[Revi]

I started this thread to get some info on what's happening. I've been listening to a lot of sources and it's very interesting. Thanks! We'll see what's happening. At least we live in interesting times!

[Yoshua]

Interest rates must fall...and the stock market must rise.

But it looks like LIBOR is breaking down. Banks simply won't lend their dollars at zero rates...not even below 1 percent (99 on the chart).

Only the Fed can lend at zero or negative rates.

The Repo spiked because the banks froze their lending? And that is why the Fed had to step in?

LIBOR is for the moment the center of the dollar universe. The Eurodollar (off shore dollar) market is a USD 30 Trillion market...without a central bank...

But in the end the Fed has to step in as the central bank of the world.

https://pbs.twimg.com/media/EH9g4T3W4AI ... me=900x900

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Yoshua', ' ')
The Repo spiked because the banks froze their lending? And that is why the Fed had to step in?

[Revi]

$this->bbcode_second_pass_quote('Outcast_Searcher', '')$this->bbcode_second_pass_quote('Yoshua', ' ')
The Repo spiked because the banks froze their lending? And that is why the Fed had to step in?

[StarvingLion]

$this->bbcode_second_pass_quote('', 'T')hey must think something is going on.

[Revi]

Well I guess the crisis is over. Here's an article that explains it all in language that I really don't understand.

I guess they decided to loosen capital requirements for the big bank, and that solved it... From the article below:

"Incidentally, the only hope that the Treasury will prevent this major regulatory overhaul, is Democratic presidential candidate Elizabeth Warren, who last week waded into the debate around last month’s repo turmoil, warning Mnuchin not to use the incident as a rationale for weakening post-crisis regulations. Ironically, just a few days later, that’s precisely what Mnuchin is doing."

https://www.silverdoctors.com/headlines ... gulations/

[Yoshua]

So what basically caused the Repo to spike was that the banks had burned through half of their reserves that the Fed had created for the banks after the financial crisis.

The banks couldn't use the remaining reserves due to regulations imposed after the last crisis. The remaining reserves are ment to protect the banks in the event of financial crisis.

[Yoshua]

But why have the banks burned through the reserves they had access to?

There's a black hole somewhere in the economy. That black hole is right in front of our eyes: the government debt is growing faster than the GDP.

The Fed will now build up those bank reserves again by buying all those treasuries that the banks hold on their balance sheets.

The Fed will monetize the government debt.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Revi', '
')I noticed that the Fed is expected to lower interest rates again.

They are throwing all their firepower at the situation.

They must think something is going on.

[Outcast_Searcher]

$this->bbcode_second_pass_quote('Yoshua', 'B')ut why have the banks burned through the reserves they had access to?

There's a black hole somewhere in the economy. That black hole is right in front of our eyes: the government debt is growing faster than the GDP.

The Fed will now build up those bank reserves again by buying all those treasuries that the banks hold on their balance sheets.

The Fed will monetize the government debt.

[shortonoil]

$this->bbcode_second_pass_quote('', 'S')o what basically caused the Repo to spike was that the banks had burned through half of their reserves that the Fed had created for the banks after the financial crisis.

[Yoshua]

The reserves that the banks held at the Fed were USD 2.8 Trillion when the Fed ended QE3.

Those reserves started to decline the moment the Fed ended its QE program and are now a USD 1.4 Trillion.

The reserves have been declining for some reason. And for some reason the banks stopped lending to each others which caused the Repo to spike.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'T')he reserves have been declining for some reason.

[Yoshua]

The banks seems to have lost the power over the price of money (interest rates).

If I owe the bank USD 1000 then the bank owns me.
But if I own the bank USD 1 Trillion then I own the bank.

The global economy owns the banks USD 240 Trillion. If the banks don't keep lowering rates, then the global economy defaults and brings the banks down.

When the banks lose the ability to pump in more money at ever lower rates, then the central banks moves in and starts pumping in money.

The banks and central banks are now slaves to their master...the economy.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'T')he global economy owns the banks USD 240 Trillion. If the banks don't keep lowering rates, then the global economy defaults and brings the banks down.

[GHung]

$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'T')he global economy owns the banks USD 240 Trillion. If the banks don't keep lowering rates, then the global economy defaults and brings the banks down.

[Armageddon]

$this->bbcode_second_pass_quote('GHung', '')$this->bbcode_second_pass_quote('rockdoc123', '')$this->bbcode_second_pass_quote('', 'T')he global economy owns the banks USD 240 Trillion. If the banks don't keep lowering rates, then the global economy defaults and brings the banks down.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'Y')ep. And let's conveniently skip the part where, at the currently low (negative?) interest rates, the average saver and things like pension funds have a big problem growing their wealth in order to meet their expected returns and obligations. OH,,,, maybe they can all invest in oil prospects, eh?
Funny how a bit of cherry picking various economic sectors can put a good spin on what is really a conundrum, especially by those who display the hubris of their own perceived wealth. No point in having any concern for those whose fortunes aren't as 'fortunate' as yours. Right doc? Or those who haven't even yet entered this economy that is basically fucked, long-term.
Trump is desperate to get interest rates down, down, down, so the debt he's creating to maintain his tax cuts can be, as you imply, "serviced".

[mousepad]

$this->bbcode_second_pass_quote('rockdoc123', '
')You also don't seem to understand what motivates billionaires like Trump to want lower tax rates. As an example it isn't unheard of for the very wealthy to get long term loans at rates well below prime. Let's say, for instance that a billionaire takes out a $10 MM loan over a 30 year period and gets a rate of 2.0% (probably could have done better with the right bank). The bank is happy as this amount is inconsequential to the individuals total net worth and obviously there is no worry of him paying it off...essentially zero risk. He takes that $10 MM and invests in the market to get an annual return of 4% (easily done today without taking on much in the way of risk especially when you wind in dividends and equity). The result is he makes 2% on that 10 million right out of the gate or ~$200,000 at zero cost to himself.

[rockdoc123]

$this->bbcode_second_pass_quote('', 'W')hy does the billionaire not take $10M of his own money to invest, instead of getting a loan?