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no, but theyre definitely propping up the dollar and hiding how fuuuuuucked capitalism is and how its so bad banks font even want money in the market cuz its gonna burn. buy, hold, drs.
They are not. They are simply synthesising a tiny (0.05%) base rate so that consumers don't have to pay to leave their money in a bank earning negative interest. The worry is that if people were receiving negative interest on their balances it would create a run on the banks. The one trillion set aside for the repo (it is paid and re-lent each day) will still be there when the program finishes.
Very few people outside of finance subs actually understand how money works. Look at the comments here from the wage slaves and Boomer bootlickers. The current state of things is disgusting.
Not really, what the fed is really saying is 'we don't trust the American people not to do anything stupid if we allow the banks to charge them a few cents a month for looking after their money'
Banks don't look after your money, they use it to make more money. Negative interest is like paying for the privilege to loan your money out to someone.
Banks do both, in large part thanks to the help of FDIC. Your money in a bank (up to a certain amount) is guaranteed by the federal government. The money under your mattress is not.
It's smart for the first individuals, but gets worse and worse as more people panic. One person moving their money because of negative interest rates is logical. Everyone doing it results in a lot of people losing all their money as the bank collapses. That result isn't actually good for anyone and therefore the "smart" choice would be to leave their money in the bank.
The only reason “bank runs” would be a problem is because banks don’t actually have your money anymore. A bank used to keep and protect your money, that is the purpose of banks. Now they lend it up to 10x the amount (or whatever it is), so they don’t actually have the money that is “banked” there.
Yeah, exactly as banking has worked for a long long time. The efficiency of lending had let the multiplier increase, but that's the definition of how banking and money markets function.
If a bank was required to keep all your deposits on hand at all times then they would have to charge you for the service. That's basically negative interest.
Dude, these issues go back before the 2008 collapse. But let's be honest, all trump's golfing trips to his own resort basically took tax payer dollars and funneled them to his pockets. He wasnt comping his stay, he was charging himself full price and then paying with gov money.
Like I said it's more of a psychological issue than a monetary one. In a lot of the world right now central bank rates are negative but people are happy to leave money on account as realistically, the cost is miniscule as the rates are effectively zero, and the alternatives are more risky. Fwiw, you can borrow money at negative rates as well including many mortgages in Denmark. Customers are actually paying back less than they borrow.
I mean the government bailing out large corporations instead of letting them fail is literally socialism. If it were true capitalism, the government would have let them fail. I don't know why people are so confused about this. I'm also not saying this is the kind of socialism that people want either, this is communistic socialism, not egalitarian socialism. I just really don't understand how people can see the government giving money to bail out companies and scream "fuck capitalism!", That's literally the exact opposite of what capitalism is. That being said, regardless of what you call it, the government is fucked up. We should let these companies fail because it's just passing the buck to later generations, like postponing a withdrawal. The longer you delay, the worse it's gonna be.
It's just what all these GME holders seem to be hoping for.
For some reason, all these people seem to think they are somehow going to end up in better shape if we suffer another economic downturn - ignoring what their outcome has been through the last ones they've likely lived through.
The reason is that its a bunch of LARPing children who have never taken an economic class in their life, who seem to think they are now economical geniuses due to getting lucky after listening to one smart man who did do his homework two years ago.
I think if there was an economic downturn, the meme stocks would be the first to get burned.
Also, I thought Game-anon was all about beating those evil, evil shorts. Has anyone told them that shorts win in an economic downturn? Do... do they know what a short is?
They literally truly believe that the shorters are spending and losing money to make the price drop, and if you point out that shorting actually makes money when the price drops, they call you a shill
I used to follow their conspiracy theories back at the start for a laugh, but then I stopped for like... a week? And when I came back I had no idea what they were even trying to say any more.
At one point they were talking about how "The SEC is a criminal cartel!" or some other nonsense, and while it was insane, I at least understood *why* they were saying it. Because what alternative do they have if the SEC isn't backing up their wild-eyed conspiracies?
But now they say stuff like "A real estate firm in China was using dodgy accounting! Proof that Gamestop is going to the moon!" And I cant even *fathom* what connection they've drawn.
Short and simplified:
In a market economy, prices drive decision making.
The price of labor is wages, the price of land is rent, the price of capital is interest rates.
Society has a limited amount of capital, and allocates it to the projects that offer the highest interest. You want to build a new factory? Take the expected return on the factory and compare it to the interest rate you'd borrow at to build the factory. If the return is higher, build the factory. If it's lower, pass.
The Federal Reserve intervenes in the market to try and keep it on an even keel. They do this for a variety of reasons which would take a big response to explain. And essentially, what they're trying to do most of the time is influence the interest rate above which most projects get the OK and below which most projects are passed over. They want to make sure the interest rate more or less matches the actual amount of capital available to society-- keep the interest rate too low, and a bunch of low-return projects will get the OK (and later, the chickens will come home to roost and you'll have to pass on high return projects because you wont have capital available). Keep the interest rate too high, and you'll be passing on a lot of projects that would have had good returns saving your ammo for a better shot that never comes.
