Global Debt

[malleefarmer]

A different picture when per head or capital basis.

Or does that not matter Errol.

[errolanderson]

mallee . . . There are now dysfunctional market signals that suggest there is again something very wrong with the financial system. The Fed has had to recently bail the repo market out nite after nite. Investors appear oblivious that without the Fed rescue mission right now, financial markets may begin to fail, some banks would not be able to do their everyday business. Lack of liquidity is a huge risk. There isn't enough USD in the system suggesting that the Fed may be quietly beginning QE4 money printing. We highlighted this risk to feeders and growers in ProMarket Wire yesterday. . . .

This is now a fallout symptom of your global debt chart. The chickens have come home-to-roost . . . .

[biglentil]

mallee . . . There are now dysfunctional market signals that suggest there is again something very wrong with the financial system. The Fed has had to recently bail the repo market out nite after nite. Investors appear oblivious that without the Fed rescue mission right now, financial markets may begin to fail, some banks would not be able to do their everyday business. Lack of liquidity is a huge risk. There isn't enough USD in the system suggesting that the Fed may be quietly beginning QE4 money printing. We highlighted this risk to feeders and growers in ProMarket Wire yesterday. . . .

This is now a fallout symptom of your global debt chart. The chickens have come home-to-roost . . . .

Call it whatever you like but bailing out the repo market is QE. Just another form of monetizing debt and inflating the money supply.

[AlbertaFarmer5]

Check out the explanation by the poster Falcofog over at newagtalk.

As far as this reserve shortage I will do my best to explain again. Before the financial crisis the FED maintained its effective federal funds rate using a corridor system. At this time the payment system that the fed oversees only needed very little excess reserves to operate. Here is a link to an interactive chart:

https://fred.stlouisfed.org/series/EXCSRESNS

During the financial crisis the fed almost ran out of treasuries trying to maintain its EFFR and they decided to change to a floor system so they would always have a huge amount of treasuries and to finance the purchase of treasures they would make the banks hold reserves you can clearly see on the chart when this happened. The banks were unhappy the FED was making them hold the reserves that they didn't need so the FED said we will pay you to hold these reserves and switch to a floor system and use interest on excess reserves to set the FEDs overnight rate.

So the FED had treasuries as an asset and the reserves as a liability so its balance sheet equaled zero. The feds balance sheet must always equal zero because our entire financial systems balance sheet must equal zero. Right now the FED wants to run its floor system with the minimal amount of reserves necessary and they have been reducing reserves to see where that point is. Now they have found it.

So fast forward to the recent debt limit fiasco when the treasury had to use extraordinary measures to keep paying the bills. By the time congress settled the debt limit issue in the summer the treasury ran its checkbook balance at the FED real low. At the beginning of August the Treasury Dpt. came out and said roughly this, " hey we have around a $100 billion balance, by the end of September we are going to run that back up to where we want it which is about $400 billion."

You can see on the attached daily treasury statement the Treasury started the year with $384 billion and the month of September with $133 billion and Tuesday they had a balance of $323 billion. The treasury sold treasury securities to get money to rebuild its cash position. And we all know that the sale of treasury securities is a reserve drain.

So when you add the usual banking system and corporations holding reserves for the end of quarter accounting, Corporate tax payments, and the treasury rebuilding its cash position on its balance sheet you get a system that is caught short of reserves.

Does this help explain?


Edited by FalcoFog 9/26/2019 12:15




(DTS9-24-19 (full).jpg)

Anyone agree or disagree.

As for the US having the highest debt per capita(and massive trade defecits), that is an inevitable outcome of having the worlds reserve currency. And is sustainable over long time periods.

[farming101]

I agree.
It's all about good policy and confidence in the system.

[macdon02]

Check out the explanation by the poster Falcofog over at newagtalk.



Anyone agree or disagree.

As for the US having the highest debt per capita(and massive trade defecits), that is an inevitable outcome of having the worlds reserve currency. And is sustainable over long time periods.

When the Fed decided to pay on the reserves, that was the major flaw that prevented inflation and why they can print any amount they desire, the banks simply will hoard and collect the fraction of a percent in interest, its free money. Why take on any risk during a crisis? I would agree on the above analysis and expect at minimum 1 more wave of deflation

[malleefarmer]

didnt quite word it correctly.

Australia i think had nearly 1% of debt but weve only got 24 million i think