This week’s $41B appears to be a rollover of previous repurchase agreements – ie, this isn’t ‘new’ money going into the financial system it is more like extending or re-setting a previous loan
Let’s say that Banco de 4Plex (Bd4) was in a bind for cashflow – Bd4 takes $10 mil worth of MBSs to the Fed and puts these securities on deposit with the Fed – Bd4 walks away with $10 mil cash to use at it sees fit – the repurchase agreement is for 90 days so Bd4 will have to come up with $10 mil in 90 days to buy back the MBSs from the Fed
90 days later Bd4 is in even worse shape so the Fed offers them a new repurchase agreement of $10 mil – this isn’t really new money it is just an extension of the original loan
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These repurchase agreements are supposed to be temporary – eventually Bd4 pays the Fed back and everyone is happy – a number of analysts are starting to wonder if these temporary market actions have become permanent – if Bd4 never pays the Fed back (or the Fed continues to roll the loan over every 90 days) then the Fed has monetized the worthless MBSs that Bd4 provided as backing for the $10 mil loan – monetizing worthless paper is one of the quickest ways to cause hyper-inflation in an economy:
Monetary theory is complicated – I believe the banking cartel has intentionally obfuscated how the American economy and banking system works – if it is complicated enough the average person will not take the time to understand how it works so the cartel can do whatever they want – when their methods are questioned they can pat us on the heads like children and gently explain that economics is too complicated for us to understand – just leave it to the professionals who do this stuff for a living
America: you are seeing the result of letting the banking cartel do whatever they want – do you like the results?
