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"But It's Just A 0.25% Rate Hike, What's The Big Deal?" - Here Is The Stunning Answer
After today's market plunge, the result of what even Goldman admitted may have been a major policy error by the ECB, suddenly the Fed's determination to hike rates in two weeks lies reeling on the ropes. After all, what the ECB did was an implicit tightening of reverse QE1 proportions (it is no accident that the EURUSD is soaring as much as it did in March 2009 when the Fed unleashed QE).
But assuming the Fed is still intent on hiking at all costs, and does just that in two weeks time, a question many are asking is where will General Collateral repo trade in case the Fed does decided to push rates higher by 0.25%: after all the Reverse Repo-IOER corridor is the most important component of the Fed's rate hike strategy, one which better work or otherwise the Fed will be helpless to raise rates with some $3 trillion in excess liquidity sloshing around, and what little credibility it has will be gone for good.
And much more importantly, what are the liquidity implications from such a move.
For the answer we go to the repo market expert, Wedbush's E.D. Skyrm. Here are his thoughts:
Where will General Collateral trade when the fed funds target range is moved 25 basis points higher to .25% to .50%? In the most simple method, GC has averaged about .15% for the past month, which implies a GC rate around .40% after the Fed move.
However, given the unprecedented amount of liquidity in the financial system, there's a belief the Fed will have problems moving overnight rates higher.
We have two quantifiable events over the past few years where the Fed moved Repo rates higher or lower: quarter-end and the QE programs. Given there are so many moving parts, consider these to be very rough estimates: Beginning in 2015, when funding pressure began each quarter-end, the market, on average, took approximately $255B additional collateral from the Fed and, on average, GC rates averaged 20.5 basis points higher.
In 2013 on my website, I calculated that QE2 moved Repo rates, on average, 2.7 basis points for every $100B in QE. So, one very rough estimate moved GC 8 basis points and the other 2.7 basis points per hundred billion. In order to move GC 25 basis points higher, in a very rough estimate, the Fed needs to drain between $310B and $800B in liquidity.
If readers didn't just have an "oops" moment, please reread the last bolded sentence until they do, because it explains precisely what the market is missing about the Fed's rate hike cycle: according to Skyrm's calculations, to push rates by a paltry 25 bps, the smallest possible increment, what the Fed will have to do is drain up to a whopping $800 billion in liquidity!
Putting that in context, QE2 - which pushed the S&P higher from November 2010 until June 2011 - was "only" $600 billion.
In other words, to "prove" to itself that it is in control and the economy is viable, the Fed will effectively conduct, via reverse repo, an overnight QE2.... only in reverse.
For those who think this will have a positive, or even neutral, impact on risk assets, we have several bridges located in Brooklyn that we are looking to offload at 150% of par. Please send your BWICs to the usual address.
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warning.....
thread change....and for good reason....bitcoin...hilarious. DEATH TO THE MONEYCHANGERS.
"Goldman Sachs has made a patent application for a cryptocurrency settlement system in a move that underlines bank hopes that the architecture behind bitcoin can revolutionise global payments. The application for a new virtual currency, dubbed “SETLcoin” by the bank, said it would offer “nearly instantaneous execution and settlement” of trades involving assets including stocks and bonds.
Banks have been racing to tap the power of blockchain — the ledger system that backs digital currencies such as bitcoin. Harnessing the technology has been likened to the changes wrought by file transfer systems on the music industry, or to the effect that email had on communication.
Although electronic dealing platforms have increasingly made front-office trades virtually instantaneous, the actual swapping of payments often still takes days, creating risk in the banking system. The premise of blockchain is a network of computers that share the costs of transactions and use cryptography to keep deals secure, although regulators have expressed concerns about this aspect. Trades are recorded on a public ledger that anyone on the network can see. Potential uses range from payments and storing client identities to possibly developing “smart” products, such as a credit derivative that pays out automatically upon default by the underlying company.
Goldman’s recently published application, first reported by bitcoin magazine, describes processes “to substantively instantly settle securities, based on cryptographic currency technology, without the risks associated with traditional settlement technologies”.
http://www.ft.com/intl/cms/s/2/b0d8f614-997c-11e5-9228-87e603d47bdc.html
OMG!! You said Bitcoin!
