RT @JWilliamsFstmed: “Repo” means something different in my world.
The Federal Reserve Bank of New York very quietly handed out $75 billion in cash to the banks on Wednesday in a process known as a ‘repurchase operation,’ or repo. https://t.co/25x4K6lHuY
This could very well be the beginnings of the next #Bitcoin #bullmarket cycle.
Don’t get too excited and expect a big run-up soon though, as the bull market always start off slow... https://t.co/qJeC6d16y2
Don't downvote me just for suggesting possiblities, guys. I have found evidence of likely vote manipulation with regards to coinrivet and another site. Source and the removeddit link.
Now then, there are quite a few posters in here with sketchy post histories. This, in and of itself, indicates nothing, but imagine yourself being in possession of that many accounts generating conversation surrounding a topic just "going with the flow." it wouldn't be difficult to exploit, would it be?
Honest question - let's say the government couldn't do this. What would happen? There was short term liquidity crunch that caused interest rates to spike. We've seen things like this before. It's akin to trying to run an engine without any oil in it, the whole thing just seizes up.
In our glorious crypto future where fiat is dead and governments can't affect markets like this, what is the answer a similar financial crisis? When everything freezes up and there aren't any entities that can spend heavily in the short term to keep the entire thing from going ass over tea kettle.
Look, don't get me wrong, I'm all for the digital deflationary future, but I'm highly skeptical of people that think it will only be good and there is literally no possible downside to any of it. If nobody has the power to step in when markets begin to behave erratically (or not at all), how does the economy of the future claw it's way out of a recession? The boom and bust cycles that plagued every economy for three hundred years before the past hundred are likely going to return.
TL;DR - Even if crypto grants us freedom from fiat, it doesn't not guarantee any kind of economic utopia going forward.
It allows for BAD companies to go bankrupt. Today, bad companies (that generate no return) are kept afloat through ever increasing debt. Its just a never ending sea of promises. Companies should create value, not destroy it and place the burdens on third parties.
One of the reasons they've actually been able to continue to print money like this is actually because of drug trade. And they don't want to admit it but billions of USD cash arre held in houses in Mexico and in Hong Kong and in Afghanistan. The War on Drugs is turning into a war on cash and that's why we need to prepare with a different type of currency. the Fed has done a great job of not allowing inflation and I don't think it's going to happen in the short term but there is a long-term plan here and that's exactly what this is about
If they can have the power to print money. Imagine the amount they are printing behind the curtains. The numbers that never get to us. Outside all regulations. Oh please don't tell me they are not doing it.
Just remember. While you're making a budget, working two jobs and struggling to make it until the next paycheck, the government is printing more money than you've ever seen and giving it away to the big banks. Then remember that your tax dollars went to those same banks.
No one printed money, the fed operates independently of the government, noone gives the banks free money. The Fed actually make a profit on the interest they get from the deals
You have a supreme lack of understanding of what this is. I say this not as a jab, just hope it can make clear what this actually was. That which you don’t understand can seem scary.
The repo market is a consistent $2 Trillion private sector market, which provides access to liquidity for quick short term balance sheet adjustments for banks, whose capital outlays and cash flows can experience all kinda of shocks for all kinds of reasons.
It is a complicated beast fueling the wealthiest, most dynamic, and credit hungry nation in the history of civilization.
In a repo agreement, Party A gives party B an asset (typically a security) and party B gives party A cash at its mark to market with an agreement that it will be bought back, often the very next day, at that amount plus accrual, the repo rate.
It’s a short term collateralized loan, no printing of money or even general increase in money supply
Simple analogy would be, you are getting a paycheck tomorrow but u need $200 to pay some bill today. Instead of going through a credit card and incurring unnecessary fees to get the cash, you sell me a piece of jewelry worth $200 for $200 with an agreement that you will but it back tomorrow for $200 + interest after you get your paycheck.
Thats what this was.
No one is getting bailed out, there is nothing broken in this system, it is a very simple and efficient liquidity instrument.
