The Fed had only recently began actively shrinking the money supply—a process which has now been well and truly aborted with the tremendous spike in Federal Reserve loans to member banks in response to the recent liquidity fears.
I have read elsewhere is not easing (or stopping the tightening), and/or that these loans should not be viewed as allowing the banks to avoid the losses (due to their under-water investments to continue losing value as rates have risen). But I'm not savvy re these topics -- and/or I'm not sure who to trust given their bias to present these consistent with their past predictions or clients. Have you done a deeper dive on these 'loans' and whether they do indeed present a pivot or return to QE (and/or giving the banks a pass on those poor decisions)? Would you please?
Thanks in any event for all you are providing here -- Hoping you have some time to pray, give thanks and reflect on this day of our Lord.
The loans being made are generally very short term, are presumably fully collateralized.
The question will be whether or not these loans end up as permanent additions to the Fed's balance sheet.
If the balance sheet is expanding, the Fed is easing. If the balance sheet is shrinking, the Fed is tightening.
Events right now are far too fluid to be certain what is and is not easing. Certainly the short term loans being made through the discount window and other facilities have the potential to constitute easing, but it would be getting ahead of the data to say one way or another just yet.
I feel like I’m looking up in the sky and watching a giant financial asteroid plunging right toward Earth. And nothing anyone can do to stop it...
Okay, here’s a question right out of ‘spy novel’ territory. Most of the world’s billionaires - including drug lords, illegal arms dealers, Russian oligarchs, and members of the World Economic Forum - keep substantial cash in Swiss bank accounts, right? You probably can’t find any hard data on this, but I’d love to hear your speculation on the chain of events that could happen if these world players lost trillions as Credit Suisse (and others?) completely tank. Putin’s war ends, because his financial backers aren’t playing anymore? The nefarious plans of WEF members exposed and upset as their extreme financial losses pile up? This could all unravel in so many morbidly fascinating ways!
excellent point -- have you read that our Fed is incentivized to assist re CS because it provides much needed support for our stock markets? so, as the Fed claims to fight against inflation as a basis to raise rates (when others argue it is to fight WEF and the Davos crowd), might it also cite the 'we need to support CS due to participation in our markets..." to bail out the $$$ you note -- which then undercuts the idea it really is raging a war against the WEF; so is the Fed position wrt CS a tell?
The Fed did a central bank liquidity swap with the Swiss National Bank some months back, just to support Credit Suisse. Although I doubt that such moves would help at this time. Things have gone too far for that.
Oh man, this coming week could be just a shocker! I keep thinking ‘kinetics’ - the chain of events will be determined partly by the *rate* of reactions. Whichever event happens fastest will determine which events happen next, and so on. So the exact path is unpredictable at this point - but virtually all the pathways lead to big trouble.
Looks like the merge might not be going through.
There's some pushback.
The only thing that is certain is Credit Suisse is history. It's only a question of what kind of death will it have.
Peter - your para here:
The Fed had only recently began actively shrinking the money supply—a process which has now been well and truly aborted with the tremendous spike in Federal Reserve loans to member banks in response to the recent liquidity fears.
I have read elsewhere is not easing (or stopping the tightening), and/or that these loans should not be viewed as allowing the banks to avoid the losses (due to their under-water investments to continue losing value as rates have risen). But I'm not savvy re these topics -- and/or I'm not sure who to trust given their bias to present these consistent with their past predictions or clients. Have you done a deeper dive on these 'loans' and whether they do indeed present a pivot or return to QE (and/or giving the banks a pass on those poor decisions)? Would you please?
Thanks in any event for all you are providing here -- Hoping you have some time to pray, give thanks and reflect on this day of our Lord.
DT
The loans being made are generally very short term, are presumably fully collateralized.
The question will be whether or not these loans end up as permanent additions to the Fed's balance sheet.
If the balance sheet is expanding, the Fed is easing. If the balance sheet is shrinking, the Fed is tightening.
Events right now are far too fluid to be certain what is and is not easing. Certainly the short term loans being made through the discount window and other facilities have the potential to constitute easing, but it would be getting ahead of the data to say one way or another just yet.
I feel like I’m looking up in the sky and watching a giant financial asteroid plunging right toward Earth. And nothing anyone can do to stop it...
Okay, here’s a question right out of ‘spy novel’ territory. Most of the world’s billionaires - including drug lords, illegal arms dealers, Russian oligarchs, and members of the World Economic Forum - keep substantial cash in Swiss bank accounts, right? You probably can’t find any hard data on this, but I’d love to hear your speculation on the chain of events that could happen if these world players lost trillions as Credit Suisse (and others?) completely tank. Putin’s war ends, because his financial backers aren’t playing anymore? The nefarious plans of WEF members exposed and upset as their extreme financial losses pile up? This could all unravel in so many morbidly fascinating ways!
excellent point -- have you read that our Fed is incentivized to assist re CS because it provides much needed support for our stock markets? so, as the Fed claims to fight against inflation as a basis to raise rates (when others argue it is to fight WEF and the Davos crowd), might it also cite the 'we need to support CS due to participation in our markets..." to bail out the $$$ you note -- which then undercuts the idea it really is raging a war against the WEF; so is the Fed position wrt CS a tell?
The Fed did a central bank liquidity swap with the Swiss National Bank some months back, just to support Credit Suisse. Although I doubt that such moves would help at this time. Things have gone too far for that.
Oh man, this coming week could be just a shocker! I keep thinking ‘kinetics’ - the chain of events will be determined partly by the *rate* of reactions. Whichever event happens fastest will determine which events happen next, and so on. So the exact path is unpredictable at this point - but virtually all the pathways lead to big trouble.