Re: Financial topics
Posted: Fri Jul 23, 2021 4:56 pm
It seems the "Reverse Repo" action is really the Fed buying up more bonds.
https://fred.stlouisfed.org/graph/?g=FD9M
https://www.centralbank.go.ke/rates/rep ... erse-repo/
The way hyperinflation gets going is people sell their bonds and the central bank is the only buyer.
But the more money the central bank prints to buy bonds, the less anyone wants to hold bonds, so the faster they sell.
So you get a positive feedback loop or death spiral where the public gets out of bonds and the central bank prints new money like crazy.
So this "reverse repo" may be the start of the main hyperinflation feedback loop.
However, the Fed makes it sound like Reverse Repo is removing liquidity:
https://www.newyorkfed.org/markets/dome ... agreements
But maybe this means that the Fed is taking the risk of a sudden drop in the bond values. If people were worried about bonds crashing,
it seems like a Reverse Repo may protect them from losing in that case.
I am not sure of this stuff. Is anyone sure of what is going on with repo and reverse repo?
https://fred.stlouisfed.org/graph/?g=FD9M
https://www.centralbank.go.ke/rates/rep ... erse-repo/
The way hyperinflation gets going is people sell their bonds and the central bank is the only buyer.
But the more money the central bank prints to buy bonds, the less anyone wants to hold bonds, so the faster they sell.
So you get a positive feedback loop or death spiral where the public gets out of bonds and the central bank prints new money like crazy.
So this "reverse repo" may be the start of the main hyperinflation feedback loop.
However, the Fed makes it sound like Reverse Repo is removing liquidity:
https://www.newyorkfed.org/markets/dome ... agreements
But maybe this means that the Fed is taking the risk of a sudden drop in the bond values. If people were worried about bonds crashing,
it seems like a Reverse Repo may protect them from losing in that case.
I am not sure of this stuff. Is anyone sure of what is going on with repo and reverse repo?