Historically the fed would help ease the strain on the repo markets very regularly and not only during recessions, however it has been about 15 years since that has been the case.
75 billion is nothing for the scales we are talking about, and this wasn’t about anyone risking insolvency or anything systemic.
Similarly there are people adding the two deals together. Think about the analogy i gave you earlier. If after you bought back the jewelry a few hours later you needed another $200 back again (or your niece needed it or something) so we made the same deal again, would it make sense to say I loaned you $400?
No right. Because its the same 200 we already settled up on.
Same goes for these deals. It would be akin to adding your outstanding credit card balance up nightly so the same $1000 on it each night could be described as you being extended $30,000 this month. It doesn’t make any sense
I would add all this strain in the last few days that put pressure on the repo market is contained to small and regional banks, none of the big guys have an issues.
Also, the Fed nets a profit, and not a small one, and that money goes back to the treasury... ie the place your taxes go
These sorts of operations mean the fed is generating more revenue (in the form
of accrual at the repo rate) and actually help subsidize the federal budget and help you.
Best know what your talking about before you start vilifying things you don’t understand
This was released yesterday.
“Effective September 19, 2019, the Federal Open Market Committee directs the Desk to undertake open market operations as necessary to maintain the federal funds rate in a target range of 1-3/4 to 2 percent, including overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than one day when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 1.70 percent, in amounts limited only by the value of Treasury securities held outright in the System Open Market Account that are available for such operations and by a per-counterparty limit of $30 billion per day.
An **open market operation** (**OMO**) is an activity by a [central bank](https://en.m.wikipedia.org/wiki/Central_bank) to give (or take) liquidity in its currency to (or from) a bank or a group of banks.
How does new money get into circulation?
The Federal Reserve Banks distribute **new currency** for the U.S. Treasury Department, which prints it.
Once more you are conflating the jobs of the Fed and treasury and distinct mechanisms through which the Fed operates.
The primary mechanism by which the Fed controls the money supply is the buying of treasuries from the market, introducing more money into the system, or the selling off treasuries, taking money out of the system. These are open market operations.
The fed controls the money supply through such channels which via supply and demand moves the fed funds rate. It also can do this via moving the IOER and the discount rate, which set a corridor through which the open market decided fed funds rate theoretically cannot escape (else there would be arbitrage opportunities that would self correct the fed funds rate).
This article, and the issue being discussed here, are about repo agreements, which are an entirely different types of transactions with distinct purposes, and are not related to the above.
The Treasury decides if/when to print cash. The fed just help introduce it to the system. It has no authority nor mechanism through which to so itself.
The fed issues treasury bonds, not actual cash.
You wiki-ing general monetary policy channels doesn't change a single component of what I have explained in an attempt to make clear something that is not normal to understand unless you are an economist or work in very particular sectors of finance.
I am not trying to argue with you, just to clarify things you are mixing up. It's perfectly okay to know less about this admittedly niche and boring stuff than someone who studied this at school and has worked in fixed income and capital markets for their entire adult life.
Theres a great 6 part documentary of the history of money and the financial system whose name I cannot recall at the moment. Its great, and I believe theres a whole episode on the Fed.
If you’re interested Ill send when I remember the specific one, but there are tons.
Cool fact, my great uncle, Paul Warburg (my grandmas cousin) was on of the main authors of the federal reserve act!
His side of the fam moved to the US, when my grandmas side moved to Argentina, and then the US when shit hit the fan there in the 70s.
Absolutely, I may be ignorant, but it's not on purpose.
Neat about your great uncle too. He why you got into to the field?
Also, what are your thoughts on the current state of the global economic system?
The Ascent of money is the history of finance series I was thinking about, but it actually has little to nothing about the fed there it looks like.
Not sure there's not much beyond the purely academic to point to
Classic the more you know, the more you know you don’t know.
Every time ive ever spoken to a professional in a field I thought i had a good grasp on I leave realizing there is way more there than I ever thought
My biggest thing currently is that yesterdays rate cut was pointless, and potentially dangerous for when the next downturn comes.
