TPS

A good piece on the recent repo madness by former NY Fed president Dudley: https://www.bloomberg.com/opinion/articles/2019-09-20/how-the-fed-can-handle-the-repo-market

How can you not love this team and organization!!

Go Bills! And edit for this weekend: Viva los Bills!!

How did you know it was my birthday...? ?

Why do you insist that I don't think it's troubling? I responded to your question--you asked if I found this behavior legal or ethical, and I said NO. I think it is entirely unethical. I think it shows Trump's true nature, which I believe you and I agree on....

As I've said here many times, there is no economic reason for the Fed to reduce its balance sheet, it's a philosophical issue related to intervening in markets. Yes, the Fed will have to start expanding again, for many reasons.

Well, I guess someone was using government "resources" to ask the president of Ukraine to investigate Biden.... https://www.wsj.com/articles/trump-defends-conversation-with-ukraine-leader-11568993176

Rudi's work in Ukraine...

Given how quickly it happened, it certainly seems there were some "discussions" going on between the league (Goodell) and the Pats (Kraft). Wonder if it had more to do with how AB and the Pats played this, as opposed to AB's off-field issues?

I imagine the Pats are going to be sniffing around some PS for a WR...

Hmmm...interesting about this whistleblower case that the country in question is Ukraine...

Strength against Strength there--their Pass O, Bills Pass D.

One more strike or if anyone sniffs around Duke on the PS...

Here's a good piece from the WSJ today about bank reserves. Anyone following the previous debate between me and GG might find a lot of it very familiar....In fact, it almost sounds like the writer was following that discussion.. https://www.wsj.com/articles/bank-reserves-what-are-they-and-why-a-shortage-is-roiling-a-key-interest-rate-11568891110?mod=hp_lead_pos5

Interesting Aspect on the Fed's response, or lack there of, that should put a smile on GG's face.... 1. The head of the Fed is an academic with no Wall Street experience. 2. Two senior officials overseeing the trading desk recently left and have not been replaced. bottom line: the Fed failed to react quickly on Monday to quell the turmoil. https://www.reuters.com/article/us-usa-fed-williams-analysis/repo-chaos-tests-wall-street-confidence-in-ny-feds-williams-idUSKBN1W333H

For an alternative analysis on the drone attack: https://www.asiatimes.com/2019/09/article/how-the-houthis-overturned-the-chessboard/ US intel insists that 17 drones and cruise missiles were launched in combination from southern Iran. In theory, Patriot radar would have picked that up and knocked the drones/missiles from the sky. So far, absolutely no record of this trajectory has been revealed. Military experts generally agree that the radar on the Patriot missile is good, but its success rate is “disputed” – to say the least. What’s important, once again, is that the Houthis do have advanced offensive missiles. And their pinpoint accuracy at Abqaiq was uncanny. So we’re back to the realistic bottom line, which has been stressed by not only Moscow and Beijing but also Paris and Berlin: US President Donald Trump gambled big time, and he lost. Now he must find a face-saving way out. If the War Party allows it.

The explanations were from the Fed's website. Again, the Fed's target is the Fed Funds market, and the repo rate is typically tied to it via arbitrage. In the FF market, they control the supply curve, so they control the interest rate on a daily basis. That doesn't mean when there are significant demands for liquidity during periods (like this week with quarterly corp tax payments due), that there won't be spikes during the day. however, The Fed has unlimited power to inject reserves into the FF market. They have not committed to formally targeting the repo rate. In the largest financial markets in the world, there are going to be temporary hiccups. However, the Fed can supply unlimited funds to any other markets too--that's what they did in the crisis, and if they need to do it again, they can and will. Which is why they just threw $70 billion per day over the past two days at the repo markets. They also lowered the IOER to 1.8% which will cause banks to supply more funds into the repo market. To your main point: by markets, you mean supply and demand for funds. In the FF market, the Fed is the monopoly supplier of reserves, so it controls the supply curve, and therefore the interest rate in that market. If there is a spike during the day, it will use open market operations (buying treasuries) to inject more reserves to meet ANY demand. In other short markets, like repo, they do not explicitly control supply, so the whims of supply and demand can certainly influence daily rates--no disagreement here. However, most of the time the market is sufficiently liquid, so arbitrage ties the repo rate to the FF rate. This week, there were several factors putting undue demands on cash in the repo market, forcing the Fed to intervene there and supply enough funds to restore market liquidity. Can the repo rate spike from "the market"? Yes. Can the Fed bring the rate down to any level they desire? Yes. As they will do tomorrow... https://www.bloomberg.com/news/articles/2019-09-18/fed-plans-to-intervene-in-repo-market-for-a-third-straight-day?srnd=premium

Whooo boy...You think the DW is the primary tool the Fed uses to control its interest rate target? It's called the Federal "Open Market" Committee for a reason... https://www.federalreserve.gov/monetarypolicy/openmarket.htm The Fed buys/sells treasuries to manage the supply of reserves in the FF market--they controlled the supply curve in this market which allowed them to keep the rate within its target. Given the surplus of excess reserves post-2008, the Fed now must operate in the Repo market AND adjust the IOER to manage the FFR. As I said, the repo market is now more important in maintaining its FF target.

Read answer #2 again.

They should've listened to Bullard... https://www.bloomberg.com/news/articles/2019-09-18/u-s-federal-open-market-committee-sept-18-statement-text

...To the Fed's daily management of the payments system.

1. Yes, he was on government salary, if that's what you mean by "resources"? 2. No. And I'm shocked, shocked that someone would suggest a politician did this! 3. Ukraine provides dirt on Biden, and they get Trump's favor and that $250 million in military aid...

How is it using Fed resources? It was (supposedly) a backdoor ask of Ukraine's president to do the dirty work.

The "once a decade" that is going on currently is the repo market, not the FF market. The Fed is always operating (intervening) in the FF market because that is the target rate it manages. There is no debate about this. As I stated, because the Repo market is now more important for daily liquidity, (I guarantee) they will continue intervening in that market as well..

The target rate is in the Fed Funds market, which is not the same as the Repo market. There were spikes during the day in the FFR market, but the FED always intervenes in the market where it sets the target. The Fed is now intervening in the Repo market to relieve the temporary liquidity issues.