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Federal Reserve lent $300B in emergency funds to banks in the past week

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Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#231

Post by Retric »

antibasilisk wrote: post #226
Retric wrote: post #95

Earlier quoted context omitted.

No QE is purchasing something not a loan. https://en.wikipedia.org/wiki/Quantitative_easing . QE creates money from thin air when distressed assets fail. This doesn’t because the asset is still on the banks balance sheet and can thus cause the bank to fail. Which is a critical distinction.

The 'something' here being bonds 99% of the time, so... a funky loan.

The loan was compared to QE, not what was being purchased.

> No QE is purchasing something [generally a debt], not making a new loan.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#232

Post by cvoss »

regpertom wrote: post #178
cvoss wrote: post #61

Earlier quoted context omitted.

> anecdotally I know a few people who are withdrawing all their hard cash Why (anecdotally)? Even if the bank holding your checking/savings account fails, the US federal government insures you up to $250k. And that promise is an important one for the government to make precisely because it tips fear/security scales so that people don't do exactly what your friends are doing, which is contributing to the risk of a ban…

Anecdotally, here’s one: https://en.m.wikipedia.org/wiki/Pyramid_Building_Society Loose summary: Final payout 2005, collapse 1990. Depositors returned 51% of the dollar. As it was happening: govt says nothing to worry about. Months later: no govt guarantee lol. To someone who didn’t get involved in the run: what are going to do for food, all our savings are locked away and it’s a fortnight until next payday. Those ef…

From reading that account, it sounds like the deposits were not actually insured at the time.

> The Victorian government of the time had chosen not to participate in that scheme [an Australia-wide National Deposit Insurance Corporation], believing the government could regulate and supervise societies.

Although, it sounds like the protections in place for Australians today are stronger now and aligned with protections for Americans. https://www.rba.gov.au/publications/bulletin/2011/dec/5.html

The cultural memory in America is that in the 1929 crash there were little to no government protections and economic disaster ensued. Reforms, including the FDIC, were created precisely so that people could lean on the government in time of crisis. The beauty of the FDIC safety net is that it's mere existence reduces the risk of its needing to be used.

And the more recent living memory is our 2008 financial crisis in which the government issued enormous loans (since repaid with interest) to a few large banks to protect the whole banking system, and the belief that, in retrospect, it worked and was a good move.

So I guess my question still is: why distrust the safety nets that are in place, when they are shown to be working? What's the story about a time when the US government enacted an economic security promise and then broke it?

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#233

Post by lazide »

8note wrote: post #213
lazide wrote: post #114

Earlier quoted context omitted.

No, Japan has had massively crashing population, which offset the massive inflationary impact. https://www.macrotrends.net/countries/JPN/japan/population-g... Despite a massive decrease in population, Japan has been mostly flat, when they should be in a strong deflationary environment due to demand destruction - because, you know, people being dead. So hey, if the US population would decrease .5% a year (doesn’t soun…

People being dead also means that people aren't working to provide those services and goods

Those people stopped providing those goods or services decades beforehand though (retirement), while still spending money.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#234

Post by antibasilisk »

Retric wrote: post #231
antibasilisk wrote: post #226

Earlier quoted context omitted.

The 'something' here being bonds 99% of the time, so... a funky loan.

The loan was compared to QE, not what was being purchased. > No QE is purchasing something [generally a debt], not making a new loan.

Purchasing a bond is effectively just loaning money. I don't know why your distinction would have any relevency

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#235

Post by bequanna »

drexlspivey wrote: post #33
chasebank wrote: post #25

Earlier quoted context omitted.

Source? Did we not have rapid asset inflation since QE started in 08? Inflation pops up in all sorts of ways, not just blanket across the board.

Typically people mean core goods (CPI) when they say inflation not stocks and crypto

Umm… Housing? Energy?

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#236

Post by fosk »

light_hue_1 wrote: post #225
fosk wrote: post #170

Earlier quoted context omitted.

