[Bas]

has anybody noticed btw that the dollar so far hasn't tanked at all after the rate cut (it's even a little up against the Euro)

[emersonbiggins]

$this->bbcode_second_pass_quote('Bas', 'h')as anybody noticed btw that the dollar so far hasn't tanked at all after the rate cut (it's even a little up against the Euro)

[halcyon]

I don't claim to understand Forex markets, but this one has baffled me too. Gold didn't increase in price significantly either, afaict.

[xerces]

$this->bbcode_second_pass_quote('Armageddon', 'T')he Fed will print as much money as it needs to and keep the banks propped up. This thing won't tank yet. A slow painful death is the plan. $5.00 gas, $4.00 bread and $6.00 milk by the summer.

[LoneSnark]

At my local grocery store a loaf of bread is $1.19 and a gallon of milk is $3.49.

[gnm]

What at the day old store Snark?

here - bread $2.50
milk $4.29

And thats the local regular milk not organic or anything. That stuff is $6.99

-G

[CrudeAwakening]

$this->bbcode_second_pass_quote('SchroedingersCat', 'D')oes it matter that the banks reserves are now negative? As in they have borrowed form the Fed to cover all their reserve requirements and then some? I saw a mention of this over at TOD and had to look for myself:
AGGREGATE RESERVES OF DEPOSITORY INSTITUTIONS

Check out the second chart: Not seasonally adjusted.
Total Non-borrowed Required
39989 -1387 38278

This has not happened in the last 50 years that the Fed's post data for. Not even close.

[SchroedingersCat]

It appears that banks have borrowed $40 billion in the last month to cover their reserve requirements. Remember the Fed opening a Temporary Auction Facility (TAF) a couple months back? It allowed the banks to secretly borrow billions from the Fed without the embarrassment of disclosing the transaction to the public. They were able to put up much of the questionable CDO and MBS stuff as security.

[CrudeAwakening]

Yes SC, I can see that the recently loaned reserves offset the drop in non-borrowed reserves, but I don't understand why the non-borrowed reserves have dropped so much in the first place.

I can't see how bad debt write-downs would reduce non-borrowed reserves, as reserves are not loaned out to the public and should (?) be immune to balance sheet adjustments resulting from write-downs, which should only affect the value of loan assets and net equity.

Mysterious.. one month the banking system had reserves that it possessed outright, the next month it only has reserves that it owes to the Fed.

[CrudeAwakening]

Ah ha! It seems that the Fed has been 'sterilising' the reserve injections of the TAF after all, with open market operations:
$this->bbcode_second_pass_quote('', 'T')herefore, with the rescue operation of the TAF’s dimension, it has offset TAF auction credit with open market selling operations of U.S. Treasury Bills, see: (-) 61,659 (H4.1) 1/10/08, as well as Treasury Bill redemptions (which decrease the assets on the Federal Reserve’s balance sheet — by reducing the SOMA portfolio), and reverse repos (from non-U.S. banks, etc,) to drain the added reserves from TAF borrowings (H4.1).

[SchroedingersCat]

Nice find. So basically, the banks got a good enough price from the Fed for these loans that it made sense for them to borrow for their reserves and use the displaced money to offset their writedowns?

This is the Fed injecting liquidity into the system. Directly.

[cube]

$this->bbcode_second_pass_quote('halcyon', 'I') don't claim to understand Forex markets,

[MrBill]

$this->bbcode_second_pass_quote('cube', '')$this->bbcode_second_pass_quote('halcyon', 'I') don't claim to understand Forex markets,

[Permanently_Baffled]

$this->bbcode_second_pass_quote('', 'F')ed Chairman Ben S. Bernanke and his colleagues said Jan. 30 ``risks to growth remain'' after cutting the benchmark rate by a half-point, eight days after an emergency three-quarter- point move. Odds of another half-point cut, to 2.5 percent, in March rose to 84 percent from 68 percent late yesterday, according to April futures quoted on the Chicago Board of Trade.

[Starvid]

It seems the primary objective of the FED is to support asset values. Funny. Our central bank has a single clear objective: keep inflation at 1-3 %, as close to 2 % as possible. Nothing else is supposed to matter.

[kublikhan]

$this->bbcode_second_pass_quote('Pretorian', '')$this->bbcode_second_pass_quote('Armageddon', 'T')he Fed will print as much money as it needs to and keep the banks propped up. This thing won't tank yet. A slow painful death is the plan. $5.00 gas, $4.00 bread and $6.00 milk by the summer.

[MrBill]

The one thing we know for certain about Helicopter Ben is that when in doubt, he will cut first, and raise rates later. It is his publicly stated policy. He will cut to 2.50% - or 1.00% again - to get the US out of recession even if, ironically, this particular recession was caused by the blowing-up of assets bubbles by low real interest rates to begin with.



This can only exacerbate global imbalances as oil producers and Asian manufacturers manipulate their own currencies to keep them export competitive in the face of lower global demand lead by a US recession. It is a race to the bottom and it is inflationary. Or more accurately stagflationary!

Did anyone check-out the images coming from China as one lousy snowstorm over the holiday period derails the entire economy? Given that level of social unrest do not expect the PBoC to suddenly start shifting FX reserves out of the US dollar, and risk an export lead domestic slowdown. A lot of policy makers are likely feeling very uncomfortable in the bed that they have made.

[Gerben]

$this->bbcode_second_pass_quote('MrBill', 'T')he one thing we know for certain about Helicopter Ben is that when in doubt, he will cut first, and raise rates later. It is his publicly stated policy. He will cut to 2.50% - or 1.00% again - to get the US out of recession even if, ironically, this particular recession was caused by the blowing-up of assets bubbles by low real interest rates to begin with.

This can only exacerbate global imbalances as oil producers and Asian manufacturers manipulate their own currencies to keep them export competitive in the face of lower global demand lead by a US recession. It is a race to the bottom and it is inflationary. Or more accurately stagflationary!

[MrBill]

Gerben wrote:
$this->bbcode_second_pass_quote('', 'T')he Chinese have recently allowed their currency appreciate more rapidly. They are aiming for an export lead domestic slowdown: they use the currency appreciation to reduce domestic inflation and slow down their rapid economic growth. I wonder how that strategy continues with the coming US recession: will they continue ttheir current rate of appreciation or will they slow down?

[MC2]

$this->bbcode_second_pass_quote('MrBill', 'T')he one thing we know for certain about Helicopter Ben is that when in doubt, he will cut first, and raise rates later. ... ironically, this particular recession was caused by the blowing-up of assets bubbles by low real interest rates to begin with.



This can only exacerbate global imbalances as oil producers and Asian manufacturers manipulate their own currencies to keep them export competitive in the face of lower global demand lead by a US recession. It is a race to the bottom and it is inflationary. Or more accurately stagflationary!