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Large scale QE often causes banks to come in conflict with required leverage ratios. Trade and invest using the concepts of MMT. Get a 30-day free trial to MMT Trader. https://www.pitbulleconomics.com/ Mike Norman Twitter https://twitter.com/mikenorman Mike Norman Economics: https://mikenormaneconomics.blogspot.com/ Understanding the Daily Treasury Statement video course. https://www.pitbulleconomics.com/understanding-daily-treasury-statement-video-course/?s2-ssl=yes
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Large scale QE often causes banks to come in conflict with required leverage ratios. Trade and invest using the concepts of MMT. Get a 30-day free trial to MMT Trader. https://www.pitbulleconomics.com/ Mike Norman Twitter https://twitter.com/mikenorman Mike Norman Economics: https://mikenormaneconomics.blogspot.com/ Understanding the Daily Treasury Statement video course. https://www.pitbulleconomics.com/understanding-daily-treasury-statement-video-course/?s2-ssl=yes
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| Large scale QE often causes banks to come in conflict with required leverage ratios. Trade and invest using the concepts of MMT. Get a 30-day free trial to MMT Trader. https://www.pitbulleconomics.com/ Mike Norman Twitter https://twitter.com/mikenorman Mike Norman Economics: https://mikenormaneconomics.blogspot.com/ Understanding the Daily Treasury Statement video course. https://www.pitbulleconomics.com/understanding-daily-treasury-statement-video-course/?s2-ssl=yes |
Ahhhh. I wondered about this for a long time. I pictured it as the banks owning the treasuries so the swap net zero.
Are we saying that the treasuries that purchased but not owned by banks, become bank deposits, and therefore a liability for the bank?
I find your videos very educational .
Thank you
MMT policy has failed, inflation still high, please return to gold standard!
Sure, so we can have a depression every 10 years. Go away…
Great vid!! Love the viewer qs series I was wondering why QE stresses banks but the point about banks not owning all the assets they sell but taking the reserves on their balance sheet explains it
Iron Mike !!!!
Professor Mike you did a hell of a job
got it thx
Can someone explain or elaborate on how the QE isn't a 1 for 1 swap. If Tsy buys 100 tbonds with 100 reserves then assets have stayed the same.
Not all the Tsys the Fed buys are those held by the banks. Maybe even none. They can be customer securities.
@Mike Norman MMT Economics Thanks Mike. I think I've got it. If Bank A has 100 assets, 90 liabilities and 10 capital (so 10/100 lev ratio) and Fed buys 10 Tsy from customer 1 at Bank A they credit bank A's reserve account for 10 then Bank A adds 10 deposits to Customer 1 deposit account which is a liability of the bank. So Bank A now has 110 assets, 100 liabilities and still 10 capital for 10/110 leverage ratio which is lower ratio and possibly in breech of regulation.
Now can you explain why reverse repos lower bank assets as that also seems like an even swap?
Thanks! Keep up the good work don't get discouraged few people understand this we can't be blamed when we are fed so much misinformation from "elites" who it is beneath their dignity to critically think
@Mike Norman MMT Economics PS you are awesome
How does the hedge funds and unregulated private investors get money from the primary dealer, and what about Lehman Brothers doing swaps overnight to hide debt to beat earngings until Dick Fuld got busted, how do these guys get this fiat money to thier buddies who in turn take reckless bets with Other People's money. GE defaulted on bonds and had to get bailed out.
The rules you describe are total bullshit, Example Goldman Sachs was made a member bank of the Fed in two days during the 2008 credit crisis/MBS and CDS real estate traunches. The Fed changes the rules, IE move the goal posts when ever it suits them.
20 000 workers at the fed, and the post office does a better job delivering the mail than these people.
Great insights, and thanks for dumbing it down. Like Einstein said if you really understand a machinations , theory etc, than you should be able to explain it to a child. thanks for taking the time.
Nice! Very insightful comment.
Great work Mike!
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Thank you for all the excellent information you always share.
It's crazy how it all works, when you look under the hood.
🧡🧡🧡🧡🧡🧡🧡🧡👁
Mike, where are you getting that ALL reserves are treated as assets under the SLR? From what I understand, it's only reserves that are stored at the Fed that are treated as assets in that equation. All the bank has to do is take those reserves out of the Fed to meet the SLR.
Reserves are literally electronic deposits, unless you're talking about bills and coins. All reserves are on deposit at the Fed and credited to the member banks according to the amounts they hold. They can't be "held" anywhere else.
Mike, it would be good to hear your views on the Reuters article from 14 Oct, "U.S. Treasury asks major banks if it should buy back bonds". Seems like a bizarre idea.
Am I correct in thinking that the Treasury doesn't need bonds to raise money for spending?
I talked about that in a previous video.