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What's up with the Repo rate?

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Re: What's up with the Repo rate?

Unread postby GHung » Wed 30 Oct 2019, 12:54:57

The US government has no problem meeting its debt obligations currently nor do most countries which was why I asked the question which countries were at risk of default. But apparently since you didn't understand the conversation you wanted to change topics. :roll:


It's all part and parcel of the same economy. If individuals aren't in a position to pay the taxes, where TF will the Federal Government get the revenues to pay the interest on $22+ trillion (and rising) debt???

Not sure why you would want to bring up my own debt situation as I have none, haven't had any for a couple of decades. I buy what I need and what I can afford. If everyone did that they wouldn't have a problem either.


I also have zero debt, but that is not the case for most Americans. Not a problem??? YET. But in your extremely obtuse manner, you choose to ignore the link I provided that shows that debt WILL become a problem for many if things continue as they are (either way in reality) .....
https://www.forbes.com/sites/johnmauldi ... e598f37fc5

Maybe all of these non-geologists are wrong.

Image

.... and that's just a reference to Social Security. The declining work participation rate + an aging populace will affect all sectors of our highly leveraged economy, along with declining overall purchasing power, government services being cut, increasing healthcare costs,,,, I could go on, but methinks your mastery of self-delusion is complete. So go about your business and stop pretending the rest of us are, as you've called so many of us, "morons".

And Billionaires' schemes? Really? They'll suck up your wealth as well because that's all they'll have left to take. You're nothing but a piss-ant to them.
You really are utterly out of touch with how the other ~300+ billion live.
Implying that it's THEIR problem is indicative of deep socioapathy and a lack of systemic thinking.
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Re: What's up with the Repo rate?

Unread postby Outcast_Searcher » Wed 30 Oct 2019, 14:20:50

GHung wrote:
The US government has no problem meeting its debt obligations currently nor do most countries which was why I asked the question which countries were at risk of default. But apparently since you didn't understand the conversation you wanted to change topics. :roll:


It's all part and parcel of the same economy. If individuals aren't in a position to pay the taxes, where TF will the Federal Government get the revenues to pay the interest on $22+ trillion (and rising) debt???

But there is a painfully obvious solution, which doomers of most stripes steadfastly refuse to consider.

Lower living standards.

Which are NOT doom, by the way, they are simply lower living standards, overall. (Despite the claims of doomers, the vast majority of first worlders are NOT on the edge of starvation or anything remotely close to that).

If it's insane for the average new car transaction price in the US to be over $37K (per Kelly Blue Book), so the average buyer can have a REALLY FANCY ride with numerous bells and whistles, they COULD always buy a good used car in the same class for about half or less, or they COULD buy a smaller and far more practical car with a MUCH less total cost of ownership. (I would say that figure IS insane, BTW. My last new car transaction price (in 2017) including an 8 year extended warranty was about $23K, for by far, the nicest car I've ever had, and all the car I could possibly WANT, much less need).

https://www.boston.com/cars/car-news/20 ... r-may-2019

They might not LIKE it. And politicians might not force it on them until push comes to shove, but it most certainly wouldn't kill them.

Now, multiply that example by quite a few, for the typical first world lifestyle, and there you go.

The irony is that generally, frugal people who make it a lifestyle choice to carry little to no debt and therefore live WELL within their means, already know this. They tend to be FAR richer than they look, and my guess is they tend to sleep far better at night, as one class of American living "problems" (problems with money) is something they don't have to a large extent. (You need food, housing, and medical care. You do NOT need much of the CRAP people think they want).

Taxes could be raised, and pissed off Americans living more frugally by government decree would, perhaps, FORCE government to be far more frugal re things like defense spending and endlessly trying to grow give-away programs, by refusing to vote for politicians who don't behave more in line with what they demand.

Not saying it's likely to be soon, but it sure as hell beats total economic destruction and all the consequences of that -- and despite all the endless doomer ranting, I think it's a FAR more likely outcome, given all the facts on the ground, and the history of economic theory and human behavior.

....

Now I'm sure the fast crash doomers can tell me why this can't possibly be so, and why re THIS, their accuracy will be SO much better than their near zero track record re doom doom doom. :roll: (And be wrong yet again, of course).

OTOH, the gradual descent doomers like KJ may well have this sort of thing as part of their vision for a decline on the scale of hundreds of years, which is already underway. One example: Social Security and Medicare have already had small cuts re games with inflation calculations for the COLA's, extra taxes for medicare benefits re MODIFIED adjusted gross income, etc. So it's not like this isn't already happening to some extent -- it's just slow enough thus far that it's not obvious if you're not paying fairly close attention.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: What's up with the Repo rate?