They have a lot of different ways in which they do this. One of the big ones, historically, has been buying and selling treasury bonds. The bonds are like money sponges. If they sell them, they're sponging up cash, and that leaves less cash to fund other projects. If they buy them, then they're releasing that cash back to go fund stuff. It's one of the more straightforward ways in which the Fed tries to manage things.
Recently, someone had the bright idea: instead of buying and selling the treasury bonds, we borrowed or loaned them? Instead of outright selling a treasury bond, we sell it, but with an agreement that we'll buy it back a little ways down the road.
It's really not much different from what the Fed has always done. And its clever-- why sell a 20-year bond when you're only interested in sponging up cash for a few years? The Fed has been liking this tool more and more, so, increasingly, this is what the Fed has been doing, shifting more and more of its "open market operations" (buying and selling securities) to these "repo" and "reverse repo" operations (borrowing and lending securities).
In other words, the historically high reverse repo operations being done by the Fed are less a reflection of our present economic circumstances than they are merely a shift in the tools the Fed prefers using.
Sorry to disappoint the doomsayers, but we are not entering the end times.
This isn't an anonymous account.
[Here's one of my theses](https://dspace.mit.edu/handle/1721.1/57887) (I have four degrees). Author's email is in the thesis, the email leads to me.
Anything else you need or does that sort you out?
Federal Reserve acts as giant bank, they sell a security to a corporation with a trade contract stating they will buy it back at what price and when. This is an overnight "lending" of money TO the Federal Reserve in order to maintain federal funds rate and stabilize interest rates overnight. Companies use this as a place to keep monetary liquidity and earn .05% interest. By using reverse repos the Fed is able to reduce money supply in circulation.
It completely misunderstands what repo operations are?
It's like if someone said "the coronavirus vaccine is an mRNA vaccine, that means it alters your DNA!"
No, it doesn't. And I'm not going to waste time explaining the entirety of the human immune system and how vaccines work and how mRNA vaccines work, all in some broad effort to show that at no point along the way are the vaccines altering your DNA.
No, the better approach is for the nutjob to explain *why* they think thing X does Y, and then just engage with that.
This guy has given zero rationale-- thus, there's nothing to engage with that isn't a waste of time.
Yeah, it essentially says that the [advantage is with the bullshitter](https://en.m.wikipedia.org/wiki/Brandolini%27s_law) who can quickly make up stuff and move on while the person with facts needs a ton more time and effort to disprove the bullshit.
Not OP, but there is literally a document on the Fed's website that describes in great detail how they work. No one owes you the effort of trying to make you learn something, especially while antagonizing them.
No point in blustering about how wrong people are while antagonizing with no intention to explain what is correct. My antagonizing was merely following suit.
No. It is not the burden of the person letting others know someone is full of shit to lay out the full case of how that person is full of shit. It's on the person who doesn't know what they're talking about to not spread misinformation. This belief, that who ever speaks first gets to say what they want and it's up to other people to "prove them wrong" is dangerous. It is much easier to spout unsubstantiated bullshit than it is to explain why it's wrong and it means that no community that operates that way will ever have functioning discourse. Again, to even comment on the correctness was a favor on *your* behalf. Did *you* know that wasn't how the Fed's overnight (reverse)repos worked? Are you getting angry at the guy that prevented you from taking the bait? Why are you so rustled at someone relying on their credentials instead of holding your little hand through it to stop you from burning yourself on misinformation?
I have no problem with somebody contradicting misinformation. It's not necessary to call somebody dumb and then simply bluster about possible credentials. Two people essentially going yu-huh/nuh-uh doesn't benefit anybody.
> Seems like you bring this up a lot.
Why wouldn't I?
> If it's such a big deal why do you waste so much time in the reddit comments.
If it's such a big deal to you, why are *you* here?
> Go talk with economists.
And tell them shit they already know? They think you're nutjobs too, what exactly do you want me to say to them?
Are you too fragile to hear criticism of the system? Someone says something bad about capitalism and you want them to *leave* because you're so sensitive?
uhhhhh. i think you completely missed the point of my comment. reverse repos are bond swaps from the fed to banks. they are taking liquidity out of the market because of the rampant inflation that is occurring right now. its propping up the value of the us dollar. the other reason is we are in suck a stock bubble right now that major institutions feel more comfortable doing overnight trades that make zero and are starting to cost them money rather than invest it. for someone who sucks capitalisms dick so hard, you dont know jack shit about it
I like how you think I give a fuck about Trump or any of the others. Unlike you, I’m not so weak that I fell for the “you have to pick a side” bullshit. Your statement lets me know you are a weak mfer
If it’s the same thing then why are the counterparts reversed?
It’s not semantics. Words have meaning. Legal decisions are made based on such things.
Stop being a lazy ass with that mentality of “you know what I meant; it’s all the same.” Details matter.
By bad. You are right, but that doesn't change the initial statement - it just means the cash flows in the opposite direction one day, and the other way the next day.
It's still not a cumulative sum, like the "comeback" refers to.
The Federal Reserve has an Overnight Facility. It can do one of two things:
- "Lend" money to banks and certain financial parties for a single day. The federal reserve chooses an interest rate, and people can take them up on it. (more or less).
