201805.22
3
8

Eurodollar University: Way Beyond Bank Reserves

The Crash of ’87 was a big deal, though not in the way most people remember. It was a stock market event, obviously, and those are the terms under which it has been understood. That’s not really its legacy, however, as the major shifts that began with Black Monday have had little and most often…

201805.11
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Bank Reserves Appendix; One Additional Case Study

Early last month, Deutsche Bank replaced one CEO pledged to paring back the bank’s ailing franchise with another committed to doing the same thing only more quickly. As I wrote at the time, “Cryan isn’t being ousted because he was wrong, but because he was right.” In comes Christian Sewing whose plans are starting to…

201805.09
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Bank Reserves Part 3; In Practice

There’s one final step to our examination of QE and bank reserves (you’ll need to read through at least Part 1, though Part 2 is worth the time, too). It’s all well and good to try and map out complex subjects using very simple models. That can help illuminate concepts, but we should always strive for…

201805.08
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Bank Reserves Part 2; If QE Was Really QT, Then Why Hasn’t QT Been QE?

Since we’ve already cracked open the accounting, it makes some sense to take our example into an important corollary examination (if you haven’t yet, you’ll need to read through Part 1). In our prior examples, we’ve assumed that the swap of risk-free assets on Bank A’s asset side is a neutral trade. That is, there…

201805.08
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Bank Reserves Part 1; The Great Tease

I completely understand the confusion regarding bank reserves. I really do. It’s easy to believe they are money because that’s what you’ve been taught from Day 1. Not only that, the same message is carelessly reinforced in the media every single time QE or any LSAP is referenced. Bank reserves are the aftermath of money…