It was not a major thing, but between this moron of a president and a whole generation who think QE (fed artificially keeping rates low but buying up shit tons of assets) should be the new norm are such panicky fools that if the Fed didn’t do
So they would bring about a self fulfilling prophecy where things turn for the worst, is ridiculous.
Unfortunately markets are dictated by human psychology, and for the most part humans are fickle dogmatic animals, especially when it comes to group think. Fed literally acted irrationally to protect the system from the irrational reactions of the mob. Ironically these almost universally being the exact same people who were vehemently against QE in the first place. As ever people so ironically irrational its almost a satire on itself
I always knew i want to work in finance. studied math/econ at college. I love games (i mean in a game theory sense), especially long cycled ones like poker. Combination of art and objective math.
Trading in niche markets is a lot like that. Its a very stimulating and rewarding job. I guess id be lying if i said i didnt like stress in a way too. It is for sure nerve racking, but that makes the thrill of nailing a bid on the head feel all the better
The types of assets laid out are always part of very large liquid markets. Their prices are well established.
My teams and I build and manage our cash flow modeling at my firm. Run dozens of varying types products daily,
Getting very granular for the sake of producing bids for actually trading or for hedging is different to assessing a basic MTM
Typically within any sector everyone will agree on a basic fair accounting price, where they end up varying is how the bond will behave in the future and what they think it will be worth in a year, or 2, or 10
For these short term transactions simply taking a comparable recent trade and using heuristic methods to adjust for minor feature differences is typically sufficient, and there are dozens of independent valuation firms and advisors ppl use for such things for official deals.
Its doesn’t come out of left field. If that were to come about (which I dont believe it ever will within that specific market like it did in 08, largely due to financial assessment on all mortgage products) for months beforehand spreads would widen and the market would see some considerable volatility.
Under such circumstances volatile securities, like say RMBS, either wouldnt be accepted as collateral for such deals, or if were it would be with a significant haircut and higher repo rate due to less appetite for the risk.
This is more or less what people are talking about when they mention credit markets have frozen up. There is no appetite to accept the risk on the underlying colleteral and everyone prefers to just sit on their notes or earn IOER, what the fed pays in interest on cash reserves.
In such situations the Fed becomes significantly more important, as the private market would dry up. That being said, when those kind of things happen there are always larger systemic issues, which the market and fed would have to deal with through other channels. Repo wouldnt be that mechanism
The above plays into why the fed moved the IOER by more than they did the fed funds rate.
By lowering the interest gained on money not lent you increase effectively increase the cost of not lending (the opportunity cost gap between the IOER and what you’d earn lending it increased).
While these are good questions, the loans are designed to resolve at the end of business the next day. So there'd have to be incredible timing for the value of the asset to drop significantly in a less than 24 hour period
Actually I just read up on the deals, it was largely treasury and mortgage backed collateral. There's no risk of substantial losses because the banks control the value of the mortgage securities and the FED controls the value of treasury securities.
It's still barely a band aid on a ridiculously unhealthy market, though. There are huge systemic problems that need to be worked out, instead dof just providing liquidity whenever it's needed.
The banks are holding the mortgage backed collateral and the T-Bills. I agree that the T-Bills won’t drop instantly (though the likelihood that they will goes up with these kinds of issues) but the mortgage-backed securities are exactly the asset that went to zero almost instantly back in 2008. The banks most certainly do NOT control the value of the MBS.
Yes, I know the banks are holding the securities.
And they don't control it directly, but they certainly can't be blindsided by the value collapsing. Look at all the banks that sold off their CDO's in preparation for the 2008 bubble burst. And the only reason they were able to do that is by holding the valuation agencies hostage, because losing a $200b contract will put your business underwater, and it makes no difference to BofA who they got their appraisal from. So if things were actually that dire, they wouldn't be tossing their shitty securities to the FED knowing they'd have to take them back in a day, yknow?
The Fed has introduced/created/printed over 16 trillion dollars into the financial system. My lack of internal understanding doesn't make what they're doing sustainable or right. I will dig in and try to fill my gaps though.