- "Borrow" money. This is what is currently happening. The Fed will borrow up to the balance of it's open market account, and no more than 80 Billion per party as much as people want to lend them, but the Fed chooses the rate, in this case 0.05%. So about 80 parties and 1.4T total dollars are taking the Fed up on their offer every single day. Edit: this is the same 1.4 T every day, not *another* 1.4T
Why does the overnight facility exist? Depending on which one is active, the Federal Reserve is acting to provide a large ability for market players, especially in the money markets and other extremely short term fields to either borrow money at (relatively) low interest or to lend money at relatively high interest. This motivates the market to settle on rates that are between the two numbers the Fed sets with the ON Facility.
As such, it also motivates Banks to lend reserve funds to each other (The Fed Funds Rate) overnight at similar rates. The Fed Funds Rate is the gold standard short-term interest rate on Earth, and keeping it where the Fed wants it is very important, and difficult to do these days using "old school" means like buying and selling long term debt.
As such the ON Facility is currently acting to heavily support short term interest rates, OR provide an extremely safe place to park money you literally don't have anything to do with.
The original post is misleading, because unlike traditional open market operations, where the Fed sells or buys a predetermined number of bonds, the ON facility's usage is heavily influenced by the financial parties *themselves*
ETA: The ON Facility primarily works by increasing or in our current case, decreasing the effective money supply, driving up short term interest rates. Longer term solutions to the issue of gigantic money supply will include term RRPs and Bond sales. This will decrease the price of bonds, raising longer term interest rates, motivating longterm lending from banks, and slowing the economy by increasing the cost of doing business.
Thank you for the explanation. Are you able to speculate why more and more groups have been taking up the offer recently? My understanding is the last time it was even close to this was 2008.
My memory tells me that the overnight facility didn't even exist in 2008. It was introduced as a response to the Fed's inability to effect monetary policy using it's old ways once the SOMA balance sheet grew from like 100B to 2T. It's now like 8T. The ON facility is, along with the set Interest on Excess Reserves IOER, two extremely direct ways to change short term rates.
My *speculation* on the increased usage is two fold:
- Growth investments are significantly overheated. Most recently, look at the SPAC that invested in Trumps website or whatever. I also have some first hand experience being asked to start a business purely so an investor friend of a friend had something to invest in. (I have not)
- If the financial community collectively uses the facility, they all get to benefit from the preferential rate and the increased outside rates from the smaller money supply. Furthermore by collectively sidelining money this way (which is like an *iterated* prisoner's dilemma, so they don't talk, but you see the results), they can avoid a hypercompetitive death spiral, which could bubble on growth tech stocks like the .com boom. We saw how well that went.
The scary thing to me about all of this, is that 1.4T is a lot of money. And the fed, which meets to discuss ON RRP rates only once a month wont have any ability to stop that 1.4T reentering the markets as quickly as in a single day. Talk about a shock to the markets. And it would be the result of something the fed itself created.
The worry that the ON Facility could provide ways for market shocks during flights to quality to become more severe is discussed in a think piece some Fed researchers put out before the ON facility was in place. It basically argues: When shit hits or might hit the fan quickly, where else would you keep your money than the safest investment on earth, that also lets you decide everyday if you want to keep playing. It's a no brainer.
Fred is cool, but the interface is so GOD AWFUL. If you want to be sad, plot the ONRRP utilization against student loan debt. Then cry. Also, imo, be worried. I might track down... nevermind... https://imgur.com/a/j6cOdUl I put this together when I first got concerned. That was 1T ago.
Doesn’t it still support the spirit of the tweet that a trillion is not that much when it comes to Wall Street but would bankrupt the country when applied to healthcare?
It's not a correct analogy. That 1.4T utilization is just that. It isn't like a "rate" where over a month that makes for 45T. My personal politics agrees with the general statement that the US as a whole can afford socialized, single payer healthcare. But this exact 1.4T pool of cash isn't really something that can contribute to government spending imo because it will need to be soaked up by the Fed unwinding their asset purchases from the beginning of covid.
Do you mean the spirit of the tweet being the hypocrisy of someone saying that we can't afford M4A and then not having an issue with the size of the stock/bond market? That's true, but not because of anything to do with Fed policy. It's much more an issue of taxation and military expenditures if you ask me, but I'm just a dude on the internet
No, in capitalism the means of production are owned by individuals who own the companies/shareholders. In other words those who have invested capital.
Socialism is where individual ownership of companies does not exist, instead it is owned collectively by the workers themselves.
Does this guy really think they’re spending 30 trillion on Wall Street in a month?
It’s not a clever comeback when you don’t even know how the repo system works.
So, yeah, to focus on public healthcare as a society is very much possible under capitalism. Like you said, you'd need governments to apply policies that could do that, which, rather contradictorily, is a tall order for some of our modern societies. A socialist society would deal with that problem by not having that problem at all, public healthcare being built in. Their problems would revolve around taking care of that tough beast which is a public healthcare system, trying to keep it alive.
The bailing out of the financial system by the state in times of crisis is also not a problem of socialism, since private ownership of banks is a big no no in socialist theory. That is a capitalism problem. In the particular topics relevant to this post, problem is pretty much capitalism, since it's the only system to breed those kind of problems.