I say, Shitcoin. It only has a half life of the next 24 hour BM...
Are we still allowed to say the "B" word?
I look forward to the interest rate increase. Instead of earning $0.42 in interest on my $100,000 bank deposit I'll earn a whopping $0.48.
In BitCoin!...lmao!
Happy dance
http://goo.gl/BZIOCS
Dude, I know what it is and I don't click on any links offered, especially the virusy kind.
Don't you have Huff-Po people to infect?
Porn won't infect you. Unless you're Charlie Sheen.
Then you should die a horrible death.
http://goo.gl/7tHnDu
Well Dec. 16th would make sense as it's a couple of days before the Christmas/New Year vacation period.
Tyler takes the worts case scenario - $800B liquidity drain.
But best case scenario remains a 50% drain of QE2's $600B overnight.
So even thats worth putting in your pipe and smoking.
Rate hikes simply aren't going to work. The global economy is still too fragile for this stress. You're going to see massive deflation in anything priced in dollars. I smell another round of QE in 2017.
deleted, no comment,,,
You say rate hikes ain't gonna work, then predict massive deflation and QE.
I'd call that working pretty damn well, for some folks...
Apart from ZH and Wall Street, who the fuck wants ZIRP forever?
As far as your projections as to what the Fed move will do, I will offer a quiet 'ouch'. Anyone who bought into the bullshit of manipulated and artificailly levitated asset prices that made money off of QE and ZIRP should not cry now that the Fed tries to go down the road of normalization (which may still never happen). Does anyone think equities and real estate can maintain these lofty values when average incomes across America have actually gone backward? I think the Fed wants to try and ease the air out of the balloon slowly in stead of watching it burst. My powder is dry and safe. I'm not searching for a bottom, just real value, which hasn't been around for years.
They will not raise rates. They cannot. It is that simple.
You are 100% correct. There is money to be made on this. Look back in September at what moved when the Fed stood pat. Dollar drop, PMs spoke, etc etc.
Oh, they can raise rates. The point of this whole exercise is to collapse sovereign currency with the dollar the last man standing, and this will accomplish that.
So the US dollar will continue to devalue. If you believe oil will increase (has it hit a bottom?), consider that Russian banks offer 7-10%, depending on the amount and duration. Obviously you are taking currency and bank risk. Just a thought.
A base rate raise, and the dollar continues to increase against foreign currencies. Simple PPP. Where would you rather hold a cash balance; negative or plus .5? Foreign dollars flood into the country. This will have yield-curve shaping consequences as well, as those with immediate cash needs will favor next week's T-bills, while those with longer range cash demands will favor longer maturities. While it sounds insane, it appears the Fed is determined to raise rates to save what is left of their credibility.. Replay of 1937?
They'll most likely raise supposedly to preserve credibility then do a shitload of QE next year. Bunch of monkeys.
I agree with you, but given their stupidity, they will probably do it anyway.
I saw an online ad for a credit union offering 3% on a checking account; a few hoops to jump through, but still 3%!
~~~~~~~~~~~~~~~~
Rand Paul: "Democratic" Socialism Is Still Theft"; yeah but at least I get the goodies! Republicanatic Crony Capitalism is also theft; and now I'm the victim..You will lose 100% of your principle.
Stay the fuck out of banks.
Fascinating article Tyler. Because if the math is correct, which I believe it to be or damned close, then the Fed is about to drain several hundred billion dollars from an illiquid credit market leaving no bid at year end. So after the Fed created mini-crash, then a Santa Claus Bullcrap Rally, we move into year end and on to January with a smashing potential for a 10-20% rapid correction in the S&P along with a Treasury market crashing in parallel and no buyers.
Shit could get real between the next two Fed meetings, that is for certain.
They drian that much ... regardless ....
With the economy this sick and the general malaise wafting about the consumer/public, it will be The Single Biggest Fuck Up ever Committed to by a Central Bank since Germany post WW!.