Unread postby rockdoc123 » Wed 30 Oct 2019, 14:45:49

.... and that's just a reference to Social Security. The declining work participation rate + an aging populace will affect all sectors of our highly leveraged economy, along with declining overall purchasing power, government services being cut, increasing healthcare costs,,,, I could go on, but methinks your mastery of self-delusion is complete. So go about your business and stop pretending the rest of us are, as you've called so many of us, "morons".


did you even bother to look at the charts I provided? Apparently not. They show household debt to disposable income has decreased rapidly from 2009 through 2012 and then has continued to drop at a lower rate ever since (i.e. it isn't worse) and the plot of personal income needed to service debt has been hovering around 10% since 2014 haven fallen from 13% during the recession. You are the one who is self-deluded....this is actual data on how much debt households have and whether they are capable of handling it. IN the US there are no alarm bells from this data, in Canada it is a different story.

And Billionaires' schemes? Really? They'll suck up your wealth as well because that's all they'll have left to take. You're nothing but a piss-ant to them.
You really are utterly out of touch with how the other ~300+ billion live.
Implying that it's THEIR problem is indicative of deep socioapathy and a lack of systemic thinking.


Obviously some reading comprehension problems there on your side. You were the one suggesting Trump was lower interest rates so the debt payments could be handled. That makes zero sense given current debt makes up less than 10% of the annual budget. What I was pointing out was why billionaires want low interest rates and I made no statement about whether that was good or bad (in reality it is a bit of both). I'm as in touch with global and North American economics as you are, I'm positive of that.

And somehow you think people buying crap they don't really need and going into debt because of it is somehow my fault or something I should feel sorry for them about? Not going to happen, and rightfully so.
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Re: What's up with the Repo rate?

Unread postby Outcast_Searcher » Wed 30 Oct 2019, 14:55:14

rockdoc123 wrote:did you even bother to look at the charts I provided? Apparently not. They show household debt to disposable income has decreased rapidly from 2009 through 2012 and then has continued to drop at a lower rate ever since (i.e. it isn't worse) and the plot of personal income needed to service debt has been hovering around 10% since 2014 haven fallen from 13% during the recession. You are the one who is self-deluded....this is actual data on how much debt households have ...

Several folks on this site have reapeatedly tried to point out such stats.

Doomers seem to steadfastly ignore such data, as it doesn't tell the story they want to preach.

And so it goes.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: What's up with the Repo rate?

Unread postby GHung » Wed 30 Oct 2019, 15:11:01

Which are NOT doom, by the way, they are simply lower living standards

Exactly. And who said anything about doom? Again, you inject things into the conversation that were not there. Red herrings,, anyone? Bueller? Your attempts to divert these questions into extremist-better-to-be-ignored-categories stopped working some time back.

Anyway, "lower living standards" comes with all sorts of knock-on effects. In essence, it is removing energy from a system that is dependent in many ways on current (financial) energy levels. Firstly, a large segment of the population will find themselves being pushed out the back of the bus even as services designed to minimize that pain are being curtailed. Spending/consumption drops <==> job losses <==> government revenues drop <==> debts in default <==> debt obligations go POOF!,, and so on. Considering our society's high level of entitlement, methinks people aren't going to handle that well, especially in our increasingly divided and blameful culture. What next? Reduced interest rates? Really? Increase taxes? That'll fix it :lol:

But go ahead and minimize our growing liabilities. Some of you are really good at that.

Jeez, Chile has recently had violent protests due primarily to increased subway fares.
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Re: What's up with the Repo rate?

Unread postby GHung » Wed 30 Oct 2019, 15:49:24

rockdoc123 wrote:
Obviously some reading comprehension problems there on your side. .


Yeah, doc. You keep saying that. Likely because it's impossible for you to grok that your communications aren't what you think they are.

.....did you even bother to look at the charts I provided?


Do you think no one would notice that that trend is since the last recession? QE1,2,3? Massive Federal debt increases? Trump tax cuts? Or maybe you think we're too dumb notice that your charts correlate nicely with the lowest interest rates since the 50s.

Image

And somehow you think people buying crap they don't really need and going into debt because of it is somehow my fault or something I should feel sorry for them about? Not going to happen, and rightfully so.


1. People buying that crap is what gives many of their neighbors jobs.

2. I'm not under any delusion that you feel sorry for anyone or anything. And I never said it was "your fault". Damned dishonest of you to imply otherwise. Not surprising though.
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Re: What's up with the Repo rate?

Unread postby rockdoc123 » Wed 30 Oct 2019, 18:03:42

Do you think no one would notice that that trend is since the last recession? QE1,2,3? Massive Federal debt increases? Trump tax cuts? Or maybe you think we're too dumb notice that your charts correlate nicely with the lowest interest rates since the 50s.


