<<<<The fed fund rate has been under target intermittently for months and FED has had to go in and do RRPs to prop it up. Do you deny that FED is doing RRPs? Or do you deny that they're doing it to protect their target? >>>>
No, I dont' deny anything.
You've tried to deny everything, but slowly you're having to give ground as all your myths are being exposed.
.. I asked you to show your data that the fed has been following rates down... your #1 data point was a graph of fed funds futures which has nothing to do with that assertion.
It has everything to do with it. To claim to the contrary is to claim the St Louis Fed is trying to deceive the Ny Fed. I don't think so. The St Louis Fed includes that graph because it shows how the futures market reacts to what occurs in response to material transactions in the bond market when FED enters. There is no deviation between the two.
As to this link, I'll have a look, although your NEW assertion that the rate has been "INTERMITTENTLY" under the target rate for MONTHS, certainly makes much more sense to me...
The term, "intermittent", was used because the market is so narrow due to the low level of interest and low absolute rate level that it's easy for random fluctuations on a given day to take the next transaction up to FED's fix. All primary dealers know FED is fixing so they're confident they can transact at the fix without consultation. You made a comment about FED's "ask". There is no "bid" or "ask" because the price is fixed. This means that as much as is needed will be supplied at the fix. The thing is that for months, for several years, there hasn't been enough demand to hold the fix. There's been net supply with a resulting draw down rather than the chronic extensions in loanable funds.
Contrary to what Lloyd said, real estate isn't being financed by bank reserves created by FED. Real estate is being financed by private savings which have piled up so high that there's no pressure from a paucity of them in the interbank market to cause a relayed demand enough to push to take at the "ask". The result is that fed funds at the margin diverges negatively from the fix.
This has persisted to such a surprising extent that FED has had to lower the fed funds target or become irrelevant. FED doesn't think that they can be perceived as irrelevant. They believe they have to maintain an image of control that they in fact never have.
Now, just at a glance, it looks to me like even the data you provided does not show the fed 'proping' the funds rate up on net does it?
When Fed follows the rate down the cumulative effect of being effectively tight, fixing the price of money above true equilibrium, forces FED to lower when they may not have economic data to justify a change in policy. Policy changes can't be applied daily as is the case when the free market has total control of money pricing. FED has to wait to see if they're justified in lowering the fix, but they can nominally affect the reserve base by temporary additions or subtractions. If fed funds rate in the interbank market is falling, it must be the case that there's too much supply, so FED initiates RRPs to reduce supply thereby pulling up or propping the true rate to the fixing rate.
Looks like they go both ways lately,
If you admit this, your claim that "it looks to me like even the data you provided does not show the fed 'proping' the funds rate up on net" has to be false.
Am I missing something?
You're missing everything.
Also, if you remember the conversation started with talking about Fed accomodation and home prices, ie. a long term issue. You seem to be changing the topic....... again.
It's all the same subject. I can't help it if you can't retain what has been stated. I'll state it again, but your prejudices which come from the mass of myths you have, won't accept what has been demonstrated, so your ego will force you to miss it again:
The real estate market strength isn't coming from FED's creation of money supply. Money supply is currently disconnected with interest rates. |