Long term bonds will have a 1% handle before it's all over if they do that. Think we got deflationary pressures now?
Hah!
Bernanke did a little "draining" of his own; and brought down the global financial system...
THEN "SAVED IT", AND HE WAS HAILED AS A FUCKEN HERO!
Yellen my just be trying to secure her spot on the cover of Time for "Saving Us Again".
can someone remind Yellen she can reset gold to $50k / oz and settle america's debt?
She better do it soon coz if Shanghai decides to step up and take over the global pricing mechanism america is stuck with its debt for centuries.
And she better do it soon for my sake too, there's a nice Bed&Breakfast I want to buy.
If rates do go up next meeting, this will positively be the last "Fed will do X" article that I read.
I just cannot take the suspense.
And if the Fed stays put, will you then believe that they will never raise rates?
How many times do we need to see this film to remember how it ends?
In the end, the Wizard is behind the curtain pulling off a scam.
Dorothy sees & figures it out. As for the general public . . . who knows?
In October of 2008 there was a fairly large drain of money and things got scary (https://research.stlouisfed.org/fred2/graph/?chart_type=line&height=600&...[1][id]=MULT&width=1000).
A child screeching:Theres No Malaise! Theres No Malaise!!!...lol.
"The Single Biggest Fuck Up ever Committed to by a Central Bank "
The single biggest fuck up is believing Central Banks can grow an economy. Financialization of everything has resulted in the earth coming to an end over a 1/4 % rise in the Fed Rate ?
They have been shitting in our nests for nearly a generation, caused the greatest misallocation of investment in history, created boom and bust cycles of ever increasing proportions and now they fear raising rates 1/4 % ? Wake me up from this Kafkaesque script.
Please remember...these moves are not accidental, they are moves toward the final destruction of the United states by entities who have no loyalty to the United states...
Gott mit uns...
Bitcoin doesn't seem to be suffering any half life decay so far? Can we say the same for your brain?
But Bitcoin is private & secure !
All the folks without a Phd in Computer Science & who haven't spent a lifetime career studying the mathematics of such systems say so -
afterall, they read that in an article.
99% of people who hate BitCoin don't even know what BitCoin really is. "I hate it because I don't understand it".
Those who know what BitCoin really is, 99% realize it's potential to revolutionize the financial system and take back our freedom.
You are likely noticing how more and more people and businesses are coming on board the BitCoin express. Truth, like math, is immutable. This is why BitCoin is a game changer.
Some say ignorance is bliss. Go ahead and be blissfully ignorant. Stick with dinosaur media and dinosaur banking, that way you don't have to think much.
Hoorrah- Gold Sack Shitcoin - put the dirtiest player in bed with crypto currency.
That - ought to kill it with fire.
Baked Satoshi Alaska Shitcoin, Ball Sachs Style.
Yeah, I never could figger out if he was actually trying to trash BitShit with his incessant BitBS or just pumping it gain another ethereal fiat called the dollar.
I went with the old axiom, if it's overly complicated, it's likely a fraud.
....in which case your computer is a fraud and probably most other "complicated" things (for you) are also "frauds".
Take a gander at the spyware on Windoze 10?
Oh...You do not run Windoze 10 anf run Unix to avoid that?
Well I do not use BitCON to avoid that.
Teh we doesn't know what you are trying to say? Maybe if you could try again but make sense tish time?
Maybe it was too "complicated" for you.
If its impossible for me to truly understand it - because we only have one lifetime, & I didnt use the required years of mine to deeply study such systems -
I stay away from it.
I don't know if Bitcoin is 'good' or 'bad', but I recognize what I know and don't know. And, there is no way for me to make that determination. So, I would be left with 'believing' what someone else tells me.
Kinda like organized religion.
“smart” products, such as a credit derivative(s)..........ya cause we need more of those.........
A little grease for the Patent Office and Voila!
All your bitcoin will be subject to a Goldman royalty fee every time you use it.
More likelly a very small fee for a decent lawyer and Goldman Sachs has to pony up Billions to the Bitcoin foundation ...
