tag:blogger.com,1999:blog-8764541874043694159.post1827722278816938036..comments2024-03-18T09:09:07.887+00:00Comments on Coppola Comment: The blind Federal Reserve Frances Coppolahttp://www.blogger.com/profile/09399390283774592713noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-8764541874043694159.post-72160230127841430552020-10-14T14:33:43.765+01:002020-10-14T14:33:43.765+01:00Hello Frances,
Could you please clarify the below...Hello Frances,<br /><br />Could you please clarify the below? <br /><br />To create a "floor" for the Fed Funds rate, the Fed started paying interest on those excess reserves. Had it not done so, the Fed Funds rate would have fallen to zero, regardless of the FOMC's decision<br /><br />a) Are you talking about effective FF?<br />b) As you later described - banks do not trust each other as they used to - why would effective FF rate went down to 0%? Wouldn't that mean that EFF should be actually spiking?<br />c) I also cannot understand why RP rate was higher than both Eurodollar rate (Libor) and effective FF rate. Repo is collateralized so it should have lower not higher rate than both Libor and FF rate. What am I missing here?<br /><br />Thank you.<br />KrisAnonymoushttps://www.blogger.com/profile/15628757792195004929noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-7629027737436059482020-01-02T04:16:50.651+00:002020-01-02T04:16:50.651+00:00The reason dealers do repo is because they can reh...The reason dealers do repo is because they can rehypothecate. The same asset is multiplied across different balance sheets. The repo'd asset becomes more than its liability. More money emerges from repo than went in.Robert S Mitchellnoreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-80297951046827936992019-12-11T14:58:44.105+00:002019-12-11T14:58:44.105+00:00"Meanwhile, JPM ends up with more reserves th..."Meanwhile, JPM ends up with more reserves than it wants, so it lends cash in the repo market, thus transferring reserves to another bank, perhaps Citigroup."<br /><br />I am wondering if this statement is correctly placed in the sequence of events. JPM cannot count the transfer as complete, thereby "ends up", until the reserves have been transferred completely. <br /><br />Citigroup needs to find a money owner who has an unencumbered cash deposit from who they can borrow who is active in the repro market AND <i> who's money is NOT residing in a Citigroup account. </i> The ideal money owner would have an account in JPM but owners in other banks (still excluding Citigroup) would be OK. <br /><br />Having borrowed reserves, Citigroup can complete the MMF transaction by giving reserves to JPM.<br /><br />While I think my description is correct, I may have it all wrong.<br /><br />"Follow the money, not its owners."<br /><br />If my description is correct, we need to follow BOTH owners and money.<br /><br />I await your judgement.Roger Sparkshttps://www.blogger.com/profile/01734503500078064208noreply@blogger.comtag:blogger.com,1999:blog-8764541874043694159.post-72678612673958087882019-12-11T13:48:57.915+00:002019-12-11T13:48:57.915+00:00Dear Frances,
I've recently been reading abou...Dear Frances,<br /><br />I've recently been reading about the sovereign money concept:<br /><br />https://positivemoney.org/2016/12/sovereign-money-an-introduction/<br /><br />It seems to have a lot of advantages and be a better manager of money flows than interest rates.<br /><br />I would welcome your thought, perhaps, in a future article.<br /><br />You have a great ability to communicate these complicated ideas in a straight-forward and clear way. This is a great talent that we are sorely in need of these days.<br /><br />Please keep up the good work.<br /><br />Regards,<br /><br />Kevan BradleyKevan Bradleynoreply@blogger.com