TAF increase and interest on excess reserves

[gonegolfin]

Now it is getting scary ... the TAF has been increased to $900 billion. This is considerably more than the current treasury portfolio of the Fed. Which means ... a lot of this money cannot be sterilized.

Additionally, the Fed announced today that interest will be paid on excess reserves (over and above reserve level requirements). This is essentially a prop under the federal funds market. Bank will not lend into the federal funds market below the rate being paid on excess reserves at the Fed. This will pull the federal funds rate back up to its target.

Brian

 

[Paulie]

Was this a late day move? Because PM's didn't really respond. Gold up a little, but silver down.

 

[gonegolfin]

Was this a late day move? Because PM's didn't really respond. Gold up a little, but silver down.

No, it was released this morning.

We are in the midst of a massive deflation scare. Fed injections are having little or no impact. The liquidity is actually making things worse as banks are less likely to borrow/lend to each other if the Central Banks are there ready to lend.

Gold is up because investors are using it as a safe haven (and the physical price is much higher than the paper price). Folks are also flocking to cash and treasuries. Hence the strong US Dollar. Silver is both considered a monetary metal and an industrial commodity. Hence, Silver is up w/respect to investment demand, but down hard on the industrial side. The net is that Silver is somewhat down today (paper, that is).

Brain

 

[Paulie]

No, it was released this morning.

We are in the midst of a massive deflation scare. Fed injections are having little or no impact. The liquidity is actually making things worse as banks are less likely to lend to each other if the Central Banks are there ready to lend.

Gold is up because investors are using it as a safe haven (and the physical price is much higher than the paper price). Folks are also flocking to cash and treasuries. Hence the strong US Dollar. Silver is both considered a monetary metal and an industrial commodity. Hence, Silver is up w/respect to investment demand, but down hard on the industrial side. The net is that Silver is somewhat down today (paper, that is).

Brain

Yeah, I was only referring to today's PM moves. I would think they would have both spiked on this news today, no? It certainly makes ME want to buy.

 

[gonegolfin]

Yeah, I was only referring to today's PM moves. I would think they would have both spiked on this news today, no? It certainly makes ME want to buy.

I was referring to today's moves as well. As I said ... deflationary scare.

Brian

 

[Paulie]

I was referring to today's moves as well. As I said ... deflationary scare.

Brian

Let me ask you a question. Where do you see the economy by next June?