Get real ... read what bitcoin is all about and what a Open Source License mean and Who Owns the License ...
Licenses are granted by governments- governments who can withdraw such licenses. While I don't know the mechanics of Bitcoin, I do know that encryption can be broken. So if Bitcoin is rooted in encryption, the risk of loosing your dough still exists.
Fonestar... you are a hack.
Stay out of the casino.
...you can't use your chocolate coins in a casino either. Sorry.
I'd like A "REFILL Before the dip.
dO YOU TAKE bITCHITS?
I like your tenacity Phone Star
If you were paying attention, Phoney Star? I said that I purchased an 100toz contract @ $1055.00 close to 24 hours ago.
Before the dip into the $1045 area.
I love Canadian bacon. usd/cad @73 cents
And you are a bond owner. Tell we which is worse?
I wonder who's retarded enough to buy Bitcoin.
Yeah who would want to own teh world's most powerful currency? Right retard?
Goldman seem to want some of it. Which should be a clear hint to stay the fuck away from it.
You mean gold/silver? Ya know, something tangible that's been used as money over 6,000 years as opposed to some virtual bullshit that has literally nothing going for it.
Kaiser,
It is hard to be right, when the government is wrong.
Goldman is making a new honest currency? Revoluntionary!
So Goldman seeks to be the Central Bank of Bitcoin? Why am I not surprised? Foolishness to let this happen. Keep 'em out...
Have you ever seen a monkey fuck a football?
I call BS. THE markets would never open for 10 days , down limit, when we'd be down 95%
No, but I saw one fuck a skunk.
And like him, I haven't had all I want, but I have had about all I can stand.
An overnight reverse QE2...well THAT would shrink the balance sheet.
So what's really being said is here is that if they raise rates, buy the fucking dip cause they'll drop them to zero again and launch QE4?
Absolutely. They need to crash the economy in order to save the economy.
(j/k, they already killed the economy.)
The dead economy sketch - Monty Pythons parrot.
The economy is resting I tell ya, it's just resting. It will pick up in a minute you watch ... and watch ... and watch.
See that, it moved then did you see it? No you blind or something it moved, really it did.
LMFAO.
It's not dead, it's just resting, after a long squawk.
Not to worry. That bird is alive and lives as
UberParrot
its pining for mark to market
Pretty scary that the central economic planners at the Fed have conditioned so many people to assume the Greenspan / Bernanke / Yellen put will bail them out no matter what.
Just because they have "PhD" next to their name, it is not ok to assume they know what they are doing. Two of the four partners at the hedge fund Long Term Capital Markets were PhDs and Nobel Prize winners (in economics, not to be confused with the peace prize for starting new wars all around the Mediterranean).
What happens when bailing out the financial markets is in direct conflict with protecting the US Treasury and its tax base? The Fed cannot serve two masters...
That's why the next crisis is 'the end' of the Fed along with many, many 'people' employed by them. Can't wait!
It will be a mother beautiful short...and it will be there.
Ya just gotta have a little faith baby ;-)
Guy name of Oddball.
Oddball!!??!!?? He's a freak!
Definitely an antisocial type.....*Woof* *Woof* *Woof*
Thats my other dog impression! ;-)
Crazy! I mean like so many positive waves maybe we can't lose! You're on!
Margin call on a global scale. Lets see ww3 or us civil war . Tough call
Chances are we'll see both, although there isn't anything civil about war.
One of the best by Guns & Roses:
Civil War
(I don't need your civil war...)
You mean the next chapter in the "War of Northern Aggression " ?
I'm your daisy, let's play for blood...
Love the avatar, Dirk.
The South will rise again!
Trick question?
25 basis point's blows-up the emerging markets, that are already DEAD.
Is Brazil considered emerging market. We need those "proficient" credit ratings agencies, and 80% miss rate, analysts to tell us so?
25 basis point's blows-up the emerging markets, that are already DEAD.
I think that is the point.
Brazil aint emerging markets, its submerging markets.
You forgot the ," apostrophe".
So what is the explanation if the S & P soars after a rate hike?
Premature anticipation
Beats Premature Ejaculation.