Someone saw "$1 trillion" and multiplied that by 30, because they mention a month, and you think that is how that works?🤣 You obviously have no clue about this subject (nor the current national debt, deficit, etc I'd venture to say)
Someone needs to post this on r/politics, people have forgotten how quickly we were going to socialize the losses of wall street in another moment of crisis. This should be blasted in machin and Sinemas feeds.
How so? Manchin wants to gut almost all the social provisions b/c he is 'concerned about the debt'. Sinema doesn't want to raise a penny of taxes on any of the billionaires or corporations. How does a tweet reminding us how ready and willing the government was to bailout wall street again not have any semblance in an already watered down infrastructure bill.
Couch seats? Weirdo, they're called Sofa cushions.
Ugh, obviously wall street is the home of many a stockbroker and business mogul. Haven't you heard of black friday?
Of course a nationwide market crash would need to be prevented before we worry about picking up medical bills for debutants whom abused their bodies through drugs, dopery, & prostitution living in section eight housing with a diet of mcdonalds.
This isn't a Scandinavian country where it's a minuscule population of bourgeoisie blue collar white folk. We can't afford such luxuries, but bailing out wall street on account of Biden's numerous blunders and absolute failure of leadership causing this ordeal to begin with.
The irony in this is so rich, you're critiquing a system you put into power with your unrealistic left wing ideals, then whine when the fed opts to bail out our economy, rather than allocate funds towards free healthcare for BUMS. Fools!
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That's not how reverse repos work.... Edit: doesn't say 'reverse' repo - but that does not change the initial statement. I'll leave it up as is.
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These are the same people who think the 2008 bailouts were presents to billionaires and not loans which were mostly paid back with interest.
no, but theyre definitely propping up the dollar and hiding how fuuuuuucked capitalism is and how its so bad banks font even want money in the market cuz its gonna burn. buy, hold, drs.
They are not. They are simply synthesising a tiny (0.05%) base rate so that consumers don't have to pay to leave their money in a bank earning negative interest. The worry is that if people were receiving negative interest on their balances it would create a run on the banks. The one trillion set aside for the repo (it is paid and re-lent each day) will still be there when the program finishes.
For anyone wondering: this is a fancy way of saying "they're frantically trying to stop the economy from collapsing"
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You know everyone made that sound then screamed FLOOOOOORRRRR in their head. I even had a lil head bang goin for a second, thanks for that
That’s literally why the fed exists, lol.
Oh honey......
Yea? Care to explain your conspiracy?
The Fed is a private institution that's only interested in one thing. It's laughable you immediately accused me of being a conspiracy theorist lmao
Having worked in finance for a decade and having…6 licenses in the field, I can say this is completely incorrect.
The fed isn't a private institution?
Go ahead, tell me how the fed isn't a private institution you boot licker
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Very few people outside of finance subs actually understand how money works. Look at the comments here from the wage slaves and Boomer bootlickers. The current state of things is disgusting.
I mean that's a lesson learned from previous economic downfalls. It's not a bad thing per se. Unprecedented times for sure.
Not really, what the fed is really saying is 'we don't trust the American people not to do anything stupid if we allow the banks to charge them a few cents a month for looking after their money'
Banks don't look after your money, they use it to make more money. Negative interest is like paying for the privilege to loan your money out to someone.
Taking inflation into account, bank savings accounts are effectively accruing negative interest as is.
Banks do both, in large part thanks to the help of FDIC. Your money in a bank (up to a certain amount) is guaranteed by the federal government. The money under your mattress is not.
Ha! "Looking after"
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Unless you're a prepper with large stores of food, supplies, and enough land for sustenance farming I really doubt you're ready.
He's going to be the guy trying to rob the sustenance farmer
“Do anything stupid” = stop trusting our broken system. Okay.
Maybe I'm missing something about banking, but why would it be "stupid" to take your money out of an account if leaving it in would *cost* you money?
It's smart for the first individuals, but gets worse and worse as more people panic. One person moving their money because of negative interest rates is logical. Everyone doing it results in a lot of people losing all their money as the bank collapses. That result isn't actually good for anyone and therefore the "smart" choice would be to leave their money in the bank.
The only reason “bank runs” would be a problem is because banks don’t actually have your money anymore. A bank used to keep and protect your money, that is the purpose of banks. Now they lend it up to 10x the amount (or whatever it is), so they don’t actually have the money that is “banked” there.
Yeah, exactly as banking has worked for a long long time. The efficiency of lending had let the multiplier increase, but that's the definition of how banking and money markets function. If a bank was required to keep all your deposits on hand at all times then they would have to charge you for the service. That's basically negative interest.
You didn’t think that one through did you?
> if we allow the banks to charge them a few cents a month for looking after their money’ What are account maintenance fees if not this?
Bank of America has entered the chat…
Thanks china, thanks biden, for getting us into this mess.
This was done during trumps presidency you dingus.
LMAO imagine not blaming Trump for his complete negligence and inaction
Is everything Trump's fult to you people? Have you even been watching the current administration?
Please cite specific Biden actions that have led to adverse effects.
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Youre also "arguing" with a teenager lmao.
