Jump to content



Photo

FED Still Pumping Like Crazy


  • Please log in to reply
10 replies to this topic

#1 Douglas

Douglas

    Member

  • Traders-Talk User
  • 1,509 posts

Posted 21 June 2022 - 01:20 AM

The current FED Funds rate is 1.75%, so the FED charges member banks 1.75% for short term loans used supposedly to maintain banks required liquidity ratio, but banks are only willing to pay consumers somewhere between 0.1 and 0.2 % for short term deposits.  If there was any competition for short term money, why would banks only pay consumers diddly squat when the alternative is almost 10 times greater?  Because they are not.  They are not stupid.  The liquidity banks need is finding its way into banks through some other FED operation, maybe some sort of repurchase agreement.  The low consumer short term deposit rates are a clear indication that the banking system is flush with funny money.  The FED has not to any great extent tightened credit or it would show up in short term bank rates as the banks were forced to complete in the market for deposits.  The FED pump is still running hard.  The FED must still believe inflation is transitory so no real tightening is needed, they just aren't saying it out loud.  

 

Regards,

Douglas

 

 

 



#2 slupert

slupert

    Member

  • Traders-Talk User
  • 2,369 posts

Posted 21 June 2022 - 04:29 AM

Banking Act of 1933 (Glass-Steagall) | Federal Reserve History



#3 slupert

slupert

    Member

  • Traders-Talk User
  • 2,369 posts

Posted 21 June 2022 - 04:30 AM

 

"In addition, the act introduced what later became known as Regulation Q, which mandated that interest could not be paid on checking accounts and gave the Federal Reserve authority to establish ceilings on the interest that could be paid on other kinds of deposits. The view was that payment of interest on deposits led to “excessive” competition among banks, causing them to engage in unduly risky investment and lending policies so that they could earn enough income to pay the interest. The prohibition of interest-bearing demand accounts has been effectively repealed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Beginning July 21, 2011, financial institutions became allowed, but not required, to offer interest-bearing demand accounts."

 


#4 gm_general

gm_general

    Member

  • TT Member+
  • 1,607 posts

Posted 21 June 2022 - 08:39 AM

Parabola

 

https://fred.stlouis...eries/RRPONTSYD



#5 slupert

slupert

    Member

  • Traders-Talk User
  • 2,369 posts

Posted 21 June 2022 - 09:00 AM

Reverse repo agreemenrs put a floor under the market whe

 

He's talking about the Fedral Funds rate. Notice how that chart coincides with the establishment of the SRF in'21 (standing Repo facility). The goal of the SRF is too curtail upward movement of rates in the overnight market. They don't want that to spill over in the Federal Funds rate. The reverse repo's were established to put a floor under the over night rates. The overnight market is usually for people like Goldman or Morgan Stanley, investment banks that do not have depositors, when they get short cash, they go to the overnight market.



#6 fib_1618

fib_1618

    Member

  • Traders-Talk User
  • 9,836 posts

Posted 21 June 2022 - 12:22 PM

boombust062022.png

 

http://www.technical...mbust062022.png


Better to ignore me than abhor me.

“Wise men don't need advice. Fools won't take it” - Benjamin Franklin

 

"Beware of false knowledge; it is more dangerous than ignorance" - George Bernard Shaw

 

Demagogue: A leader who makes use of popular prejudices, false claims and promises in order to gain power.

Technical Watch Subscriptions



 


#7 Douglas

Douglas

    Member

  • Traders-Talk User
  • 1,509 posts

Posted 21 June 2022 - 12:51 PM

That 0.2% rate I noted was for a short term 1 month CD not a checking account. The money market demand account at the credit union I use in the States is paying something around  0.1% or maybe less.  Banks are not competing for deposits.  Heck they used to compete.  They even used to give away free prizes for deposits.  I think my sister still has a rocket shaped coin bank that a bank gave our dad for a deposit he made in the early 1960's.    The picture below is for one just like it for sale on Ebay for $110.  These days you're lucky if you even get a howdy-do when you walk in a bank. They don't need depositors when there's plenty of FED funny money sloshing around.  

 

s6jA3IC.png

 

Regards,

Douglas



#8 pdx5

pdx5

    I want return OF my money more than return ON my money

  • Traders-Talk User
  • 8,565 posts

Posted 21 June 2022 - 02:44 PM

That 0.2% rate I noted was for a short term 1 month CD not a checking account. The money market demand account at the credit union I use in the States is paying something around  0.1% or maybe less.  Banks are not competing for deposits.  Heck they used to compete.  They even used to give away free prizes for deposits.  I think my sister still has a rocket shaped coin bank that a bank gave our dad for a deposit he made in the early 1960's.    The picture below is for one just like it for sale on Ebay for $110.  These days you're lucky if you even get a howdy-do when you walk in a bank. They don't need depositors when there's plenty of FED funny money sloshing around.  

 

s6jA3IC.png

 

Regards,

Douglas

 

Unless the FED money is free or costs less than 0.2% interest rate, it makes no sense.

If banks must pay 1.75% FED fund's rate, why would the bank not want depositor's money costing only 0.1-0.2%? 


"Money cannot consistently be made trading every day or every week during the year." ~ Jesse Livermore Trading Rule

#9 pdx5

pdx5

    I want return OF my money more than return ON my money

  • Traders-Talk User
  • 8,565 posts

Posted 22 June 2022 - 10:04 AM

Did anyone tune in to Powell being grilled by Congress this morning?
"Money cannot consistently be made trading every day or every week during the year." ~ Jesse Livermore Trading Rule

#10 Rogerdodger

Rogerdodger

    Member

  • TT Member*
  • 25,953 posts

Posted 22 June 2022 - 01:06 PM

I had one of these!

s6jA3IC.png

 

Billionaire Seth Klarman sees value in gold; nobody should own cryptocurrencies - interview with Harvard Business School'

"Interest rates are starting to move higher, and they should move higher because they've been held artificially low for a long time," Klarman said in the Harvard Business School interview. "I think it's going to jolt some people, and even the system, when they start to move higher."

 

"The market has priced in five or six increases this year alone. What's hard to think about is whether the Fed will raise rates into a slowing economy and a melting-down financial market," he said. "My guess is they'll chicken out at some point."

The bond market has been in a bull market for 35 years, and the current selloff could be a big shock for investors who have been forced to take more risks to find better yields.

"I can't see the point of crypto," he said. "It has this feel to me of being like catnip for techies. The idea that we're using more energy than the country of Iceland, to mine extra crypto, to solve math problems that don't need to be solved, seems crazy to me."

 


Edited by Rogerdodger, 22 June 2022 - 01:07 PM.