Stupidity induced group hallucination?
That the economy was strong enough to take it.
There was a reason no one wanted the job of chairman after Bernanke left. The person taking the job was going to be the person who blew up the world.
Ppt in overdrive, count on it.
BWAhahahahah! Good one gator.
The FED hooked the 12 volt QE jumper cables to the S + P ?
Sucker rally?
A 25 basis point rate raise is already priced in, almost everyone is expecting it. The S & P will move signficantly only if the rate raise other than 25 basis points. All this liquidty explanation for S & P is BS. The impact of Fed's announcements on S & P moves is based on what the market believes the Fed's outlook for the economy is and how accomodating the Fed is. If the Fed raises the rates, but the raise is below 25 bps or does not give a forward guidance of raising rates till historically "normal" levels, it means the Fed believes the outlook for the economy to be weak and the S & P will crash. If the Fed raises the rates by 25 basis points and gives forward guidance of further rate raises, the S & P will move up a little, since that is what it is expecting anyway. If the Fed raises the rates by more than 25 bps, the market may again crash, because of the impact it will have on the cost of borrowing and investment.
The Fed will most likely raise the rates by 25 bps with a forward gudiance to keep raising them until they reach "nromal" levels i.e. will do what most analysts are expecting. It will crash the markets, but not immediately. It will crash them after the implosion of the interest rate derivatives bubble, likely after the second or third rate hike and not the first. That way the Fed doesn't get blamed for the crash.
Your 'analysis' employs 'reason'. What is called the 'investors' in the S&P do not...
They won't raise rates. Saying that they will is all a part of the act. They are just trying to convince everyone that they can.
Its Lucy pulling the foosball...again. Howlong til folk figure it out?
Janet...I am so sorry this is happening to you...I know you assumed control of the " mother money ship" just a short time ago...and Ben forgot to tell you there was flooding in the engine room...and I know you want to take some interesting action...but we don't want to cause panic...oh shit...the money ship is tilting to starboard and we have lost power and are drifting out to sea...now is the time for bold action...I know lets call for a meeting of the Fed board members...as they say....all aboard!
Or point the guns at the deck and broadside yourself with 25bps.
If the fed raises rates they are doing it for one reason only, and that is TPTB are ready to collapse the whole damn thing. With eCONomic numbers where there are, the fed should really be considering cutting.
If there was only something like a 'basket of currencies' in the works that could step in and replace the dollar. Hmmmm.
Cue Redd Foxx
http://m.youtube.com/watch?v=stdi-1tIUhM
Come on FED, DO IT, JUST DO IT, DO IT and wipe out BILLIONS of "PET PAPER" & "PET DIGITALS" (MAKE BELIEVE MONEY) leaving just REAL MONEY a.k.a. "PET ROCKS" HEH, HEH, HEH _JOHNLGALT
Does an arrow to the knee drain liquidity?
Ask Achillies... Does Alexis Tsipras, read Zereo Hedge?
He's certainly welcome.
After the better part of a decade, its time for the world to get back to reality. Doing so might hurt.
Because negative interest rates would be so much better.........
5% would be reality. You won't live long enough to see reality.
I fail to see the problem - just add another trillion on to QE4 and continue the party. sarcasm flag here
If the FED can no longer raise or lower rates (and they can't) do we even need a chairman or board. Just print. Rates must stay at zero forever.
Gibberish.
If there's so much damn liquidity, then the market doesn't need the Fed, and the Fed can raise overnight rates to 4% immediately. Only of course they have no intention of doing that. All he's argued here is that the rise (not raise!) might be even more harmless than thought.
Remember, this is NOT a raising of rates, this is a relaxing of unnatural, emergency constraints so the market seeks balance again, even a teeny tiny little bit.
Wedbush you can post your job offer for me here.
It's not even going to be a 25 bps rate hike.
Watch and see - they are going to do it in 12.5 bps increments this time.
They might even get the Fed Funds target all the way up to 0.75% before they have to start the next easing cycle.
I am long 10 year Treasuries at 2.33%. VERY long.
