CB Archive

Fed to lend to CBs in unlimited quantities (day 2)

[Skip to the end] I’m keeping an eye on crude prices rising a lot more than the USD is falling; so, I suspect the great Mike Masters inventory liquidation has run its course. Inventories are at record or near record lows. If there has been net demand destruction, it hasn’t yet showed ...Read More

Fed to lend in unlimited quantites to foreign CBs??? (Update1)

[Skip to the end] This is hard to believe. Those CBs don’t have unlimited USD. So, if true, they will be borrowing them from the Fed via an extension of Fed swap lines. The FOMC has approved lines of $620 billion as last reported. This is functionally unsecured lending to these CBs. ...Read More

Bloomberg: Inflation weakening some currencies

[Skip to the end] Interesting how reports of higher inflation have often meant stronger currencies in the short run due to higher anticipated rates from the CB. Inflation, however, by definition means the currency buys less of most everything; therefore, inflation and a weakening currency are one and the same. But it ...Read More

NYT: Too big to fail?

[Skip to the end] Too Big to Fail? by Peter S Goodman Using public money to spare Fannie and Freddie would increase the public debt, which now exceeds $9.4 trillion. The United States has been financing itself by leaning heavily on foreigners, particularly China, Japan and the oil-rich nations of the Persian ...Read More

Wed am recap

Mainstream economics says: Get inflation right and that ‘automatically’ optimizes long-term growth and employment. Adding to demand with a negative supply shock turns a ‘relative value story’ into an ‘inflation story.’ The ECB is following mainstream theory, while the Fed is not. why? The Fed sees looming systemic, deflationary tail risk at ...Read More

Money (USD)

My take on the USD: It was at a level based on foreigners wanting to accumulate $70 billion per month which also = the US trade gap (accounting identity). Most of that desire to accumulate came from foreign CBs trying to support their exporters, oil producers accumulating USD financial assets, and foreign ...Read More

Changing dynamics for the Fed

Cutting 75 basis points rather than the expected 100 basis points gave the Fed positive near term reinforcement from market participants: Dollar went up Food/fuel/commodities went down Stocks did ok, including housing companies Credit did ok But it’s going to look to the Fed a bit like taking medicine: initial small doses ...Read More

Re: Bear Stearns Cont’d

(some email q&a’s) UPDATED as more questions come in!! Why would shareholders approve this sale? Answer, they may not. They may take their chances with getting more $ in bankruptcy. Or a higher bid might surface. The Fed has turned Bear Stearns into a ‘free call’ with their non recourse financing, And ...Read More

Re: proposals for liquidity and the dollar

> On Tue, Mar 4, 2008 at 5:14 PM, Saunders, Brock wrote: > No problem….was just trying to think of solutions to regain liquidity in the credit market and provide some support for the USD. Good thought! My original proposal was for the Fed to reduce capital requirements for any bank absorbing ...Read More

Central bank debate: Is it inflation or deflation?

Here’s how the inflation can persist indefinitely: In addition to the India/China type story for resource demand, this time around nominal demand for commodities is also coming from our own pension funds who are shifting more of their financial assets to passive commodity strategies. Pension funds contributions have traditionally been invested primarily ...Read More