Following up on yesterday’s look at the concept of repo reserves. These are, as hopefully that narrative retelling established, very different from the inert byproducts of QE; or, bank reserves. The explanation for record low and negative yields amounts to a pretty intuitive process, though in practice it is incredibly complex. Sovereign bonds as “pristine” repo collateral (what some Economists [...]
The anniversary actually seems more poignant with each passing year. You would think it would be easy to get used to it, or at least become numb and normalized for the deep inflection it had represented. But the more everything stays the same the closer you are pulled to going back in time and rethinking things from the start. How [...]
For central bankers like Bill Dudley and Ben Bernanke, the Global Financial Crisis was a godsend. So much had been a disaster it was hard to pin down specific failures. Where does one begin? Practically everything went wrong, so take your pick. The Financial Crisis Inquiry Commission (FCIC) did its part pointing the finger at those greedy Wall Street bankers [...]
It wasn’t the first time it had happened, but to that point it did suggest something had changed. Things were going wrong and afterward the very idea of wrong took on an even more disastrous nature. On Monday, September 29, 2008, the Dow Jones Industrial Average plummeted nearly 778 points. It was the largest single day’s point loss in the [...]
Another discussion with Erik Townsend of MacroVoices about bonds, rate cuts, and what's behind everything this year. https://youtu.be/RvFBkFaPKoY
If you haven't had a chance yet, head over to MacroVoices for my latest presentation with Erik Townsend. A rerun of our Harvard appearance, it's an overview of the major points from how we got here to really understanding and appreciated where is here. Here is the MacroVoices page. And the same on Youtube. Some depth and details behind the [...]
They said May 29 was Italians. I say it was collateral. Offshore repo collateral, to be specific. Because we keep seeing May 29 show up everywhere, what happened that day matters. Getting the story straight allows us to properly analyze the craziness in between then and now. From that, we hope to get a better sense of what comes next. [...]
In September 2012, the Federal Reserve’s third QE wasn’t the only major “rescue” of note. The Europeans had benefited from Mario Draghi’s “promise” earlier that summer but that was a little too vague. So, the various governments cobbled together sufficient backing to launch the European Stability Mechanism (ESM). This replaced two other prior “rescues”, neither of which are worth mentioning. [...]
The repo rate above the federal funds rate is an assault on everything we’ve been taught. There is supposed to be a risk-driven hierarchy that governs financial markets, every single one of them. The global economy depends on it. If you are judged to be a higher risk, that’s who pays the higher interest rate. But repo is lower risk. [...]
We’ve seen this all before. Three times. When things started to look better in the Spring of 2015, for example, “better” was more so a term of art. Another way of saying green shoots is “not as bad” or “no longer accelerating to the downside.” These have very different connotations and therefore to make an optimistic case there needs to [...]
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