So the latest edition of the FOMC minutes is out. And I took a “stroll” over to the Fed’s website to have a look at it, wondering if there were any possibility for it to outperform the previous levels of pathetic, hoping to be surprised. But right now, I have no new meat misses to lob criticisms to pose as I got bogged down in the reverse repo authorization mumbo-jumbo at the top.
I’ve been somewhat curious about the FOMC’s planned repo facility, or I should say, I’ve been rather skeptical about it based on nothing pure cynicism regarding the intentions competence of our central bankers. I didn’t understand what it is, or at least what it is intended to do until recently when I found this post by Tyler Durden on ZeroHedge who appears to understand it. While I take most things I read on ZeroHedge with a grain of salt, this one on the reverse repo is a concise, easy to understand post on the subject. And it makes sense; so I’m running with it until someone says, “Hey, that stuff is just wrong.”
My takeaway from this post is that the repo facility is intended to do a couple of things:
- Alleviate the demand for safe assets
- Provide broader control over short-term nominal rates
My translation of it is: expansion of IoER to non-banks, mainly MM funds. And there’s nothing like taking a contractionary policy and expanding in ways that make mattress stuffing appealing to the entire planet.
My comment? Oh, God. Why can’t they experiment with stuff that is more likely to be accidentally expansionary instead of playing with the financial equivalent of atom bombs? They are off their rockers hawkish. Anyone want to take bets on more QE in the not-so-distant future?