3 consecutive posts from the Enlightened.......last to first and backward to the reply from which this is a continuation.
To: YourNameHere who wrote (10863) 3/21/2008 3:23:43 PM
From: ahhaha of 10875
Past four years? I went back and checked. As far as I can determine they haven't done a Permanent drain since 1969 when they were still using raw tools, buy and sell reserves to influence interbank borrowing.
I'd like to mention that they've lost control over the private market for funds where banks use CDs and other questionable paper for a base for loans. That lets banks engage in 19th century shenanigans, and it calls for reinstatement of some form of Glass Steagall.
To: YourNameHere who wrote (10861) 3/21/2008 3:15:35 PM
From: ahhaha Read Replies (1) of 10872
Here's a role for the 'crats to play and one that they savor. They can reintroduce regulation along Glass-Steagall which is, as you put it, is a way to preserve the vehicle you want to take you where you want to go rather than the one where the banks take you to Beggas.
Securitization of mortgages must stop. It has no redeeming value. 'crats won't go so far because too many of their lawyer friends engage in legal stealing via this vehicle. There's no one in the world who can argue validly that mortgages should lose the identity of their makers in order to facilitate a reduction of face rate. That's total BS. Anyone out there want to argue with ME about this? A mortgage is a covenant between lender and borrower, and no one else, because no else will be responsible to uphold the covenant.
To: DMA who wrote (10860) 3/21/2008 3:04:14 PM
From: ahhaha of 10874
It appears to me that the Fed has reduced the money supply by about $70 bln. Is this correct?
In effect, yes, but the multiplier makes this quantity more on the level of 10 X $70B = $700B!
Oh shit, these boys mean business.
Is it really that much?
No.
The Tbill sales were meant to address the excess Tbills "sloshing" around due to previous operations, and due to the public's flight to safety. Nonetheless, a Tbill drain for whatever reason, DRAINS. This is why FED huddled with foreign CBs last week. They had to tell them that these actions had no true monetary policy intent, i.e., FED wasn't intending to squeeze demand for loanable funds with the sales or not trying to prepare the way to an increase of the fed funds rate.
The coupon pass has no mopping explanation. It's a cold outright move to bust the MECHANISM.
It should be pointed out that no one on CNBC, say Liesman, et al, or in the financial press to the extent I could cover, said a word about this extremely important move. Instead, they all talked about irrelevancies associated with fed funds rate.
Hell, they could have raised fed funds rate to 4%, or lowered it to 0% with no consequence. Any rate below 4% has no material consequence to the economy over the short run. Certainly, a sustained ff rate below inflation embeds future dislocation, chaotic transitions, as I termed it on another thread, but it remains to be seen if FED will sustain it. They don't know at this time. Depends on the degree of repair of the loan liquidity squeeze over time, and it depends upon inflation. With commodities headed down inflation should evaporate since it was only a monetary inflation, not the real thing.
In any event the immediate priority is to bust the MECHANISM. I would have said that's the way, but FED hasn't done a sale at scale of Permanent since the early '70s! So I figured their eternal prosperity credo would have precluded them from doing the right thing, and that is to bust the MECHANISM. |