OK, so logic wasn't taught at your school. You were arguing that people can't afford to pay off their debt now....not back before the recession so what numbers matter? The ones that are most recent. What I plotted was the maximum available from that data source but it doesn't matter because it clearly shows that for the last half-decade debt to disposable income and interest payments as a percentage of income have been either stable or dropping slightly. They aren't rising. Interest rates are what they are....low hence people do not have a problem paying off debt as illustrated by those charts. Are you now suggesting that having less than 10% of your disposable income going to debt servicing is too high? It has been much higher and that did not create wholesale personal bankruptcies.
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Re: What's up with the Repo rate?

Unread postby GHung » Wed 30 Oct 2019, 21:17:21

rockdoc123 wrote:
..... You were arguing that people can't afford to pay off their debt now....not back before the recession so what numbers matter? .......


Where was I arguing that?
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Re: What's up with the Repo rate?

Unread postby GHung » Thu 31 Oct 2019, 07:42:03

It was a simple question, doc. Strawman busted?
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Re: What's up with the Repo rate?

Unread postby Yoshua » Thu 31 Oct 2019, 12:15:04

@ Rockhead

The U.S government is short USD 1.4 Trillion annually. The U.S government can't pay any little part of its debt or interest on it. But as long as the government can continue to borrow money to pay its debt and interest... everything is just fine.

I think it's called a Ponzi scheme. But who am I to judge.
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Re: What's up with the Repo rate?

Unread postby rockdoc123 » Thu 31 Oct 2019, 12:42:44

The U.S government is short USD 1.4 Trillion annually. The U.S government can't pay any little part of its debt or interest on it. But as long as the government can continue to borrow money to pay its debt and interest... everything is just fine.

I think it's called a Ponzi scheme. But who am I to judge.


where do you get that little piece of completely false information? The US budget for 2020 includes all payments related to debt including interest and maturities. That makes up about 8% of the total budget. The budget shortfall is based on expenditures for things the government wants such as the very sharp increases in military spending under the current administration combined with less revenue due to the tax cuts. Those are wants, not need to haves. All costs associated with the debt even at its current high level are easily managed under the existing budget. IF they wanted to get rid of the deficit they just need to cut back on spending on the that would be nice to have.
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Re: What's up with the Repo rate?

Unread postby Revi » Thu 31 Oct 2019, 13:34:38

Back on topic, they cut interest rates yesterday, and it looks like things are calming down, or are they?
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Re: What's up with the Repo rate?

Unread postby Yoshua » Thu 31 Oct 2019, 14:48:55

Back to topic.

The Repo spiked because the banks wouldn't accept U.S treasuries as collateral anymore...because the the banks could not find buyers for the treasuries on theirr own balance sheets...because they all knew that the U.S government was running a Ponzi scheme.

Only after the Fed accepted to print the money to buy the treasuries...the Repo rate came down.

The economy isn't really performing anymore like it use to do.
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Re: What's up with the Repo rate?

Unread postby Armageddon » Thu 31 Oct 2019, 18:49:27

Repo is happening because banks won’t lend to each because they don’t trust each other. They know it’s all about to come down. So the FED has to bail them out. The FED is and will bail out everything. That’s where we are. Approaching end game. Got gold and silver? You better have
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Re: What's up with the Repo rate?

Unread postby Revi » Fri 01 Nov 2019, 07:13:06

Yoshua wrote:Back to topic.

The Repo spiked because the banks wouldn't accept U.S treasuries as collateral anymore...because the the banks could not find buyers for the treasuries on theirr own balance sheets...because they all knew that the U.S government was running a Ponzi scheme.

Only after the Fed accepted to print the money to buy the treasuries...the Repo rate came down.

The economy isn't really performing anymore like it use to do.


Best description I have heard yet for what's going on. Thanks!
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Re: What's up with the Repo rate?

Unread postby shortonoil » Fri 01 Nov 2019, 09:17:19

The repo crisis is the result of a liquidity shortage. It is the same shortage that is showing up all over the world. The shortage is appearing every where from bank runs in China to negative bond rates in Europe. It is occurring because the debt formation process, which destroys the currency in circulation, is greater than what the central banks can inject to compensate. The central banks ability to inject liquidity is limited by the credit markets ability to absorb it. This is an ongoing crisis that will only worsen until the monetary system fails. At the present rate of world debt formation the central banks will be completely overwhelmed in 24 to 30 months.