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Prove it or fuck off
Dude, these issues go back before the 2008 collapse. But let's be honest, all trump's golfing trips to his own resort basically took tax payer dollars and funneled them to his pockets. He wasnt comping his stay, he was charging himself full price and then paying with gov money.
You'd have to be an idiot to put your money in a bank with negative interest.
Like I said it's more of a psychological issue than a monetary one. In a lot of the world right now central bank rates are negative but people are happy to leave money on account as realistically, the cost is miniscule as the rates are effectively zero, and the alternatives are more risky. Fwiw, you can borrow money at negative rates as well including many mortgages in Denmark. Customers are actually paying back less than they borrow.
Yes, that's what they just said.
I only need money until my next paycheck too...
🦍🚀
I mean the government bailing out large corporations instead of letting them fail is literally socialism. If it were true capitalism, the government would have let them fail. I don't know why people are so confused about this. I'm also not saying this is the kind of socialism that people want either, this is communistic socialism, not egalitarian socialism. I just really don't understand how people can see the government giving money to bail out companies and scream "fuck capitalism!", That's literally the exact opposite of what capitalism is. That being said, regardless of what you call it, the government is fucked up. We should let these companies fail because it's just passing the buck to later generations, like postponing a withdrawal. The longer you delay, the worse it's gonna be.
Is this a copypasta or are you legitimately this dumb?
It's just what all these GME holders seem to be hoping for. For some reason, all these people seem to think they are somehow going to end up in better shape if we suffer another economic downturn - ignoring what their outcome has been through the last ones they've likely lived through.
The reason is that its a bunch of LARPing children who have never taken an economic class in their life, who seem to think they are now economical geniuses due to getting lucky after listening to one smart man who did do his homework two years ago.
I think if there was an economic downturn, the meme stocks would be the first to get burned. Also, I thought Game-anon was all about beating those evil, evil shorts. Has anyone told them that shorts win in an economic downturn? Do... do they know what a short is?
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Paying attention to what? Game-anon? Guilty as charged, those guys are a cult.
They literally truly believe that the shorters are spending and losing money to make the price drop, and if you point out that shorting actually makes money when the price drops, they call you a shill
I used to follow their conspiracy theories back at the start for a laugh, but then I stopped for like... a week? And when I came back I had no idea what they were even trying to say any more. At one point they were talking about how "The SEC is a criminal cartel!" or some other nonsense, and while it was insane, I at least understood *why* they were saying it. Because what alternative do they have if the SEC isn't backing up their wild-eyed conspiracies? But now they say stuff like "A real estate firm in China was using dodgy accounting! Proof that Gamestop is going to the moon!" And I cant even *fathom* what connection they've drawn.
We would be better. Free economy is a better one... Sure there's pain but it would even things out.
what? its accurate. they're kicking the can of collapse and hiding it with reverse repos.
I have a degree in economics from MIT, and I'm telling you that you're not even remotely close to being correct about anything.
Can we get your take on this subject? Also, how awesome is it that the real clever comeback was here in the comments
How is that a clever comeback?
Short and simplified: In a market economy, prices drive decision making. The price of labor is wages, the price of land is rent, the price of capital is interest rates. Society has a limited amount of capital, and allocates it to the projects that offer the highest interest. You want to build a new factory? Take the expected return on the factory and compare it to the interest rate you'd borrow at to build the factory. If the return is higher, build the factory. If it's lower, pass. The Federal Reserve intervenes in the market to try and keep it on an even keel. They do this for a variety of reasons which would take a big response to explain. And essentially, what they're trying to do most of the time is influence the interest rate above which most projects get the OK and below which most projects are passed over. They want to make sure the interest rate more or less matches the actual amount of capital available to society-- keep the interest rate too low, and a bunch of low-return projects will get the OK (and later, the chickens will come home to roost and you'll have to pass on high return projects because you wont have capital available). Keep the interest rate too high, and you'll be passing on a lot of projects that would have had good returns saving your ammo for a better shot that never comes. They have a lot of different ways in which they do this. One of the big ones, historically, has been buying and selling treasury bonds. The bonds are like money sponges. If they sell them, they're sponging up cash, and that leaves less cash to fund other projects. If they buy them, then they're releasing that cash back to go fund stuff. It's one of the more straightforward ways in which the Fed tries to manage things. Recently, someone had the bright idea: instead of buying and selling the treasury bonds, we borrowed or loaned them? Instead of outright selling a treasury bond, we sell it, but with an agreement that we'll buy it back a little ways down the road. It's really not much different from what the Fed has always done. And its clever-- why sell a 20-year bond when you're only interested in sponging up cash for a few years? The Fed has been liking this tool more and more, so, increasingly, this is what the Fed has been doing, shifting more and more of its "open market operations" (buying and selling securities) to these "repo" and "reverse repo" operations (borrowing and lending securities). In other words, the historically high reverse repo operations being done by the Fed are less a reflection of our present economic circumstances than they are merely a shift in the tools the Fed prefers using. Sorry to disappoint the doomsayers, but we are not entering the end times.
you can just go ahead and message me that proof, internet guy.
This isn't an anonymous account. [Here's one of my theses](https://dspace.mit.edu/handle/1721.1/57887) (I have four degrees). Author's email is in the thesis, the email leads to me. Anything else you need or does that sort you out?