Edit, I believe that 16 trillion number is since the 2008 recession
Also, what are your thoughts on doing a full audit of the Fed?
When The Fed was created it wasn't supposed to step in at all. Then if there were no buyers on the market, they let the Fed step in order not to raise the interest rate.
To implemented a cap to the lending at the same time, the debt ceiling.
And we know how that went...
The system is broken!
When the Federal Government was established it wasn’t supposed to provide financial safety nets for its citizens, healthcare, or protect woman from their husbands whims.
Is that a good argument that it shouldnt be doing these things?
These are social constructs made up by men with incomplete information to solve dynamic problems that change as the world changes, which it has, a lot
Who gives a flying fuck the specific mechanisms that were relevant 100 years ago.
If the fed has to do this to keep the economy working - how would the fed keep the economy working if bitcoin replaced fiat.
If they need to print money and they can’t print money how are they going to keep everything from going to shit.
Not being able to print money is a feature, not a bug. As demand for money rises, the value of the money rises, benefiting anyone who has it.
At the moment, demand for money benefits the people with the rights to create it.
Lots of folks in traditional circles blaming it on routine stuff or happenstance, timing wise, who seem unwilling to explain why this hasn't happened since 2008. Inverse yield curve. Liquidity issues popping up here and there.
The fed has a lot of hot air to blow into this balloon.
They were repo deals, not open market buys.
Its not the same as general open market operations, and adding the two overnight repo deals together to make a larger number makes no sense. Its not the same as a general increase in the money supply
Hmmm. That’s deflating LIBOR...
Which should trickle down to stimulate commercial and consumer borrowing.
Which indicates the greater economy might not be as healthy as they’re telling us.
Time to shore up defences...
And this is why BTC doesn’t work.
What happens if government has no controls to stimulate bad economies and tamper down booming ones? It all goes to shit.
A world where governments can’t build infrastructure, public services can’t function and people can’t even own or build their own homes. The idea of BTC as a currency would take us backwards hundreds of years.
Governments have the delusion it's possible to plan and control the economy through interests,money printing,taxes and laws and make it better. Governments stimulating and tampering down creates artificial inefficient economies that cause escalating financial problems.
It doesn't work. Governments are the cause of virtually all the problems.
Hahaha wow yeah can you see any examples of functioning economies without government? You are so lucky you have a functional government, if they were doing nothing to the economy then you’d have paid $5 for a coke in 2009.. that is if any banks survived 2008.
Your post reads like someone who thinks we shouldn’t have locks on our doors. It just makes everything harder. Why bother. But you only believe that because you’ve never been robbed before.
Economies worked very well before central governments. The one country that let the banks collapse after 2008 is doing very well.
Ad hominem are not good arguments. I'm robbed every day by the government,as are the people of the world who are robbed of their money,time and opportunities.
If you hate Bitcoin this much please short Bitcoin. If you are right you will make huge amounts of your favorite fiat money. Put your money where your mouth is.
Lol go on explain the examples you’re referencing there...
How is the government robbing you every day? By providing you protection, security, schooling, transport, tv, radio etc. If I recall correctly they actually saved all your savings, mortgages etc when they bailed out the banks. Without that I expect mortgages would be foreclosed, savings lost, people left utterly broke. You’ve had things so good for so long you have no idea what being robbed really is.
Oh great continues without central governments, really? Please point me that direction id love to go visit a booming economy that has no central government... which country let their banks collapse and how do you define doing well? I suspect those who had money in those banks wouldn’t be happy they went under?
Government provide all those things at less quality and higher price it would have been and are forcing monopoly on all those things. They created the crisis and bailing out the banks created the next one.
Check every time in history before central governments and you can find examples.
Iceland let the banks collapse and is better as a result.
Nope if private can do cheaper and better then conservative governments will sell off that to a private company.
But things like primary schools are a cost the government needs to bare. You don’t make a profit running schools. And we don’t want a society where you make a profit running primary schools as you then create a cycle of inequality where the poor can never be educated.