But it's just a wafer thin mint
https://www.youtube.com/watch?v=HJZPzQESq_0
One of the best comedy movie scenes ever...
That's the dummest conclusion ever.
The Fed won't have any problem raising rates - it's only a couple of key strokes. Easy Peasy!!
Maybe they had something there by throwing a Virgin into the Volcano
maybe we could drop truckloads of fiat into the Magma
same Results
we are getting close now there is not much left to steal
You can't close the money hole!
America needs the money hole!
https://www.youtube.com/watch?v=JnX-D4kkPOQ
Am I the only one who wonders why anyone pays any interest on money when all of it comes out of thin air to begin with?
Who deserves interest when all the money loaned out never even existed in the first place?
Thats like me lending you a an IOU for a potato I dont have and asking for two potatoes back.
Just ban compound interest forever, boom problems solved economy roars.
Without a compound interest system the national debt would level off, inflation would stay steady around 1% a year (if even that) and debt would be easier/quicker to pay off, which opens us up for NEW CONSUMPTION on NEW GOODS which creates NEW DEMAND.
We can finish paying off all the old shit to start buying new shit which creates economic activity and boosts Growth.
Or we can stay in a self-destructive death spiral of debt forever until we all die miserable slow deaths.
Your choice world... really.... it is that simple.
So, are YOU personally going to lend me money or goods for the next 25 years for zero interest?
Why not?
Oh, you mean you only want to borrow at zero interest rates, but you refuse to lend at zero? That's called being a leach, or a socalist, but I repeat myself.
Except that La Rouche and others thought of a working replacement credit system that fixed this decades ago.
Then Clinton put him in "shut up" jail for a while.
Mosquito
You got it wrong.
He wont lend at zero interest cause he can't and does not print digital money out of pure air or electronic bits like the Fed and the banks do.
If it is real money, then lend at real rates. If it is made up money, or money created by the act of lending then it does not deserve an interest rate.
Big differences, but you already knew that and knowing that and stating this shit makes you shit.
Zimbabwe tried to "print money". In fact, they printed quadrillions of Zim dollars. Tell us, what happened to them?
Your grandioso theory doesn't work.
If I had the ability to lend money into existence SURE I WOULD, its just free assets for me if you default and I foreclose.
PLEASE GIVE ME THE LEGAL AUTHORITY TO PRINT AND LEND MONEY I WILL LEND 10,000,000$ to you right now to buy a building, and when you fail to pay "hay free building for me when I foreclose" and by then due to my own actions of inflating the currency supply the building I foreclose on will probably sell for 20,000,000
This is what the banks do, they want to counterfeit money, they want to collect interest on it and then foreclose on property they dont deserve/never earned.
From a banks perspective (especially a central banks perspective) the money they lend out has no real value, its a product/commodity its like printing POGS and selling them , (I print one pog and lend it to someone who buys something that will be worth TWO POGS tomorrow, then tehy sell the property for two pogs, give me 1.5 pogs back and now he made .5 pogs he didnt have and I counterfeited 1.5 pogs for myself)
This banking system only exists the way it does because the population is fucking brain dead and dont stand up for monetary rights, justice and equality.
ALSO
If borrowing at zero and lending at interest is being a leach, well you just called every bank in the world a leach/fraud. (YOU ARE AGREEING WITH ME AND CONTRADICTING YOURSELF).
Lol WITH BAILOUTS AND "CREDIT DEFAULT SWAPS" BANKS NOT ONLY DO NOT CARE ABOUT GETTING THE MONEY THEY LEND INTO EXISTANCE BACK, THEY ACTUALLY PREFER BORROWERS DEFAULT SO THEY CAN COLLECT ON THE SWAPS + FORECLOSE + COLLECT ANY MONEY THEY GOT BACK IN PAYMENTS + GET JUDGEMENTS TO COLLECT MORE LATER.
IF you charted out bank reserves right now the chart is probably parabolic (pretty much they have so much counterfeit money they cant even spend 5% of it without making all their cash worthless).
