 30 of this year and can’t be extended. This is very different from “breaking the buck”, but I am curious to see what things would look like if money market yields went negative, which apparently is likely…

I'm curious but don't know enough about this topic. What could be likely impacts?
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