The government knows better than the people how to educate their children? Seriously? Everyone now pay taxes all the time to fund inefficient and expensive education system that churns out people without any skills or capacity for critical or logical thinking. They are lucky if they know match and how to read and write.
The poor are not educated now. Competition will give better results.
It’s about efficiency...
Is it efficient for every household to have a parent who stays home and teaches the kid everything they need to know. Or is it more efficient for one parent to be a teacher and 30 kids go and learn from that teacher while all the other parents can go and work and contribute to the economy?
This is why public services exist. It makes sense to pool resources together and do it more efficiently. Instead of every person having their own personal body guard we have a police force. This is how society works, we’ve evolved to this point over hundreds of years and the people in this sub want to take us back to the Stone Age.
On the contrary if we had a deflationary currency investments will shift to long term growth and the ppf would move down along the curve to investments rather than consumption. Research your Hayekian triangles again. :)
Ahhh no investing long term gives no returns in an deflationary currency!
I buy a house today for $200k.... in 50 years that house would now be worth $100k.
Why would I do that?
I would be better off holding on to the $200k and in 50 years I can buy that house for half what I would buy it for today.
That’s how deflation works, try again mate.
>Why would I do that?
You wouldn't. You'd buy the house for less. Think about it for a second. If you know that the currency is deflationary would you put in an offer for a house at $200,000? Or how about $100,000 with a -X% Interest rate? Things will not remain the same but you're acting as if people can't adopt or change.
Because no one is buying at $200,000 so the seller lowers their price. It will be worth $100,000 in X time like you said. In the end it's all relative. You're still paying the same amount of labor hours for a Big Mac or the house.
Are you trolling me right now? Just because you don't understand the argument doesn't make it dumb. What is worth more to you? A hot dog right now or a hot dog 10 years from now if it's the same price. If you don't understand that then it doesn't surprise me that you don't understand our convo.
Mate you don’t get it.
It’s hilarious that we started off with a house for sale for $200k and I point out that due to deflation people are not incentivised to invest in property the same way as when inflation is involved.
Your answer? Oh the owner will just take 100k instead! Sure thing! Lol your logic makes no sense at all.
Your hot dog example is useless. Same price in 10 years is no inflation or deflation and a hot dog is not an asset that can gain value or be used to make money like a house or property.
Mate you are so lost just give it up.
This would be great though, it means no speculation and people only buy what they use. I'm not convinced deflation is such a bad idea. We just need social systems to help unemployed, instead of pumping up economies for ever increasing gdp
If you’re not convinced you haven’t read enough online from economists about it.
But regardless the deflation is just one aspect. The actual chain and transacting on it is another complete shit show that would never work in reality.
Bitcoin isn’t currently working as it was designed to because people still think of it in terms of fiat currency, and too few people have any, and people don’t understand the subdivision down to 7 decimal places. So, when a Satoshi and a dollar/pound/euro are on par and tens or hundreds of millions of us hold some satoshis -rather than tens or hundreds of thousands-THATS when this will change. And technology to exchange them as easily as fiat is getting better daily.
As for taxation and capital control- taxes will change, and capital control has been in place from the start.
Nah because that’s not how an economy works.
I don’t care how many people have it. A deflationary currency with limited supply would create an economy that goes backwards.
If you’re picturing a world where it lives side by side w other currencies then I’d say why bother with BTC then.
Global economy is definitely having a bit of a slump at the moment.
But this has zero to do with how the economy functions and more to do with the global conditions and the people elected to hold power. Without Trump’s trade war many think the global downturn wouldn’t be anywhere near as bad as it is. Him yelling at the Fed all the time doesn’t help either.
Fractional reserve is the only system that actually works in today’s day and age. But every system is reliant on a competent government to run it.
And in bitcoin’s case, the government is the people who use it, and that government is also the bankers. Replaced are the egos and personalities of the bureaucrats and politicians by the code and the miners running it. Yes, the coders can code away, but unless and until consensus among the majority of users is arrived at, that code can’t change.
Lol that’s just relabelling the same thing. If government are using bitcoin and have adopted it then they would be able to dictate to the developers what to change etc. It’s the same as the system we have now but with a new name.