Simply AT THE VERY LEAST ............CONVERTING ALL DEBT FROM COMPOUND TO SIMPLE INTEREST WOULD MAKE IT SO THAT MOST OF THE POPULATION CAN PAY THEIR DEBTS OFF IN HALF THE TIME.
DEBT would GROW PROGRESSIVELY INSTEAD OF EXPONENTIALLY. (The chart will look like a slope instead of a hockey stick).
Self deluding illogic.
'Oh, you mean you only want to borrow at zero interest rates, but you refuse to lend at zero? That's called being a leach, or a socalist, but I repeat myself. '
Goldman Sachs is socialist now?
Hey asshole - Goldman has made billions walking free money over from the window to treasury 2% is 8x more than .25% - that is literally getting a permission slip to rob us taxpayers.
And thats just the beginning, asshopper....
----
Two barely animated cartoon characters resembling stuffed bears are standing in a field talking in robotic, tech-modulated voices about the Federal Reserve Board's asinine policies. I'll pick up the dialogue midstream:
Bear #2: So let me get this straight: If I want to buy the Treasury bonds with my money, I can buy them directly from the Treasury.
#1: Yes.
#2: But if the Ben Barnanke wants to buy the Treasury bonds using the American people’s money, he doesn’t buy them from the Treasury but from the Goldman Sachs?
#1: Exactly.
#2: And does the Treasury give him a good price?
#1: Of course not. They are the Goldman Sachs. They make their living ripping off the American people.
#2: But how is the Goldman Sachs able to do this?
#1: The Fed announces when it is going to buy, and what it is going to buy, before it does the trade.
#2: So the Goldman Sachs can front-run the Fed and give them the worst possible price on the Treasury bonds?
#1: Yes. Exactly.
#2: And the Fed is okay with this blatant ripoff of the American people?
#1: Yes, of course. Otherwise, the Fed would just buy the Treasury bonds from the Treasury Department.
#2: Who inside the Fed is responsible for the buying of the Treasury bonds?
#1: The buying of the Treasury bonds is conducted by the New York branch of the Federal Reserve.
#2: And who is in charge of the New York Branch of the Federal Reserve?
#1: The head of the NYC branch is the William Dudley.
#2: And what did the William Dudley do before running the New York Fed?
#1: Before running the New York Fed, the William Dudley was a partner at the Goldman Sachs.
#2: The guy in the charge of the American people’s money when dealing with the Goldman Sachs used to be a partner at Goldman Sachs?
#1: And no one has a problem with this?
#2: Apparently not.
#1: Is this an episode of The Twilight Zone?
After several similar exchanges, Bear #2 says, "Excuse me, I am going to go hit my head against a wall." But Bear #1 cautions her not to, because health care is very expensive, adding, "But that's the subject of another video."
http://bollier.org/fed-goldman-sachs-take-care-each-other
The only reason 'interest' was created was for people with money to make more money. That's it.
Interest is a fundamental mechanic of the credit market. Without a market for credit the economy will not "roar". Although you have a point about lending something you don't have, but that's more a commentary on the fiat money system more than interest as an incentive to lend. No need to throw the baby out with the bathwater. What you propose may feel right, but it's no good.
Incentive to lend?
If a bank lends me 10$ that it did not have, and I pay it back 10$.
10 new dollars just entered the system the banks just made 10$ out of thin air.
Now why do they deserve interest on that 10$? isn't the crisp new digital 10$ bill enough?
No one should make money on the creation of money, especially when its fake money.
The banks SHOULD CONSIDER IT A PRIVILEGE THAT WE GIVE THEM A MONOPOLY ON CREDIT EXPANSION AND SHOULD BE CONTENT ENOUGH THAT THEY COUNTERFEIT OUR CURRENCY, Demanding interest is crazy and they dont even demand interest THEY DEMAND COMPOUNDING INTEREST (paying interest ontop of interest) LOL Its madness.
A rate hike will require a shift from accommodating unlimited liquidity at a given level of interest to restricting liquidity to move interest rate levels. The ecosystem is not prepared for this… it is Volker type of thinking. Rate vol went crazy when he affected the quantity of money… I believe he said “cure it or kill it” or some such nonsense.
