You might have seen some headlines about the reverse repo market lately.
It sounds like financial techno-babble, and it is, but it's kind of a big deal.
The Fed makes swap arrangements with its member banks. Usually these take the form of repurchase agreements (repos) where the bank "sells" some of its assets to the feds so they can get more cash on the books at the close of business. In the morning they "buy" the assets back and pay a tiny, tiny bit of interest. It's in quotes because nothing actually changes hands.
So at the close, they have more cash and all looks good.
But now the banks are using the reverse repo market to the tune of 800 billion a day. This is the reverse of the above situation. The banks have too much cash and not enough assets. So they "buy" assets from the Fed and reduce their cash balances overnight.
This is the result of the absolute flood of dollars that have been printed over the past 18 months or so. Banks are saying they literally have too much money. When you deposit money into a bank account, you are lending that money to the bank. That loan (your account balance) is an asset for you and a liability for the bank.
So the banks are signaling they have too many liabilities and not enough assets by about 800 billion dollars.
Remember when 700 billion was "a very big number?"
Anyhoo, we're due for another banking system blow up in about 3 months.
Have fun with that!
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This sounds absolutely crazy and the opposite of what one would expect. Banks are definitely having to think outside the box these days.
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What did this banking system blowup you are refering to look like the last time?
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The crisis in 2008.
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Similar reverse repo activities took placein September 2019 if I recall correctly. What happened back then? Oh well ... a pandemic was initiated ...
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Correct
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The banks also dont have the right mix of Securities and with the Treasury lowering their cash balance, they are not producing more (for now). This is forcing the Fed to cycle through the securities in an effort to give the depositing banks what they need.
Of course, all of this while the Fed is trying to keep interest rates down. Talk about a lot of plates spinning.
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What could possibly go wrong?
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Why 3 months?
"Cyber pandemic."
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That's how long it took from late 2019 to begin seeing things lock up. Then covid hit and everything went to shit, so we don't actually know what the end result would have been.
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September and October 2019 saw the repo markets seize up and crash. That wasn't covered by the legacy media, yet it was a big deal. 2020 came, and we know what happened then.
Let's see what happens this time.
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Yep. Covid postponed it, but we're picking up right where we left off.
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I would say less than 3 months, things are heating up very fast and everyone knows it, the savior took quick action to avoid a catastrophe, I wonder when the millionaires will do it?
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