03-17-2020, 08:03 AM
(03-16-2020, 07:56 PM)6andcounting 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.
This was in the meme thread for a reason. I'm aware of all of this and have been having this discussion in other threads.
"A great democracy has got to be progressive, or it will soon cease to be either great or a democracy..." - TR
"The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little." - FDR
"The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little." - FDR
