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[6andcounting]

(03-13-2020, 07:23 AM)Belsnickel Wrote:

The $1.5 trillion is a repo though. The Fed buys a debt based assets (bonds, mortgage backed securities, etc) that are not super liquid in cash - which is super liquid. The liquidity keeps everything running smooth and protects bank reserves. Reserves are important because lending out money from the reserve is how the money supply is increased. Depending on the reserve ratio each dollar lent can create 9 more dollars out of literally out of thin air. The 2nd part of the repo is that there is a buy back date when the Fed sells back the asset for cash. It's basically a short-term collateral loan that banks will pay bank.