I’m curious why you describe the unsecured/fed funds system as unstable. Seems like the secured system is less so, especially since the 2008 crisis was a function of declining collateral values. The Fed described the floor system as easy to manage but it has proven rickety. Sep ‘19, Mar ‘20 point to a fragile system requiring constant, dramatic intervention to maintain. By contrast, the unsecured federal funds system maintained by a corridor worked pretty well. See Bill Nelson’s “I don’t know why she swallowed the fly”
It seems like whatever the banking system turns to as a “safe” bet inherently becomes unsafe because anything that a failing system uses will eventually weaken as a result of the failing system itself
Conks, assuming we get through the debt ceiling without a US default, what's your guess as to what the TGA gets built up to as a steady state, and how long do you think it takes to get there?
Not an expert but this is not a zero sum game or push this button this happens, more like push this button and 2-3 dynamics change, Soooo....I wander if/when they try to fix that "Lo'r Jaw" they loose the long end?
it is mostly foreign entities without access to the RRP, primarily offshore money market funds which hold a lot of dollars, also foreign banks who rely on correspondent banking.
I’m curious why you describe the unsecured/fed funds system as unstable. Seems like the secured system is less so, especially since the 2008 crisis was a function of declining collateral values. The Fed described the floor system as easy to manage but it has proven rickety. Sep ‘19, Mar ‘20 point to a fragile system requiring constant, dramatic intervention to maintain. By contrast, the unsecured federal funds system maintained by a corridor worked pretty well. See Bill Nelson’s “I don’t know why she swallowed the fly”
hmm, i meant more that it became unstable/unusable and so they switched
i agree that it is STILL unstable
badly worded on my part!
It seems like whatever the banking system turns to as a “safe” bet inherently becomes unsafe because anything that a failing system uses will eventually weaken as a result of the failing system itself
Hope that makes sense
Conks, assuming we get through the debt ceiling without a US default, what's your guess as to what the TGA gets built up to as a steady state, and how long do you think it takes to get there?
$500-$600B in a quarter
Not criticizing btw. I really appreciate your work.
So well researched. Excellent work.
Thanks!
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Not an expert but this is not a zero sum game or push this button this happens, more like push this button and 2-3 dynamics change, Soooo....I wander if/when they try to fix that "Lo'r Jaw" they loose the long end?
it is mostly foreign entities without access to the RRP, primarily offshore money market funds which hold a lot of dollars, also foreign banks who rely on correspondent banking.