Defense spending doesn't contribute not even a little bit to how inflation (CPI) is being calculated, because the DoD is spending money on stuff that doesn't affect the general population. Unless everyone is trying to buy an F22, of course, and that finds its way into the CPI. Not every expense is the same when it comes to the cost of general goods and services.

> Defense spending doesn't contribute not even a little bit to how inflation (CPI) is being calculated, because the DoD is spending money on stuff that doesn't affect the general population. Unless everyone is trying to buy an F22, of course, and that finds its way into the CPI. That's completely wrong. When the government spends on defense that money is not put into a large pit somewhere at Lockheed HQ and then lit…

Defense spending more than doubled from 2000 to 2019, from ~320B to ~730B, while inflation grew on average 2.10% per year during the same time period.

It is true that defense money gets redistributed across the population and into the economy, but that has always been the case and inflation was in check.

The fact that you are insinuating that this has anything to do with the current inflation problem is misleading. In 2023 we are dealing with the fallback of Covid fiscal policies, not defense spending.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#237

Post by Retric »

antibasilisk wrote: post #234
Retric wrote: post #231

Earlier quoted context omitted.

The loan was compared to QE, not what was being purchased. > No QE is purchasing something [generally a debt], not making a new loan.

Purchasing a bond is effectively just loaning money. I don't know why your distinction would have any relevency

It make a huge difference if the bond fails.

Bob the bank buys a bond from Alice. Criss at the central bank in charge of QE buys if from Bob. Alice goes bankrupt and Bob doesn’t care.

Bob the bank buys a bond from Alice. Criss at the central bank loans Bob money. Alice goes bankrupt and Bob’s bank fails.

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#238

Post by matheusmoreira »

mountainriver wrote: post #152
matheusmoreira wrote: post #100

Earlier quoted context omitted.

Not lending money to banks and letting them fail when their "safe" investment strategies fail.

That’s a great way to collapse the banking system and screw over millions of people

> collapse the banking system

Exactly.

> screw over millions of people

People who loaned their money to the banks. Why shouldn't there be consequences for lenders?

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#239

Post by arcticbull »

8note wrote: post #214
arcticbull wrote: post #154

Earlier quoted context omitted.

You’re fighting a straw man, nobody is arguing you need to do what Japan did verbatim. The only argument I’m making is when you allow supply and demand to meet prices stop going up. All the rest is narrative. The answer to where is “up.” Also the prices in Tokyo aren’t insane at all they’re super affordable by any standard.

You've skipped over the criticism. Put a billion houses on Jupiter, and their value will be zero, while new york remains expensive

But if you put a billion houses on Manhattan their value will be zero. There's almost an unlimited amount you can build up. The problem is we're currently putting houses on Jupiter instead of Manhattan through arbitrary restrictions on density. There's single-family zoning in San Francisco! 94% of San Jose. 15% of NYC (25% if you include single and two-family zoning). It's wild. [1] And that's if you can even get the city to approve your development regardless of zoning, parking minimums, etc.

[1] https://www.nytimes.com/interactive/2019/06/18/upshot/cities...

Re: Federal Reserve lent $300B in emergency funds to banks in the past week

#240

Post by SilasX »

jmyeet wrote: post #26

So here's what I'm confused by. The writing was on the wall a year ago for rapid interest rate hikes. This has well-known and predictable effects on long-term bond holdings. Why didn't banks liquidate their long-term bond holdings a year ago? I can guess the answer: they wanted to protect executive bonuses and share prices. They hoped they could just stick their heads in the sands and hold those bonds to maturity. An…

>Why didn't banks liquidate their long-term bond holdings a year ago?

Because if they had all done it then, the crisis would have happened at that time instead of this one. For any mass-liquidation, you can always ask, "well why didn't you beat the rest of the market to dumping this trash?" It's a problem in any bubble.

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