Fed-Speak Day,

[Owlet]

"the devotional time set aside to reassure us that all is well due to the god-like competence of the Federal Reserve

Next up, excess bank reserves parked at the Fed where it earns interest. You recall the scam, right? The Fed loans money to the insolvent TBTF banks at zero interest, and they turn around and park the cash in the Fed where it earns a nice rate of interest. Nice skim if you can get it.

The core idea of Central Planning was that all this new money would flow into the real economy and spark new investment, jobs etc. Instead, 80% of that new cash sits in the Fed as dead money. Yes, 80% of the Fed's massive money expansion is in the Fed earning interest--classic dead money doing nothing but bolstering the income of the banks.

the other $400 billion was "invested" in risk assets and carry trades--the Aussie dollar, Japanese yen, high-yield bonds, the oil complex--oops, that actually had a real-world consequence: oil prices rose, and now prices are squeezing the real economy hard.

As this chart shows (see link below), when the cost of oil per unit of GDP rises, GDP tanks--what we call recession. Now that the cost of oil per GDP has spiked again, what do you think will happen to GDP? Can the Fed central-manage everything in the economy? If it's so god-like and powerful, then why is it engineering another recession?"



http://charleshughsmith.blogspot.com/2012/03/four-charts-of-interest-on-fed-speak.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+google%2FRzFQ+%28oftwominds%29

[banned from Kos]

1. total garbage. "Central planning" is wingnut speak for the dreaded "Socialism"!

and the Fed does not loan to "insolvent" banks. Plus there are no "zero interest loans" plus the Fed pays a puny .025% on IOR of $1.6 trillion.

[Owlet]

2. Don't know where you get your 'facts'

but ZIRP is the Fed policy which has recently been announced to extend through 2014. Insolvency is open to interpretation, but banks which are bloated with toxic assets and unrecoverable debt could arguably be said to be insolvent. As far as banks earning interest on deposits with the Fed, that's been the case for three years now.
https://en.wikipedia.org/wiki/Excess_reserves

[banned from Kos]

3. as I said, the interest paid to banks on reserves held is a puny little 1/4 of 1 per cent

on a massive $1.6 trillion.

"ZIRP" does not mean banks pay zero interest on loans from the Fed.

The notion banks get zero interest loans from the Fed for 30 years and buy 30-yr Treasury bonds is pure fantasy.

[Owlet]

4. Wha?

What, then, do you think ZIRP means?

"The notion banks get zero interest loans from the Fed for 30 years and buy 30-yr Treasury bonds is pure fantasy."

It sure is, but what does that have to do with anything? I feel like I'm having a discussion with someone from an alternate universe. Did you take the time to read the whole article at the link?

[banned from Kos]

5. Who is getting zero interest loans? Not near zero or close to it - 0.00000%

ZIRP is just a policy of getting interest rates as low as feasible.

The Fed funds target rate now pays 1/10 of 1% on overnight interbank loans.

http://www.bloomberg.com/news/2012-03-14/fed-funds-projected-to-open-at-0-1-to-0-14-icap-says.html