MG: > In any case, I think all can agree that even hundred of millions in > reserve account interest pales in comparison with the tens of billions > in profits alone generated by the Goldman and JP Morgan Chase > trading desks this year.
No doubt. But the issue is important beyond that. $600 billions in the non-borrowed reserves contradict the Feds stated objective of providing liquidity to the banks and other lenders. The Swedish Central Bank is doing the exact opposite: one of their policy rates, their "so-called" discount rate, is -0.25%. Yes, you did not read it wrong, it is negative 0.25%. They are charging penalty to the banks for the money they keep at the Central Bank. The Fed is not only paying interest on the non-borrow reserves, but also by further allowing an arbitrage opportunity to the depository institutions, increasing their incentive to return a large portion of the pumped money back to the Fed in the form of non-borrowed reserves, rather than to lend. Another conclusion from this is that the current crisis cannot be a liquidity crisis. If it were, not only by now this much liquidity would have solved it, but also you would not have had such an unprecedented amount in the non-borrowed reserves. Best, Sabri _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