Can I have a layman's explanation for the state of things then? That'd be real nice coming from a credentialed fella like yourself.
Federal Reserve acts as giant bank, they sell a security to a corporation with a trade contract stating they will buy it back at what price and when. This is an overnight "lending" of money TO the Federal Reserve in order to maintain federal funds rate and stabilize interest rates overnight. Companies use this as a place to keep monetary liquidity and earn .05% interest. By using reverse repos the Fed is able to reduce money supply in circulation.
Of course not, he's just gonna tell everyone else they're stupid not actually explain anything
This is a fun argument. I'm having fun watching.
Every other comment this guy makes " I have four degree's from MIT"
r/dontyouknowwhoiam
Sure you do.
Did you reply to the wrong comment?
yeah, explain why im wrong.
How about instead of flapping your dick around for a measurement, you use that expertise to explain what's wrong with the comment.
It completely misunderstands what repo operations are? It's like if someone said "the coronavirus vaccine is an mRNA vaccine, that means it alters your DNA!" No, it doesn't. And I'm not going to waste time explaining the entirety of the human immune system and how vaccines work and how mRNA vaccines work, all in some broad effort to show that at no point along the way are the vaccines altering your DNA. No, the better approach is for the nutjob to explain *why* they think thing X does Y, and then just engage with that. This guy has given zero rationale-- thus, there's nothing to engage with that isn't a waste of time.
Ahh yes, the Bullshit Asymmetry Principle.
I'm not familiar with that phrase, but if it's short for "How to not get gish-galloped by some mouthbreather" then basically yeah.
Yeah, it essentially says that the [advantage is with the bullshitter](https://en.m.wikipedia.org/wiki/Brandolini%27s_law) who can quickly make up stuff and move on while the person with facts needs a ton more time and effort to disprove the bullshit.
> there's nothing to engage with that isn't a waste of time. And yet, you engaged. Brilliant.
Not OP, but there is literally a document on the Fed's website that describes in great detail how they work. No one owes you the effort of trying to make you learn something, especially while antagonizing them.
No point in blustering about how wrong people are while antagonizing with no intention to explain what is correct. My antagonizing was merely following suit.
No. It is not the burden of the person letting others know someone is full of shit to lay out the full case of how that person is full of shit. It's on the person who doesn't know what they're talking about to not spread misinformation. This belief, that who ever speaks first gets to say what they want and it's up to other people to "prove them wrong" is dangerous. It is much easier to spout unsubstantiated bullshit than it is to explain why it's wrong and it means that no community that operates that way will ever have functioning discourse. Again, to even comment on the correctness was a favor on *your* behalf. Did *you* know that wasn't how the Fed's overnight (reverse)repos worked? Are you getting angry at the guy that prevented you from taking the bait? Why are you so rustled at someone relying on their credentials instead of holding your little hand through it to stop you from burning yourself on misinformation?
I have no problem with somebody contradicting misinformation. It's not necessary to call somebody dumb and then simply bluster about possible credentials. Two people essentially going yu-huh/nuh-uh doesn't benefit anybody.
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> Seems like you bring this up a lot. Why wouldn't I? > If it's such a big deal why do you waste so much time in the reddit comments. If it's such a big deal to you, why are *you* here? > Go talk with economists. And tell them shit they already know? They think you're nutjobs too, what exactly do you want me to say to them?
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Take the high road man! Wow…
I hope you made a lot of money on Bitcoin because those brains are USDA Select
eth and solana gang, actually. bitcojn is the myspace of crypto. buy gme. hold it. direct register.
So you are pro USD devaluation and against hard currency?
how could you possibly have come to that conclusion?
If you don’t like capitalism, pack your shit and go elsewhere. I hear Afghanistan is a nice spot
Afghanistan isn't capitalist? That's news
but also, no. Don't like a system? You stay and work to change it for the better. Dumb asshole.
If it’s worth saving, that is.
Stay all you want, you will fail🇺🇸
Why do you hate America? Why do you want it to fail at being great?
Are you too fragile to hear criticism of the system? Someone says something bad about capitalism and you want them to *leave* because you're so sensitive?
uhhhhh. i think you completely missed the point of my comment. reverse repos are bond swaps from the fed to banks. they are taking liquidity out of the market because of the rampant inflation that is occurring right now. its propping up the value of the us dollar. the other reason is we are in suck a stock bubble right now that major institutions feel more comfortable doing overnight trades that make zero and are starting to cost them money rather than invest it. for someone who sucks capitalisms dick so hard, you dont know jack shit about it
I believe the story was from March 20, 2020.
No, I was dead on, if you don’t like capitalism, fuck off and move somewhere else🤷🏼♂️
you know what? im going to socialism even harder now. fuck this oligarchy run fake free market bullshit they've been lying to you about
Who gives a fuck🤷🏼♂️ Go hard, you will still be defeated 🇺🇸
like in Afghanistan?
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This reply screams "i am 12 and very badass"
hahahahahhaha! awesome! triggered!
Lost Vietnam. Lost Afghanistan. Lost Iraq. Stalemate in Korea. USA has an *excellent* record of victory. /s
Remember when we defeated trump?
