This week’s results in the Fed’s repo-market interventions in one fell swoop proved everything I’ve said about the Fed’s intervention being QE4ever and the problem’s cause.
The following results show the repo market has been fixed:
The instant the Fed returned to full-on, “we-now-call-it-QE” QE, the repo market settled right down to an easy calm.
As you can see, the amount of demand for any kind of repo the Fed was offering has dropped to near zero. And the sole reason for that is … this:
The Fed’s balance sheet, in just about a week’s time, has gone from tightening QE (relative to its final plateau of easing) to soaring above all the QE it has ever created, which happened like this:
In just four day’s time, the Fed has stuffed more than half a trillion cash in QE back into bank reserves, which has certainly sucked up any backed up surplus of treasuries the primary treasury dealer banks had by permanently replacing those treasuries with cash.
Read the rest here: https://thegreatrecession.info/blog/how-the-fed-fixed-the-repo-crisis/