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The Repo Crisis and The Fed: Part 4

Quantitative Easing has resumed.   On September 17th, overnight interest rates in the Repo Market shot up to 10%, four times higher than they should have been.  Problems there infected the Federal Funds Market, causing the Federal Funds Rate to move up to 2.3%, above the Fed’s target range of 2.0% to 2.25%.  This means the Fed temporarily…
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The Repo Crisis and The Fed: Part 3

The Fed is once again creating very large amounts of money and pumping it into the financial markets. So, it is not surprising that all the major US stock market indices have recently set new record highs. What we don’t know, however, is how long the Fed is going to continue “printing” and how much money…
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The Repo Crisis and The Fed: Part 2

Monetary Policy is the government’s most important economic policy tool.  If you really want to understand how the Fed conducts Monetary Policy, you must understand the Fed’s weekly report on the “Factors Affecting Reserve Balances”. The previous Macro Watch video began analyzing the “Factors Affecting Reserve Balances” in order to show, in detail, how the Fed…
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The Repo Crisis and The Fed

On September 16th, the interest rate in the overnight Repo Market shot up to nearly 10%.  It should have been below 2.25%. There was no shortage of Reserves to lend.  There were nearly $1.4 trillion of Reserve Balances that day.  Therefore, there was an unwillingness to lend among the institutions holding the Reserves.  The Fed had to step in…
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