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|User Info||Special weekend edition - Bank Reserves?; entered at 2008-02-04 16:50:57|
Barnaby, as usual, "Mr. Board" only tells half the story in an attempt to make you feel good.|
As I said in the blog, the issue is NOT whether banks are insolvent (which he conveniently tries to make it an issue of, then claim I'm wrong because he says I made a claim I didn't make. Cute eh?)
It is whether there is credit demand of any material amount, and whether those loans for which there IS demand can be made off actual reserves (or whether all are "fake" reserves - aka loans from The Fed)
That's where the problem is and what "Dave" doesn't address.
Because if he does, he's got a little problem eh?
See, here's the thing. On the latest TAF the Bid-To-Cover was anemic. That is, there was no big demand for the money.
Yet that money is being used to originate the new credit.
See the problem here? Credit demand is basically gone! What IS there is being met off the TAF.
This is what a deflationary credit collapse looks like! Credit demand collapses, private credit GRANTORS walk off as there's no rate you can pay them that compensates them fairly for their risk and money, and yet there's no good collateral left that borrowers can put up either.
The Fed is reduced to pushing on a string......
Oh, and from the announcements made of late expectations are that the TAF won't be expanded either - why would it be, given that there's no material amount of demand for it?
Last modified: 2008-02-04 16:51:29 by genesis