- Messages
- 23
- Reactions
- 20
Only it's happening in a place most people are not aware of. No In stock market where most people anticipate but rather the secondary markets used for banks generate liquidity to conduct its operations. To those not familiar secondary markets are used sell produced mortgages and commercial loans to other banks and government to generate liquid funds which are in turn used to produce more loans. Liquidity also comes from customer deposits and stock market operations (usually only small fraction of profits)
Since August 19 of this year the federal reserve has been conducting open market operations to inject liquid funds into these banks at approximately 50 billion perday by buying up produced loans (expanding their balance sheet) and provide funds to the banks for them to in turn produce loans and pay for daily day to day operations.This is equivalent to quantitative easing operations conducted from 08 to 15.
This is not a normal course of business. In fact the fed I'm not normally involved in these markets. Federal reserve intervention means that's customer deposits are drying up and/or banks are running out of cash to conduct their operations. What will happen when economy dips Banks are short in liquidity and cannot produce more loans, u guessed it; they cannot sell produced loans in secondary markets, cash dries up, bank goes under. That's where the feds step back in as they did in '09 and bail them out.
Here is the scary part couple days ago the feds announced that until year end the fed will be injecting garagatuant liquidity into banks of approximately 500 billion.
Since August 19 of this year the federal reserve has been conducting open market operations to inject liquid funds into these banks at approximately 50 billion perday by buying up produced loans (expanding their balance sheet) and provide funds to the banks for them to in turn produce loans and pay for daily day to day operations.This is equivalent to quantitative easing operations conducted from 08 to 15.
This is not a normal course of business. In fact the fed I'm not normally involved in these markets. Federal reserve intervention means that's customer deposits are drying up and/or banks are running out of cash to conduct their operations. What will happen when economy dips Banks are short in liquidity and cannot produce more loans, u guessed it; they cannot sell produced loans in secondary markets, cash dries up, bank goes under. That's where the feds step back in as they did in '09 and bail them out.
Here is the scary part couple days ago the feds announced that until year end the fed will be injecting garagatuant liquidity into banks of approximately 500 billion.
Zerohedge
ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero
www.zerohedge.com
Statement Regarding Repurchase Operations - FEDERAL RESERVE BANK of NEW YORK
www.newyorkfed.org