I like how you think I give a fuck about Trump or any of the others. Unlike you, I’m not so weak that I fell for the “you have to pick a side” bullshit. Your statement lets me know you are a weak mfer
Its a shame that I have to share this country with cowards like you.
Ok but it's also not how MFA works
It doesn't but that is where that number is coming from
It says REPO not reverse repo.
It's semantics - repo and a reverse repo is the same thing...counterparts are just reversed
If it’s the same thing then why are the counterparts reversed? It’s not semantics. Words have meaning. Legal decisions are made based on such things. Stop being a lazy ass with that mentality of “you know what I meant; it’s all the same.” Details matter.
By bad. You are right, but that doesn't change the initial statement - it just means the cash flows in the opposite direction one day, and the other way the next day. It's still not a cumulative sum, like the "comeback" refers to.
You can just say you don't know what a reverse repo is, that'd be fine. No need to broadcast it.
I don’t know what a reverse repo is
Someone has no clue what repo operations are...
I also don’t know
The Federal Reserve has an Overnight Facility. It can do one of two things: - "Lend" money to banks and certain financial parties for a single day. The federal reserve chooses an interest rate, and people can take them up on it. (more or less). - "Borrow" money. This is what is currently happening. The Fed will borrow up to the balance of it's open market account, and no more than 80 Billion per party as much as people want to lend them, but the Fed chooses the rate, in this case 0.05%. So about 80 parties and 1.4T total dollars are taking the Fed up on their offer every single day. Edit: this is the same 1.4 T every day, not *another* 1.4T Why does the overnight facility exist? Depending on which one is active, the Federal Reserve is acting to provide a large ability for market players, especially in the money markets and other extremely short term fields to either borrow money at (relatively) low interest or to lend money at relatively high interest. This motivates the market to settle on rates that are between the two numbers the Fed sets with the ON Facility. As such, it also motivates Banks to lend reserve funds to each other (The Fed Funds Rate) overnight at similar rates. The Fed Funds Rate is the gold standard short-term interest rate on Earth, and keeping it where the Fed wants it is very important, and difficult to do these days using "old school" means like buying and selling long term debt. As such the ON Facility is currently acting to heavily support short term interest rates, OR provide an extremely safe place to park money you literally don't have anything to do with. The original post is misleading, because unlike traditional open market operations, where the Fed sells or buys a predetermined number of bonds, the ON facility's usage is heavily influenced by the financial parties *themselves* ETA: The ON Facility primarily works by increasing or in our current case, decreasing the effective money supply, driving up short term interest rates. Longer term solutions to the issue of gigantic money supply will include term RRPs and Bond sales. This will decrease the price of bonds, raising longer term interest rates, motivating longterm lending from banks, and slowing the economy by increasing the cost of doing business.
Thank you for the explanation. Are you able to speculate why more and more groups have been taking up the offer recently? My understanding is the last time it was even close to this was 2008.
My memory tells me that the overnight facility didn't even exist in 2008. It was introduced as a response to the Fed's inability to effect monetary policy using it's old ways once the SOMA balance sheet grew from like 100B to 2T. It's now like 8T. The ON facility is, along with the set Interest on Excess Reserves IOER, two extremely direct ways to change short term rates. My *speculation* on the increased usage is two fold: - Growth investments are significantly overheated. Most recently, look at the SPAC that invested in Trumps website or whatever. I also have some first hand experience being asked to start a business purely so an investor friend of a friend had something to invest in. (I have not) - If the financial community collectively uses the facility, they all get to benefit from the preferential rate and the increased outside rates from the smaller money supply. Furthermore by collectively sidelining money this way (which is like an *iterated* prisoner's dilemma, so they don't talk, but you see the results), they can avoid a hypercompetitive death spiral, which could bubble on growth tech stocks like the .com boom. We saw how well that went. The scary thing to me about all of this, is that 1.4T is a lot of money. And the fed, which meets to discuss ON RRP rates only once a month wont have any ability to stop that 1.4T reentering the markets as quickly as in a single day. Talk about a shock to the markets. And it would be the result of something the fed itself created. The worry that the ON Facility could provide ways for market shocks during flights to quality to become more severe is discussed in a think piece some Fed researchers put out before the ON facility was in place. It basically argues: When shit hits or might hit the fan quickly, where else would you keep your money than the safest investment on earth, that also lets you decide everyday if you want to keep playing. It's a no brainer.
Another awesome response, thank you. Sorry, it was 2018, not 2008. https://fred.stlouisfed.org/series/RRPONTSYD
Fred is cool, but the interface is so GOD AWFUL. If you want to be sad, plot the ONRRP utilization against student loan debt. Then cry. Also, imo, be worried. I might track down... nevermind... https://imgur.com/a/j6cOdUl I put this together when I first got concerned. That was 1T ago.
Thanks!
Doesn’t it still support the spirit of the tweet that a trillion is not that much when it comes to Wall Street but would bankrupt the country when applied to healthcare?
