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dark leverage

Wasting the Middle: Obsessing Over Exits

By |2018-12-26T17:07:58-05:00December 26th, 2018|Bonds, Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

What was the difference between Bear Stearns and Lehman Brothers? Well, for one thing Lehman’s failure wasn’t a singular event. In the heady days of September 2008, authorities working for any number of initialism agencies were busy trying to put out fires seemingly everywhere. Lehman had to compete with an AIG as well as a Wachovia, already preceded by a [...]

The Remarkable And Lengthy Consistency of Repo

By |2018-06-25T18:11:32-04:00June 25th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Before August 2007, US$ money markets operated efficiently and predictably. They behaved according to a rigid hierarchy, which is a good thing no matter how it may sound. This inflexibility in the context of funding markets was exactly what we would want. Arbitrage opportunity was responsible for enforcing the rules. One simple example was the difference between repo and federal [...]

A Slight Hint Of A 2011 Feel

By |2018-06-07T18:53:54-04:00June 7th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Whenever a big bank is rumored to be in unexpected merger talks, that’s always a good sign, right? The name Deutsche Bank keeps popping up as it has for several years now, this is merely representative of what’s wrong inside of a global system that can’t ever get fixed. In this one case, we have a couple of perpetuated conventional [...]

Is Anyone Really Surprised DB’s Problems Had Nothing To Do With The DoJ Fine?

By |2018-05-31T17:03:13-04:00May 31st, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

You need only go back a little less than two years for an example. In later 2016, Deutsche Bank was a huge problem everyone was discussing if only because they couldn’t avoid it. Despite “reflation” then gripping much of the world, the German institution stood out for all the wrong reasons. Those were easily dismissed as nothing other than an [...]

Eurodollar University: Way Beyond Bank Reserves

By |2018-05-22T18:35:14-04:00May 22nd, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 nothing to do with stocks [...]

Bank Reserves Appendix; One Additional Case Study

By |2018-05-11T16:48:29-04:00May 11th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 come into focus. It’s not [...]

Bank Reserves Part 3; In Practice

By |2018-05-09T16:51:58-04:00May 9th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 validation. The heart of the [...]

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

By |2018-05-09T17:35:19-04:00May 8th, 2018|Economy, Federal Reserve/Monetary Policy, Markets|

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 aren’t any costs or downside [...]

Bank Reserves Part 1; The Great Tease

By |2018-05-09T17:35:48-04:00May 8th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

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 printing, therefore = money. That [...]

The (Official) World Still Has A Ways To Go

By |2018-04-24T17:29:52-04:00April 24th, 2018|Currencies, Economy, Federal Reserve/Monetary Policy, Markets|

Before Mario Draghi took over the ECB, he was head of the Bank of Italy. In between, Draghi was also Chairman of something called the Financial Stability Forum (FSF). This latter organization was created in 1999 “to promote international financial stability through enhanced information exchange and international cooperation in financial supervision and surveillance.” Draghi was appointed to lead the effort [...]

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