Thank you for the link. I'll surf around through this data later this evening. Ponzi scheme may not be the best descriptor. My concern is this: Fed loans Institution A $x dollars on Monday, to be repaid on Tuesday. Institution A is able to repay on Tuesday, but then at the end of the Tuesday, turns out they need to borrow more money. This continues daily for a couple of months. When Institution A repays their loan, where does that money come from? Why does Institution A need continual assistance to remain liquid? Also, It seems that there is not a healthy repo market currently, and without Fed support some of these institutions may be hurting. I suppose my real question are these: is there a fatal flaw in the structure/ operation of the repo market in which the Fed participates? And what is the real risk to Everyday Joe if some unforeseen event happens?
Thank you for the link. I'll surf around through this data later this evening. Ponzi scheme may not be the best descriptor. My concern is this: Fed loans Institution A $x dollars on Monday, to be repaid on Tuesday. Institution A is able to repay on Tuesday, but then at the end of the Tuesday, turns out they need to borrow more money. This continues daily for a couple of months. When Institution A repays their loan, where does that money come from? Why does Institution A need continual assistance to remain liquid? Also, It seems that there is not a healthy repo market currently, and without Fed support some of these institutions may be hurting. I suppose my real question are these: is there a fatal flaw in the structure/ operation of the repo market in which the Fed participates? And what is the real risk to Everyday Joe if some unforeseen event happens?
Is there any source that shows how much is being injected daily and the feds net balance? When I first heard the story a couple of weeks ago, It assumed that the net deposit was $500B. But on further investigation of how that market operates, it sounds like it could conceivably be a situation where the fed makes $10B each day for 50 days, but each one is paid k back the next day. Now, not knowing the rules, it's also conceivable (in my lay understanding and with the data, or lack thereof, provided) that the borrowers could potentially be running the market in a ponzi scheme like operation.