Federal Reserve Raises Interest Rates By 25 Basis Points

[g5000]

Federal Reserve raises benchmark rate by 0.25 point despite bank turmoil​

​

God knows how many more billions of dollars of bonds just sank beneath the waves.

The Fed was looking at 50 basis points, but I guess the banking crisis gave them some second thoughts.

 

[g5000]

I subscribe to a lot of newsletters, and some of them are financial. One of my favorites is from John Mauldin.

His latest newsletter has some very interesting charts.

Remember how Silicon Valley Bank had a lot of depositors whose accounts were a gajillion dollars over the FDIC insured amount?

Well, the US government made those depositors whole anyway.

Talk about moral hazard!

So check out this chart of even bigger banks whose uninsured deposits exceed their insured deposits. The percentages may be hard to read, but for example, Citibank's uninsured deposits are 74 percent of total deposits!

 

[g5000]

As of mid-2022, US banks had $10.5 trillion in uninsured deposits, and only $7.4 trillion insured.

Note the big jump at the onset of the pandemic. That's your Fed stimulus at work, and various US government stimulus programs.

 

[g5000]

With god knows how many trillions of dollars of bonds being underwater, the Fed has opened a new discount window to prop up the banks. They are allowing the underwater bonds to be used as collateral at par value.

Nice, huh?

If you thought the amount of borrowing at the Fed discount window was insane during the 2008 crisis and the pandemic, check out the far right side of this graphic:

 

[Toddsterpatriot]

As of mid-2022, US banks had $10.5 trillion in uninsured deposits, and only $7.4 trillion insured.

Note the big jump at the onset of the pandemic. That's your Fed stimulus at work, and various US government stimulus programs.

Fed buys a bond, the cash eventually ends up in a bank.

 

[g5000]

The Fed's Bond Bubble Doomsday Machine

When you buy a bond, you are making a loan to the issuer. That bond is money owed to the buyer, making it an asset. When the Federal Reserve buys a US Treasury bill, note, or bond, it is making a loan to the federal government because the federal government has appropriated more spending than...

www.usmessageboard.com

Thank you. Thank you vera muuuuuuuch.

 

[g5000]

Fed buys a bond, the cash eventually ends up in a bank.

Banks buy bonds, insurance companies buy bonds, your 401k asset manager buys bonds, college endowments buy bonds, foundations buy bonds, sovereign wealth funds buy bonds.

Everybody buys bonds.

And trillions and trillions and trillions and trillions and trillions and trillions are now underwater. Upside down. Fucked.

 

[LordBrownTrout]

With god knows how many trillions of dollars of bonds being underwater, the Fed has opened a new discount window to prop up the banks. They are allowing the underwater bonds to be used as collateral at par value.

Nice, huh?

If you thought the amount of borrowing at the Fed discount window was insane during the 2008 crisis and the pandemic, check out the far right side of this graphic:

I've been warning about this for months.

 

[Toddsterpatriot]

Banks buy bonds, insurance companies buy bonds, your 401k asset manager buys bonds, college endowments buy bonds, foundations buy bonds, sovereign wealth funds buy bonds.

Everybody buys bonds.

And trillions and trillions and trillions and trillions and trillions and trillions are now underwater. Upside down. Fucked.

That happens when rates rise. Can't keep zero rates forever.

 

[g5000]

That happens when rates rise. Can't keep zero rates forever.

Well, just like with the housing bubble and the belief that house prices would go up forever, a lot of idiots (including the Fed) were starting to believe you could keep ZIRP forever.

 

[g5000]

I've been warning about this for months.

See post 6.

 

[BluesLegend]

Idiot politician spending has come home to roost.

 

[g5000]

Idiot politician spending has come home to roost.

Yes. And ZIRP.

And all those moral hazards.

 

[g5000]

I am wondering about that massive spike at the discount window.

I am wondering if I should be scared shitless.

 

[WEATHER53]

It’s not in Fed charter about raising or lowering interest rates to stifle consumer spending. More Nanny State “we know what’s best for you”
People were home bound for two year and want to spend. Fed should not be manipulating that. People want to buy and yet Another Government Overreach entity wants to play Nanny

 

[Mac1958]

The Fed's been teetering on a tight rope for a long time, so this bank mess didn't help.

Maybe next time they won't be eight to ten months late to the fucking inflation party.

 

[Toddsterpatriot]

I am wondering about that massive spike at the discount window.

I am wondering if I should be scared shitless.

$80 billion?

 

[g5000]

It’s not in Fed charter about raising or lowering interest rates to stifle consumer spending. More Nanny State “we know what’s best for you”
People were home bound for two year and want to spend. Fed should not be manipulating that. People want to buy and yet Another Government Overreach entity wants to play Nanny

Actually it is in the Fed dual mandate to lower or raise interest rates to keep inflation at 2 percent.

The second part of their mandate is to maximize employment.

You are consistently wrong, man.

 

[g5000]

The Fed's been teetering on a tight rope for a long time, so this bank mess didn't help.

Maybe next time they won't be eight to ten months late to the fucking inflation party.

Yeah, exactly.

This very thought has had me wondering how long it takes to feel the full effect of an increase in the rate. Maybe the Fed is moving too fast now to make up for being asleep at the switch.

 

[g5000]

People were home bound for two year and want to spend.

That is precisely what is driving inflation. Consumer demand spiked to its highest level in history after the pandemic. All that stimulus money was burning a hole in their pockets.