Ever since March 2020, GFC2, Federal Reserve officials from Jay Powell on down have been busy patting themselves on the back for their splendid performance during last year’s big event. Again, market-of-last-resort. It would’ve been much worse, they claim, particularly given what happened in the Treasury market itself which we are supposed to believe QE bailed out just in the [...]
When Ben Bernanke stood up in front of Milton Friedman (it was his 90th birthday) back in November 2002, what he told the co-author of A Monetary History was that the monetary account contained within its pages had become settled, the officially-accepted version of events. What had made the Great Depression truly prolonged and horrific had been the long-ago Federal [...]
Taking our limited repo example from Part 1 a step further still, in real-world operation a bank might put up any number of securities – including any it might have just that day obtained full title too – to secure financing all at once. Thus, there are groupings of securities over which the bank has varying degrees of control – [...]
Denmark’s Niels Bohr considered himself more of a philosopher than a physicist, yet he contributed so much to the groundbreaking approach that became the basis for quantum physics. At the same time Germany’s Werner Heisenberg was writing the famous paper on “his” uncertainty principle, Bohr was purportedly on vacation thinking up the deeper consequences and meaning of all its implications.Upon [...]
Back on February 25, Treasury auctioned 7-year notes and it did not go (as) well. Maybe you remember us saying something about it, and then again and again and… The prevailing view then – and now – was reflation hadn’t just accelerated, the true inflation long-promised by so much “money printing” (or at least by those who equate bank reserves [...]
I am very much prone to bludgeoning several long-deceased equines, and given what’s really going on with the Fed's reverse repo (and nearly all commentary unhelpful surrounding it) this gives me yet another chance to really reuse my cudgel on at least two of them. This another opportunity to fixate more upon bank reserves, a forever topic until everyone learns [...]
Why are Treasury bills the best of the best, the purest of the most pristine? The better part of the answer comes in the form of a mere three letters: O, T, and R. Those happen to stand for on-the-run which in repo simply means dependably liquid. OTR securities are those most recently auctioned thereby the specific securities which have [...]
For what it ever may have been worth, you have to at least acknowledge the Federal Reserve really did put its (own limited use form of) money where its abundant mouth had been. The entire story of the crisis era and then post-crisis experience of “abundant reserves” indicated a monetary situation (liquidity, colloquially) where supposedly money was beyond sufficient. Too [...]
As usual, the focus went to the exact wrong place. In most people’s minds, the idea hammered home by the uniformly compliant financial press, it’s all about inflation and accommodative Federal Reserve policy. According to the current popular breeze, this along with Uncle Sam’s uncontrollable check-writing vigor has put the economy on course to overheating if not drastically so.Didn’t you [...]
Long-term Refinancing Operations (LTRO) became a standard non-standard monetary policy tool in the European Central Bank’s (ECB) toolkit late in 2011. A second confounding (global) banking crisis had struck yet again catching global policymakers with their pants down, this one seemingly centered directly upon Europe. On December 8, 2011, amidst constant rumors (probably real) that two of the major European [...]
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