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Where Has The Fed's Stimulus Money Gone?

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An interesting article written by someone who seems sensible about what has happened to the Fed's stimulus money

"The Obscure, Convoluted and Scary Story"

http://*******.com/o6wnn57

The paragraph that made me think a bit more laterally than I have done before when considering this...

Now about that systemic risk — banks’ balance sheets have swelled thanks to the Fed’s ever-present purchases. These additional reserves would seem to provide added safety for banks until you look at their nature. In a vast over-simplification, the Fed has been buying the banks’ highly liquid AA+ rated securities (e.g. Treasuries, etc. — which are very easily traded on the open market) and has been replacing them with bank reserve deposits at the Fed - which are only available for interbank trade.

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An interesting article written by someone who seems sensible about what has happened to the Fed's stimulus money

"The Obscure, Convoluted and Scary Story"

http://*******.com/o6wnn57

The paragraph that made me think a bit more laterally than I have done before when considering this...

Now about that systemic risk — banks’ balance sheets have swelled thanks to the Fed’s ever-present purchases. These additional reserves would seem to provide added safety for banks until you look at their nature. In a vast over-simplification, the Fed has been buying the banks’ highly liquid AA+ rated securities (e.g. Treasuries, etc. — which are very easily traded on the open market) and has been replacing them with bank reserve deposits at the Fed - which are only available for interbank trade.

The article won't open :(

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I've been trying to get my head around this- I think what's happening is that the Fed is sucking decent liquid collateral out of the system and as a result the ability of the shadow banking system to do it's own version of fractional reserve- rehypothecation- is being damaged.

The implication being that the Fed is operating with an outdated model of the economy that does not fully recognize the role of shadow banking in the credit creation process.

I believe they are taking steps to correct this by doing something called 'reverse repo'- but I have no idea what this is or how it's supposed to work.

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It's crap isn't it? They've sorted out the symptoms of a dysfunctional economy by printing money and buying everything that isn't nailed down, but left the real productive economy to evaporate in a puff of inflation.

I suppose if you don't actually do any work, or produce anything then your outlook on life, looks like it did 10 years ago.

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  • 407 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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