I suppose best case is that they will just raise Fed funds at the outset and see if money market rates respond. If not, they will just conduct reverse repo incrementally until the desired effect is achieved. Hopefully slow and steady. I wouldn’t expect equities to shine.
The FED is & has been printing a trillion per month already via back-door mechanisms; QE has never stopped. So there may be an initial shock, but the PPT will back-fill and then "everything is awesome" again. Could be a big play coming to set up the short squeeze after finishing the long squeeze, but also keep in mind that Monday is "peal Harbor Day" and we have Satanic beings running the CIA/NSA/DHS...so who knows.
I think its safe to say a silent majority think 99% of the market gains are secret fed purchases through shell corps.
No rate hike until morale increases.
Yeah. And there's like $3trillion in excess reserves parked at the Fed making IOER.
The IOER is the only rate that matters. Increasing the o/n rate to the IOER will cause the reserves to leave the Fed and come back to the banks. Inflation into circulation.
The fed will raise. Excess reserves will come down. They will claim victory and then raise again for the o/n. .25 is not the big move. The next move is.
I wouldn't be surprised to see QE 4.
I wouldn't be surprised to see QE 4.
The system is built to transfer wealth from the lower 99% to the top. QE4-evah coming in some form.
Dude, I need more pizza.
Better order now....
"drain $800 billion", yeah right.
reverse repos provide treasury collateral to money market funds (apparently the only takers right now, I am not so sure I believe that one) who by regulation are forbidden to rehypothecate them.
money market funds make money repoeing collateral to hedge funds. remember, money market funds make zero percent return! they should not exist! but they have to exist to provide this collateral to hedge funds who are leveraged to the balls.
so next time your shyster bank/broker tells you to keep your "cash" in money market funds, remember the turds who are behind that arrangement - the NY FED, hedge funds, off-balance sheet obbligations. a lovely concotion of fine people and instruments who don't give a rats a$$ about saving principle.
Here are some signs of a coming recession.
1. Factory orders continue to drop
http://www.zerohedge.com/news/2015-10-02/us-factory-orders-flash-recession-warning-drop-yoy-10th-month-row
2. Default risk spikes
http://www.zerohedge.com/news/2015-10-02/us-financials-default-risk-spikes-2-year-high
3. M&A set record
http://michaelekelley.com/2015/05/29/mergers-and-acquisitions-set-record/
4. Fed sees 2 bubbles
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
o Commercial Property higher than pre-2007 level.
http://nreionline.com/finance-investment/cre-prices-are-now-officially-above-pre-recession-peak
o Global Corporate Debt Market hits $5 trillion.
http://fn.dealogic.com/fn/DCMRank.htm
5. Iron ore prices tumble
http://www.marketwatch.com/story/iron-ore-prices-keep-crashing-adding-to-global-growth-fears-2015-11-30
6. Baltic dry shipping index tumbles
http://www.marketwatch.com/story/shipping-index-falls-to-all-time-low-stoking-fears-about-global-growth-2015-11-19
Here is how to prepare.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Here is how to get your mind off this stuff.
http://michaelekelley.com/category/humor/
Good luck!
Please pimp your blog somewhere else. You do it in every single post you make.
Enough already.
on the eye of wall streeter types, QE is bad for treasury yields, Europe QE is neutral to treasury yields, Europe slight expansion of QE is bad for treasury yields, end of QE is bad for yields, rate hikes into a depression is bad for yields.
the day you see one of those good fellas and their MSM brethren speak highly of treasury bonds and call for lower long-term yields is the day the NY FED does not "intervene" in markets - aka never
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Hey guys, I'm not being funny here, but here's a question from a newb:
Don't they have AI/computer models that they can just punch this shit in and like SIM City or SIM Tower from the 90's, see what happens when you pull or push certain levers?
I can't believe they don't.
After all, economics is a science, isn't it?
Okay. I was being funny with that last bit.
But don't they have computer modelling software for this type of macro economics?
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V-V
The software is "crooks are us" and "Global Goverment Avenue". Break the middle class and eliminate populations, only keeping whom will serve.