So Much for “Temporary” REPO Operations By FED

Finally we have the plans for repurchase operations by the FED for the next month.

As far as I can tell there is little change until the middle of February, when the 14 day repo will be trimmed down to the $30 billion area from the prior $35 billion area.

You can see the plans here if you have an interest.

As I mentioned a couple days ago this new schedule pretty much dovetails with what I expected–previous baloney from the FED on temporary repurchase operations is just that–BALONEY! I think we are going to see these ongoing through the year.

We will watch this in conjunction with the Quantatative Easing that the FED is doing to see what happens overall to the balance sheet–any reduction in assets on the balance sheet for longer than 1-2 weeks is likely to be met with a ‘tantrum’.

7 thoughts on “So Much for “Temporary” REPO Operations By FED”

  1. What I keep asking myself is, why are they doing it ? First, it was fiscal stimulus by cutting taxes, then lowering interest rates, then QE…. and all this amo when economy is growing at a >2.0% and employment is at 3.5 after a 10 yr expansion ?
    Something has got to give

    1. j-mad—I keep saying if we need this liquidity and further quantatative easing when times are ‘good’–what the hell are we going to do when we finally see a recession. The answer to this is to ‘pump’ like hell and stall off a recession because there are no good answers.

  2. Do not fight the Fed!

    They will continue to keep financial assets going higher regardless of the lowering total earnings and slowing economic growth levels.

    To someone wayyy smarter than me: “Earnings don’t move the overall market; it’s the Federal Reserve Board… focus on the central banks, and focus on the movement of liquidity… most people in the market are looking for earnings and conventional measures. It’s liquidity that moves markets.”
    -Stanley Druckenmiller

    1. GrayHawkAZ–an old saying but one that most certainly has proved true in the last 11 years.

    2. In the “short” run it’s certainly the Fed and money flows that determine asset prices. Just how long the short run is can be debated. If the real economy crashes there are limits to what even the Fed can do.

      How long the Fed can keep up the present balancing act – pumping money into the markets without apparent inflation – is still to be determined in my mind.

      The cracking point, the next crisis, to my eye, will show up in exchange rates. If the world loses confidence in the dollar, or a workable alternate reserve currency emerges, it may get ugly.

      1. Bob, That really is the question isn’t it – just how long they’ll keep going. I could never make a living as a fortune teller, but given the ever-expanding accommodative fed policy and the obvious and myriad challenges ahead, it’s difficult to see any off-ramps.

        If we have a – I mean, “when” we have a recession, it’s difficult not to imagine rates going to zero/near zero – just as follow-through on “normal” fed accommodation. So despite theses nose-bleed valuations, I’ve been increasingly asking myself if I’m willing to forgo price consideration and focus on maintaining cash flows. And if rates rise in the future – we can initiate an averaging-down process. No one good answer of course.

    3. Is it “liquidity” that moves markets or acceptance of a willingness to continue to kick the can “further on down the road,” to quote another great thinker, Taj Mahal? Other cliches that seem appropriate include “live high on the hog,” “beyond one’s means,” “borrow from future generations,” never “paying the piper,” having no political will, or backbone, etc., etc., etc.

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