If bitcoin can’t be controlled by the government and they can’t make sudden changes to save the economy in times of trouble then why would they adopt it in the first place at all?
I wasn’t suggesting govts adopt bitcoin. I was suggesting the people wise up, revolt and replace govt with a bare bones smaller version, or the ultimate: none at all, where people vote with their money.
But your scenario will probably be what happens: govts issuing their own crypto. Rather than a global currency, they’ll preserve the need for forex, they’ll backdoor Wallets to truly bankrupt people who don’t follow their laws which they’ll make increasingly arcane and bewildering to normal people...solidify control.
Yeah an alternative to government currency doesn’t work.
Because you need taxation. You need regulation (eg minimum wages etc) and also using a currency that is not a nations default currency then adds in layers of complexity and conversions and charges that make it super inefficient.
It could only work with government running it. But then it wouldn’t be bitcoin, it would need to be a coin they can print more of like tether. But then using blockchain for transactions instead of the existing system would just be a massive step backwards.
Because it keeps governments in check and creates an incentive to not manipulate a currency to an unfair degree. Now they have to compete with Bitcoin. I'll transact in Bitcoin if I can't trust my own governments money.
And it will go directly to the wealthy because they choose not to fix anything that is wrong with our system. Just more and more money handed to the wealthy but when the rest of us need fucking anything "there's no money". Fuck this world.
You forgot a very important fact. Banks inject 75 billion AND will make billions in profit.
tranceology3Platinum | QC: BTC 467, Tronix 341, CC 199 | Trade8 months ago
Exactly. Recover the losses and loan out more money collecting interest again.
How nice would that be to give a loan to a friend, charge all this interest. Collect some, he doesn't pay it all back, then ask your father, can I have $10,000, Jimmy didnt pay me. Sure here you go. Then go loan it out again to Fred and charge interest all over again.
Printing money means physically manufacturing notes. The Fed does NOT do that (that's the BEP's job.)
The phrase "printing money" is commonly used for these stories, but this popular phrase is NOT literally accurate.
The Fed (a private banking cartel) creates money as numbers in a computer - essentially someone types "54 000 000 000" and presses enter, and voila - there is 54 billion $ more in existence. No printing.
That's why Henry Ford said "*It is perhaps well enough that the people of the nation do not know or understand our banking and monetary system, for if they did I believe there would be a revolution before tomorrow morning.*"
The number of physical $ notes in existence is maybe a trillion or so - a tiny fraction of the total number of dollars in bank computers, which is hundreds of trillions.
That's what QE ('quantative easing') is all about - creating (easing) vast amounts (quantity) of money - for the banks (not the people.) The only real economic growth in recent years.
Which is what makes the US$ so risky & shaky - and BTC so hard & solid.
Written by CCN✔
person posting has sketch post history✔
on /r/cc front page less than one hour later✔
100% upvoted with 6 upvotes✔
on front page on Wednesday morning at 8:30 a.m. New York time✔
was this thread brigaded?
Other sources have already reported on it. Why are you not questioning the validity of the post arriving at its position on this subreddit and the other questions? are you pulling a red herring?
zaphod42Platinum | QC: BTC 353, ETH 343, CC 193 | TraderSu8 months ago
This is the internet... More than one source can report on a thing...
Is it really that unlikely that a bunch of cryptocurrency geeks would upvote a post like this?
Stop being so paranoid and looking for conspiracy everywhere.
I've caught asiacryptotoday.com getting their news articles brigaded on this sub before. Same for askcrypto.
Besides that, I don't think CCN should have my click: http://mlg420crypto.com/blocking-edward-snowdens-book-permanent-record-will-cause-bitcoin-to-skyrocket/
tke1600Gold | QC: BTC 30, CC 28, MiningSubs 48 months ago
Is this $75b more from yesterday’s $53b?
MrMunchkinBronze | QC: CC 34, ExchSubs 98 months ago
Yeah, it is. It's also after the initial repo failed due to technical issues.