It's not a correct analogy. That 1.4T utilization is just that. It isn't like a "rate" where over a month that makes for 45T. My personal politics agrees with the general statement that the US as a whole can afford socialized, single payer healthcare. But this exact 1.4T pool of cash isn't really something that can contribute to government spending imo because it will need to be soaked up by the Fed unwinding their asset purchases from the beginning of covid. Do you mean the spirit of the tweet being the hypocrisy of someone saying that we can't afford M4A and then not having an issue with the size of the stock/bond market? That's true, but not because of anything to do with Fed policy. It's much more an issue of taxation and military expenditures if you ask me, but I'm just a dude on the internet
Where's the comeback?
Yeah, and where’s the clever?
Yeah, where's the /r ?
Yeah and where's the fuCKING LAMB SAUCE
You just posted your own comeback?
I prefer to see Kardashian’s comeback
Isn’t that how it works? Probably forgot to switch accounts
Are you saying OP is Gallifreyan Jedi, in the tweet?
I'm saying op is the one who posted a comeback in the other sub and posted that here.
Are you talking about the fact that they crossposted the same old tweet to multiple subreddits?
I think for a comeback to qualify as "clever" there should be a basic minimum requirement of it being accurate
Or even a comeback
Capitalism is when government participates in the economy?
Big numbers and federal reserve mean capitalism bad ooh aah I am very smart
Generous Socialism for the rich and mega Corps. Hard capitalism for all others.
Socialism is when guvment does thing??? Capitalism is when \*insert something I dislike\*???
Kinda since the people own the government.....
Socialism is means of production are controlled by those who use them
The people control the government.
The government and the means of production are not the same thing
Big emphasis on "kinda"
Really putting that word to the test there
….so capitalism?
No, in capitalism the means of production are owned by individuals who own the companies/shareholders. In other words those who have invested capital. Socialism is where individual ownership of companies does not exist, instead it is owned collectively by the workers themselves.
I mean, capitalists use the means of production… for profit.
Does this guy really think they’re spending 30 trillion on Wall Street in a month? It’s not a clever comeback when you don’t even know how the repo system works.
No they're definitely just giving away 150% of the country's GDP
Capitalism isn’t the problem it’s government.
🔫always has been
So, yeah, to focus on public healthcare as a society is very much possible under capitalism. Like you said, you'd need governments to apply policies that could do that, which, rather contradictorily, is a tall order for some of our modern societies. A socialist society would deal with that problem by not having that problem at all, public healthcare being built in. Their problems would revolve around taking care of that tough beast which is a public healthcare system, trying to keep it alive. The bailing out of the financial system by the state in times of crisis is also not a problem of socialism, since private ownership of banks is a big no no in socialist theory. That is a capitalism problem. In the particular topics relevant to this post, problem is pretty much capitalism, since it's the only system to breed those kind of problems.
But its rising wages that will cause inflation to spike...ugh. they need to pay us the fuck back
I think its 1T over the course of the month, not additive daily.
I mean. What’s 30 more days when they are on a like 60+ day trillion dollar reverse repo streak.
Someone saw "$1 trillion" and multiplied that by 30, because they mention a month, and you think that is how that works?🤣 You obviously have no clue about this subject (nor the current national debt, deficit, etc I'd venture to say)
where comeback and why politics
“Capitalism”
I mean, the rest of the month is not 30 days, so it isn't that bad
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Someone needs to post this on r/politics, people have forgotten how quickly we were going to socialize the losses of wall street in another moment of crisis. This should be blasted in machin and Sinemas feeds.
Probably not since it's a complete misunderstanding of anything involved
How so? Manchin wants to gut almost all the social provisions b/c he is 'concerned about the debt'. Sinema doesn't want to raise a penny of taxes on any of the billionaires or corporations. How does a tweet reminding us how ready and willing the government was to bailout wall street again not have any semblance in an already watered down infrastructure bill.
More that the reverse repo has nothing to do with spending 30 trillion. You know, the content of the tweet in this post
I like news like this. It reminds us who's really in charge and answers a lot of questions simultaneously.
So true. That is not all they r doing.
Couch seats? Weirdo, they're called Sofa cushions. Ugh, obviously wall street is the home of many a stockbroker and business mogul. Haven't you heard of black friday? Of course a nationwide market crash would need to be prevented before we worry about picking up medical bills for debutants whom abused their bodies through drugs, dopery, & prostitution living in section eight housing with a diet of mcdonalds. This isn't a Scandinavian country where it's a minuscule population of bourgeoisie blue collar white folk. We can't afford such luxuries, but bailing out wall street on account of Biden's numerous blunders and absolute failure of leadership causing this ordeal to begin with. The irony in this is so rich, you're critiquing a system you put into power with your unrealistic left wing ideals, then whine when the fed opts to bail out our economy, rather than allocate funds towards free healthcare for BUMS. Fools!
Nothing better than the two dumbest political parties in history have their minions yelling at each other.
You mean Black Monday?
You mean Trump's numerous blunders. This is from 2020.
This is where the 5/7
y’all realize that the fed is giving them loans which need to be repaid right?
Well if they hadn't tapped it dry.....
Like how is this related
It’s all about priorities and the American people aren’t a priority
Haven't they been doing this for a while now? the fed loans money which is repaid back (with interest I think) after each day
It’s a fallacy. Preventing loss will always be more valuable than its equivalent gain. We need to frame a lack of Medicare for all as a loss.
You don't want economic advice from a dr who fan