tag:blogger.com,1999:blog-5713178645208582139.post4427353608984756630..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: Is the Fed Squeezing the Shadow Banking System?David Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger21125tag:blogger.com,1999:blog-5713178645208582139.post-76290004130706625452013-12-11T11:22:42.309-06:002013-12-11T11:22:42.309-06:00Can someone explain to me why cash cannot serve as...Can someone explain to me why cash cannot serve as collateral when QE has converted Treasuries to dollars? Doesn't the shortage of collateral arising from QE manifest as dollars in bank accounts? If a player cannot find a bond to back its derivative commitments, why can't it borrow dollars for the same purpose? Isn't credit, and not collateral, the unaffordable commodity here? Lawrence J. Kramerhttps://www.blogger.com/profile/06765377230733211459noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-3762263568645920682013-06-12T08:36:04.493-05:002013-06-12T08:36:04.493-05:00I really like the graph on safe assets, but I thin...I really like the graph on safe assets, but I think there should be a corresponding graph of total assets -- what percentage of total assets were "safe"?<br /><br />In particular, how much of the MBS / CDO total was considered/ defined as "safe" prior to the 2008 crisis (or 2006 peak house price bubble leak)?<br /><br />With the slow recovery, in part due to limited bank Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-51725674999843650822013-06-11T04:54:42.925-05:002013-06-11T04:54:42.925-05:00I am really very happy to be a part of such discus...I am really very happy to be a part of such discussions where i can get a lot of information about the finance industry and <a href="http://www.axisbank.com" rel="nofollow">banking</a>.I think you done a great job by sharing this post.Thank you so much.<br /><br /> Anonymoushttps://www.blogger.com/profile/09774426222250505635noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-81665752795648389512013-06-08T13:28:41.376-05:002013-06-08T13:28:41.376-05:00“Safe-assets” (or high credit quality liquidity bu...“Safe-assets” (or high credit quality liquidity buffers), are used in both public & private collateralized transactions contracted across the entire yield curve. But aren’t runs (shortages), on “safe-assets” concentrated at the short-end segment of the yield curve? Aren’t runs perpetuated by the higher turnover associated with shorter-term maturities (the proceeds of which require immediateSalmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-14281099399788604062013-06-08T09:58:01.663-05:002013-06-08T09:58:01.663-05:00I found an interesting data point of collateral, w...I found an interesting data point of collateral, where mostly government collateral is used as high-powered money in the financial sector, namely the Canadian payments system. http://www.bankofcanada.ca/wp-content/uploads/2010/06/dsouza1.pdf<br />In 2007, $30B in collateral was needed for a $3.6T banking sector, $1.7T economy. (For comparison, the Canadian monetary base was $50B in 2007.) Alsojtnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-91281275033802398352013-06-07T03:47:49.386-05:002013-06-07T03:47:49.386-05:00Excellent blogging.
Yes, first we have to have ro...Excellent blogging.<br /><br />Yes, first we have to have robust economic growth---without that, there will be little generation of safe assets, or anything else we want. So that remains #1.<br /><br />Secondly, Kessler seems to be calling for a large, outstanding block of safe assets---Treasuries---to be permanently embedded in our financial system. Really? We can't pay down government debtBenjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-58270101738319524152013-06-05T16:48:38.870-05:002013-06-05T16:48:38.870-05:00Thanks David. I was looking for a specific transa...Thanks David. I was looking for a specific transaction example where the shortage of Tsys has created a problem. For example, let's say there are only $1 and $5 bills, and there is a law that prohibits a person from purchasing more than one $1 Coke in any given transaction. Then suddenly, $1 bills disappear from circulation. I can see a problem there for Coke and me. Again, the Apple CFOjtnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-61572559452978123292013-06-05T13:17:05.032-05:002013-06-05T13:17:05.032-05:00Manmohan Singh & Peter Stella: “Post-Lehman, ...Manmohan Singh & Peter Stella: “Post-Lehman, there has been a dis-intermediation process leading to a fall in the money multiplier. This is related to the shortage of collateral (Singh 2011). This is having a real impact—in fact deleveraging is more pronounced due to less collateral” - -“Money and Collateral”<br /><br />& “the “risk-free” repo-rate will arguably continue to trade below Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-8654044553614726432013-06-05T11:52:17.339-05:002013-06-05T11:52:17.339-05:00Depository institutions are able to create new mon...Depository institutions are able to create new money as a function of the velocity of the deposits constantly circulating & recycling within the commercial banking system. Money creation is not based upon the volume of their existing deposits. Safe assets may be pledged & repledged, but this does not fit the definition of money per se as safe assets can be taken out of circulation (or Salmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-5684404814535219212013-06-05T11:12:51.482-05:002013-06-05T11:12:51.482-05:00Anonymous:
Obviously, liquidity is disproportiona...Anonymous:<br /><br />Obviously, liquidity is disproportionately added for the primary dealers & certain CBs (in the form of idle IBDDs), but subtracted from the traditional wholesale funding resources of the SBs (NBs). The Reserve Banks (via the remuneration rate), simply "out bid" the NBs for savings (reducing "maturity transformation" within the SBs). <br /><br />It’sSalmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-30585588134722196482013-06-05T10:31:54.387-05:002013-06-05T10:31:54.387-05:00Yes, you are right that an OMO is really just doin...Yes, you are right that an OMO is really just doing an asset swap and leaving overall liquidity the same initially. However, when talking about the shadow banking system it is treasuries and other safe assets that function as collateral. These assets are the high powered money of the shadow banking system. SDavid Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-70519428066285482552013-06-05T10:29:13.348-05:002013-06-05T10:29:13.348-05:00JT, also see Stellan and Singh's work on the s...JT, also see Stellan and Singh's work on the shortage of collateral: http://www.imf.org/external/pubs/ft/wp/2012/wp1295.pdfDavid Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-59934171407312580182013-06-05T10:28:10.502-05:002013-06-05T10:28:10.502-05:00JT, a key reason for the shortage of safe assets i...JT, a key reason for the shortage of safe assets is that short term nominal interest rates are at the zero lower bound. For the safe asset market to clear, interest rates need to go below zero. They can't (since investors can hold cash and at least earn 0%)and so we have this shortage. Here is an older post of mine on this: <br /><br />http://macromarketmusings.blogspot.com/2013/01/David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-9778504057811867732013-06-04T23:16:18.041-05:002013-06-04T23:16:18.041-05:00"Safe assets" are a contribution to liqu..."Safe assets" are a contribution to liquidity, but base money is, too--even more so. If the Fed buys a safe asset with base money, how could that reduce liquidity?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-42114982768907962112013-06-04T13:03:40.441-05:002013-06-04T13:03:40.441-05:00About as esoteric (theoretical), as analyses get. ...About as esoteric (theoretical), as analyses get. Anyone that understands the development of the ED banking system in the 60's-70's knows that the prudential reserves of the E-D banks consist of various U.S. dollar-denominated liquid assets (U.S. Treasury bills, U.S. commercial bank CDs, repurchase agreements, etc.) & interbank demand deposits held in U.S. banks. <br /><br />HoweverSalmo Truttahttps://www.blogger.com/profile/13910212017849902362noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-47011819364684513552013-06-04T07:54:55.914-05:002013-06-04T07:54:55.914-05:00David, you are right.
I agree with you.
As I rece...David, you are right.<br />I agree with you. <br />As I recently discussed in my blog (sorry it’s in German) http://goo.gl/5V5Oy , the BIS noted in a recent paper (“Asset encumbrance, financial reform and the demand for collateral assets”) http://goo.gl/80FLP that concerns about an absolute shortage of high quality assets appear unjustified.<br />Best<br />ACEMAXX-ANALYTICShttp://acemaxx-analytics-dispinar.blogspot.ch/noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-29214033955892873912013-06-04T01:46:10.639-05:002013-06-04T01:46:10.639-05:00Thanks for sharing this graph information. its ver...Thanks for sharing this graph information. its very useful for beginners in real estate.Private Money Loanshttp://welendhardmoney.com/private-loans/noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-3939690737614591992013-06-03T23:11:02.634-05:002013-06-03T23:11:02.634-05:00except that that investment won't be made with...except that that investment won't be made with higher rates. Manufacturing didn't contract in the US at all either. Try harder. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-87242383007005670072013-06-03T17:50:48.432-05:002013-06-03T17:50:48.432-05:00Hi, would it be possible to clarify exactly how a ...Hi, would it be possible to clarify exactly how a shortage of safe assets (transaction assets, collateral) is a problem? Here is why I don’t understand why these safe assets are critical, and why a shortage is problematic. I’ll mostly use Tsy’s as an example safe asset.<br /><br />Transaction assets: the meme is “there is a shortage of assets to enable transactions between two parties (like a jtnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-15752440000412145782013-06-03T17:20:43.264-05:002013-06-03T17:20:43.264-05:00From The Telegraph...
"The council said it is...From The Telegraph...<br />"The council said it is “not clear” that QE is boosting the economy, and warned that zero rates are pushing pension funds underwater on their liabilities, and may be causing firms to defer investment on the grounds that rates will remain low."<br /><br />http://www.telegraph.co.uk/finance/economics/10096951/Edward Lamberthttp://effectivedemand.typepad.comnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-87710669218474412192013-06-03T15:38:25.993-05:002013-06-03T15:38:25.993-05:00David
In this crisis, economists have become '...David<br />In this crisis, economists have become 'accountants', and of the 'static' variety. It´s all about balance sheet adjustments. Nothing else is relevant.João Marcushttps://www.blogger.com/profile/13658264244033012660noreply@blogger.com