I think I'll start a helicopter company. They'll need quite a few to drop that $1.5 trillion from the air. Think of the money to be made on the money that's already been made! I could be an instant bajillionaire.
I looked at the list via the link you provided. At the end it states: "Inclusion on this list simply means that, should the New York Fed conduct reverse repurchase agreements, those listed would be eligible to participate." Does 'eligible' have the same connotation as an invite to the admiral's reception does in the military: "you are invited [and shall attend]".So what should we do if we have a lot of money in one of the 'eligible' money market funds?
What would the money markets be getting in return? The Fed has about $18B in T-Bills on its balance sheet. Not nearly enough to pull a significant amount of reserves out. So wouldn't the money market funds have to accept less liquid securities from the Fed? What would a money market fund want with agency paper or MBSs?Even if they reverse repo'd their entire portfolio of Treasury securities there would still be about $2B left in excess reserves and that's assuming a dollar for dollar swap. I'm trying to get me head around all this and I just can't help but wonder, "what the hell is Bernanke thinking?" The PDs bid a lot of these bonds knowing they were flipping them to the Fed and now they have to suck them back dollar for dollar?
Joe,You are correct the Fed has only $18B in T-Bills, but they do have $1.4 trillion in notes and bonds,but it is still a crazy game. They would have to liquidate huge portions of their portfolios to do the reverse repos with the Fed.
Bob, If most of the QE1 and QE2 money is going into excess reserves, then what is causing the rise in prices currently? Previous money printing? Or enough of QE1 and QE2 seeping out to cause price inflation?
Reserves of what? Promissory notes mislabeled as dollars? Backed by what collateral? MBS trash?DEBT IS NOT MONEY.End the Fed.
Have you considered the Fed has simply been conducting a side-car operation? They took in seriously impaired MBS from the banks in exchange for funny money called non-borrowed reserves. The expectation is for the banks to begin using these non-borrowed reserves to "buy" their bad MBS paper back - presumably at a time when folks can start paying their mortgages again...
Educate me here... why are the banks keeping this money in excess reserves and where did they get it? I mean if they got it from Fed, then why? I thought all those bailouts were used to stay in business. How can they keep them in reserves then? It doesn't make sense to me! Could anyone explain and/or point me towards the answer? Thanks!
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