A new currency system will have to be introduced before the world's growing $341 in debt begins collapsing into cascading defaults. Some form of digital currency will most likely replace the present system. It will need to be a system that can operate with an economy that is consuming more assets than it is producing. The present debt based system can not. The new currency system can be expected to exhibit a number of initial, and unplanned Snafu's. PMs would be a good insurance policy to hold during the coming period of wide spread disruption.
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Re: What's up with the Repo rate?

Unread postby sparky » Wed 06 Nov 2019, 08:54:59

.
More helicopter money thrown at the Repo market

From the very serious Financial Times
https://www.ft.com/content/fe562cbe-fee ... fa4e77dd47

" Many have debated why the market went wrong, so fast.
The Federal Reserve was so spooked that it did not wait for answers before stepping in.
The central bank’s gross cumulative support for the market — which allows banks and investors to borrow cash in exchange for Treasuries and other high-quality collateral — will top $11.5tn by the end of January, according to our sums. The Fed did not just stabilise the repo market. Now, it is the repo market.

Repos were once the liquidity-providing “plumbing” of the financial system. Now, they have taken on another role because post-crisis rules demand that financial institutions hold far bigger balances of safe assets — at a time when yields on such assets are low or even negative.


This transformation in repos was presaged by the equity market. The Fed’s bond-buying and interest rate-cutting programme initially supported the macroeconomic recovery. The extension of quantitative easing, however, changed its nature from an output-boosting policy into an equity-market stimulus.

Exposing these repo risks in such dramatic fashion would ordinarily lead participants to run for cover. Instead, the market is so vibrant that the Fed has had continuously to increase the amounts with which it supports overnight and even longer-term deals. The best explanation for this insouciance? De facto nationalisation of the market.

Desperate to keep short-term rates within its desired range, the Fed chose not to use its backstop — known as the discount window, where it provides higher-cost loans to banks, Using these transparent fallbacks would have allowed the repo rate to settle in a new, orderly, and perhaps smaller marketplace. Instead, the Fed just opened its vault.
Thus, what should have been a learning experience is now a new, powerful incentive for moral hazard. Speculative bets can be made with the understanding that taxpayers, through the central bank, will bail out any bad calls.
To be sure, its current repo backstop puts the Fed in a supporting role — it steps in only after primary lenders step back. Theoretically, the market could operate without the Fed, but it does not because lenders love having this backstop and the central bank is always there to provide it.

The Fed also offers reverse repos, a longstanding operation designed to keep market interest rates within the central bank’s target range, no matter the risks participants take. And now the central bank is considering making its new repo operations permanent, through a so-called standing facility. In for a penny, in for a pound — and, if you are a central bank, in forever.

But with central banks providing a backstop for both equity and funding markets, what is next? Some governors have decided that they must add digital currencies to their payment systems, not only to protect the globe from Facebook’s Libra, but also as a new tool that might better transmit monetary policy.
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Re: What's up with the Repo rate?

Unread postby Revi » Thu 07 Nov 2019, 11:09:00

So they are still shoveling money into this beast?
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Re: What's up with the Repo rate?

Unread postby Outcast_Searcher » Thu 07 Nov 2019, 11:52:27

Revi wrote:So they are still shoveling money into this beast?

As they said they would about a month ago.

Meanwhile, I see the SOFR 99% level has descended all the way to 1.7% as of November. Not exactly a sign of stress. More like the FED increasing liquidity, AS THEY STATED THEY WOULD, given the signs of stress in Sept.

https://apps.newyorkfed.org/markets/autorates/sofr

Maybe if we had doctorate degrees and serious careers in macroeconomics, we'd be in a good position to judge Fed operations. :idea: Given that I don't, I prefer to look at the real world data from the experts at the Fed instead.

But let's all run in circles and panic, as it leads to great wisdom and investment results. :roll:

Tell you what, when they've expanded the Fed balance sheet by more than the $700 billion plus they recently shrank it sheet by, then I'll get concerned.

(Hint: Despite claims by short that they're adding $44 TRILLION, etc, in the real world, it's less than a percent of that, by all indications, re Fed data. More like $74 billion in October, for example.

https://fred.stlouisfed.org/series/WALCL

https://www.federalreserve.gov/releases/h41/


OR if rates rise meaningfully re the SOFR and stay elevated for weeks, I'll be concerned.

In the real world data and especially context matter.

Clearly the financial markets are far more concerned about real world issues like trade deals.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.
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Re: What's up with the Repo rate?

Unread postby sparky » Thu 07 Nov 2019, 17:58:49

.
I'm not so sure about the importance of the trade deals ,
they certainly matter but seems to be used as an excuse to move the stock markets
in a time of very low return on money investment , money flow to shares
the returns are slim but better than lending money
so the stock market valuations are just financial refuge for lone desperate trillions of bucks
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