Bank Crisis: NO bank anywhere has reserves left.

[trueliquidity]

Well it got worse, like everyone expected.

http://www.federalreserve.gov/releases/h3/Current/

Not only has bank reserves in the united states fallen negative for the first time in history, but they are now in the hole by 20 billion dollars, down from non borrowed reserves of 40 billion just a few months ago.

Hypothetically, what would happen if the general public got wind that no bank has money anymore?

 

[number22]

http://www.federalreserve.gov/newsevents/press/monetary/20080226a.htm


Increasing amount of auctions for short term; clearly 30b was not enough. Surprisingly; its yield didn't go up more; only +0.07% from last time.

 

[Ivanovich]

Someone posted this excellent thread on the subject. I apologize, I don't know who it was.

http://piggington.com/bank_reserve_requirements_and_the_taf

 

[crgarcia]

Fed can print unlimited money, and they are lending to the banks.

 

[trueliquidity]

Quote from Ivanovich:

Someone posted this excellent thread on the subject. I apologize, I don't know who it was.

http://piggington.com/bank_reserve_requirements_and_the_taf

If the banks are doing this because of attractive interest rates (negative in real terms) then I can remember another time in recent history where they could have done this as well, but didnt...

 

[Landis82]

Very interesting . . .
Can anyone say time for a "Coupon Pass"?

 

[der_kommissar]

Quote from crgarcia:

Fed can print unlimited money, and they are lending to the banks.

and then the banks have to find able and willing borrowers or else the velocity of credit creation stalls and the tsunamic continues unabated.

But then again idiots such as yourself who believe in the almighty Fed don't pay attention to details.

 

[crgarcia]

Quote from der_kommissar:

and then the banks have to find able and willing borrowers or else the velocity of credit creation stalls and the tsunamic continues unabated.

But then again idiots such as yourself who believe in the almighty Fed don't pay attention to details.

First learn to be polite, STOP insulting people.

The Fed is doing the best they can (or the only thing they can).
Inflation just can't be controlled completely, not without a 1929 or Zimbabwe style depression.

They can't control inflation, so they boost emplyment by lowering rates.

By the way, some inflation will actually help home prices come into equilibrium faster, getting out of the subprime mess.

 

[riskfreetrading]

Quote from crgarcia:

First learn to be polite, STOP insulting people.

The Fed is doing the best they can (or the only thing they can).
Inflation just can't be controlled completely, not without a 1929 or Zimbabwe style depression.

They can't control inflation, so they boost emplyment by lowering rates.

By the way, some inflation will actually help home prices come into equilibrium faster, getting out of the subprime mess.

The economic problems are not due to lack of money. It is a problem of confidence and business conditions. Recession is a good thing in the essence that it cleans bad things to allow for a new business cycle to emerge.

Reducing interest rates wiould not solve the problem, it just creates another problem. Why? Any printed cash goes not to business creation (which is the intended destination) but to buying hard assets which leads to inflation. Once this will be understood, the remedy will be to increase interest rates. At that moment that medicine will be bad as it would make the cost of capital large for businesses, and a prolonged recovery. So if there will be a recession (I hope not), it may take a long time for better days to come out.

I think that the Fed is completely wrong in decreasing interest rates at the present time. If I were them, I would have fought inflation, wait for a recession to make some work on business environment, and then lower interest rates to encourage business development and a speedier recovery.