Highly disturbing chart of the day, page 1

The following chart illustrates the Excess Reserve Balances. The parabolic increase would be indicative to most economists and bread-and butter finance types that massive hyperinflation is on the way, due to the sudden "snap" creation of money by the Federal Reserve and the injection thereof into banks:

Interestingly enough, This article's take on things is that despite the roll-the-printing press policy is offset by deflationary presures from massive credit destruction, and that the cash is sitting in banks. Banks, so the theory goes, are basically being rewarded by the Fed in the form of interest rate manipulation and other methods for NOT lending the money out. Thus, the theory goes, the money sits in banks rather than being lent out, so the ultimate inflationary effects are small to nil, and certainly not enough to compensate for the massive and ongoing credit contraction across the planet.

I'll let you make up your own minds on the issue...

reply to post by Evasius

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I like your timewave zero chart. We're in a novelty gully alright...strange days indeed. This is a weird time to be involved in finance or trading, never mind coping with precious metals, grain futures, etc...complete insanity on all levels.

I notice in your signature chart there were several other periods where the novelty level was similar. Out of curiositym do you know what those were, offhand?

reply to post by Evasius

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Excellent choice in your metaphor.

The rest of the world doesn't want an additional half-trillion dollars worth of Treasury securities each year; it doesn't want the Treasuries it now has to own. Households can't continue to put a trillion dollars worth of Treasuries away per year - that's 8% of all personal income.

That leaves the Fed and the banking system. The central bank bought Treasuries during the third quarter at an annual rate of nearly $700 billion, and provided nearly zero-interest money to banks and broker-dealers, who bought a good deal more. The Fed is buying much more than Treasury securities, to be sure; during 2009, it bought a remarkable $700 billion of mortgage-backed securities in a fruitless attempt to stimulate the housing market.

Source:
www.atimes.com...

The following chart shows Federal Reserve total securities holdings.

Here's another one, boys and girls, and oh ouch is it a doozy. Percent of job losses from the start of the employment recession. The original source is the excellent Calculated Risk.

I think it's called a Reverse Repo?

I'm pretty sure thats how they get rid of excess liquidity.

I might be way off though, I really dont have too much knowledge on this.

Does anyone else really? lol

Here, read all this and call me in the morning, haha from FED website

www.newyorkfed.org...

RPs and reverse repurchase transactions are particularly useful in offsetting temporary swings in the level of bank reserves caused by such volatile factors as float, currency held by the public and Treasury deposits at Federal Reserve Banks.

While the mechanics of a repo involve buying and then reselling securities at a set price and a set time, at its financial essence, a repo is a collateralized loan. Fed repos can be conducted for terms anywhere from one to 65 business days. They are usually overnight, though rarely longer than 14 days.

There are two main types of settlement methods for repos: triparty and “delivery vs payment” or DVP. Fed repos are done via triparty settlement, which means that the Fed and the primary dealers use a triparty agent to manage the collateral. In a triparty repo, both parties to the repo must have cash and collateral accounts at the same triparty agent, which is by definition also a clearing bank. The triparty agent will ensure that collateral pledged is sufficient and meets eligibility requirements, and all parties agree to use collateral prices supplied by the triparty agent.

The Desk selects winning propositions on a competitive basis. Each dealer is requested to present the rates they are willing to pay for the agreements versus various types of collateral. The three types of general collateral, or GC, the Fed accepts are marketable U.S. Treasury securities (including STRIPS and TIPS), certain direct U.S. agency obligations, and certain agency “pass-throughs” (or Mortgage Backed Securities, often called MBS).

The significance of the “GC” designation on the collateral is that GC collateral is fungible. That is, the Fed is not looking for specific securities; rather it is looking for any of the eligible securities that do not have scarcity value. As such there are a number of securities that would satisfy the requirements, and neither the dealer nor the Fed needs to know which specific security or securities are going to ultimately be pledged to a winning proposition. The Desk establishes relative values across the three collateral types, and then uses these values to select the best bids presented.

The New York Fed makes payment for the securities by crediting the reserve account of the dealer's triparty agent, a commercial bank. This act of crediting the bank's account actually creates reserve balances. When the repo matures, the dealer returns the loan plus interest, and the Fed returns the collateral. The return of funds to the Fed extinguishes the reserves that were originally created by the repo.

The collateral pledged by dealers towards the repo has a “haircut” applied, which means they are valued at slightly less than market value. This haircut reflects the underlying risk of the collateral and protects the Fed against a change in its value. Haircuts are therefore specific to classes of collateral. For example, a U.S. Treasury bill might have one haircut rate, while an agency coupon might have a different haircut.

Fed reverse repos are settled DVP, where securities are moved against simultaneous payment. In this case, the Fed sends collateral to the dealers’ clearing bank, which triggers a simultaneous movement of money against the security. At this point, reserve balances are extinguished. When the deal matures, the dealer sends the collateral back to the Fed DVP, which triggers the simultaneous return of the dealer’s funds. This act re-creates the reserve balances that were extinguished on the front leg of the transaction.

Market participants frequently use repurchase agreements and RRP transactions to acquire funds or put funds to use for short periods. However, transactions not involving the central bank do not affect total reserves in the banking system.

[edit on 9-2-2010 by GreenBicMan]

[edit on 9-2-2010 by GreenBicMan]

I'm so upset. Before Christmas I created this thread:
www.abovetopsecret.com...

No hits over a month ago. Where did I get my chart? Oh deep in an extensive and authoritative source pdf which I cited. No Attention. Pull the same info off a blog and its hot stuff.

And yes its quite problematic.

Originally posted by Moonsouljah
I'm so upset. Before Christmas I created this thread:
www.abovetopsecret.com...

No hits over a month ago. Where did I get my chart? Oh deep in an extensive and authoritative source pdf which I cited. No Attention. Pull the same info off a blog and its hot stuff.

And yes its quite problematic.

I hate to argue about who created what when because its all irrelevant, but, well, uh, I guess I'm going to go ahead and just say please look at the date on the first post and then get back to me.

Then look at the post posted today, which has to do with a different issue and was posted at a different time. Then, I would kindly refer you with the utmost respect to check the thread title, following which I would add an encourageemt to you or anyone else to add anything relevant here at any future date. Or, should you wish to create a similar thread, I'll be happy to play along there in your sandbox. At the end of the day, it's all sand, whoever's box it's in, right?

Peace,

Old uncle thunder




[edit on 2/9/10 by silent thunder]

reply to post by silent thunder

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Oh dang, my bad.

reply to post by Moonsouljah

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Its all good, you have a picture of 2 goats and a Chinese princess in your avatar, that automatically makes you good.

Originally posted by GreenBicMan
reply to post by Moonsouljah

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Its all good, you have a picture of 2 goats and a Chinese princess in your avatar, that automatically makes you good.

True true true.

Thanks for your link, BTW. Will take a closer look.

reply to post by silent thunder

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Dont bother.

I dont think anyone should ever have to understand that.

I wouldnt expect anyone to at least, I am not sure how I even knew that, but I surely couldn't tell you anything about it.

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