Holy Fuck!
It's no wonder that Bernanke is rushing to nationalize so much of our debt. I just don't have words to describe how bad this is, but I rescind all criticism of "Helicopter Ben". Tank the currency, inflate our way outta dept, whatever it takes....
This, sports fans, is bad.
13 comments:
Oh.Shit.
If you look up close to the graph - you'll see that it sharply turns in November '07.
That's when the reserver dropped 41 billion into supply a single day.
Give Convivial a ceegar! Yup, that was the day the heads turned....
:o)
James
I'll line up the silly questions then. Is this a measure of the hard cash reserves of banks, nationally?
If so, is this a run?
How can you go negative on this plot? Does that mean that there is no cash left at any of banks that make up this plot?
Who the hell did they loan it too - Dewey, Cheatum and Howe?
I wish the data went back earlier in time - it would be nice to see if this is similar to 1930s events. Well, nice in that I would have something to compare this too. Yes it looks bad.
On the other hand...if our currency does go further south, we'll never be able to leave this country on travel, but, everyone will want to spend their money here since they'll get 1st world goods at third world prices.
Alex, that's what I asked Russ last night when I showed him this--where the hell did this money go? I can't believe they gave it in subprimes... Anbd you're right, would be good to see the 30s data.
::sigh:: Well, so much for visiting Hungary as often as we used to. Argh. Just have to make my dad fly. If it goes like this, he'll be able to afford it better than I do.
Yes...someone has to have this money somewhere and they're spending it on something right?
I'm beginning to think that the family vacation we had planned for 2009 to Ireland really will be a dream now.
Your missing a point. I f the dollar floors, then China will dump the dollar reserves, delinking them from the US economy in a significant way. The more financially independent they get, the less likely they will be afraid of going to war with us in the Pacific for strategic access to the Pacific.
So, I'm asking about the data because I flatly don't understand it.
I dunno...I think China is way too financially entangled with us as it is. Who is going to buy all their cheap crap if not us? If it wasn't for our consumer ways, they would not have been able to grow their industry so fast.
More importantly, they've gotten addicted to cash and growing financially. If we dry up, they're going to have major social unrest of their own to deal with.
What it means is that the Fed is actively propping up the banking system right now. On a net basis, if the Fed weren't injecting liquidity via the new Term Auction Facility (new short-term instruments available to banks that didn't exist this time last year), the banking sector would be dead.
Note that this does not mean that banks have no reserves: this is an aggregate.
To clarify: by swapping credit-unworthy instruments for US bond obligations, banks can use those bond obligations as collateral to borrow/lend/etc., but that swap itself is a loan from the Fed just like any garden-variety repo -- it doesn't count as a "borrowed" reserve since this money isn't owed to other clients of the banking system, so it can still make its way onto this graph. The Fed has a sanitized version of this graph available somewhere that doesn't include the TAF bailout mechanism, and which shows a reserve level around 20B or so.
In addition, Banks can go negative because they can have more loans out, on paper, then they technically have on hand.
Which is why some of these folks have been going under lately.
Frankly, I have zero sympathy to them. Banks have been writing bad paper for years... there's a big part of me that would simply prefer to see a wave of failures and consolidations... that's not painless for the innocent depositors, however, even with FDIC.
Actually, I'm about to post about that scenario...
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