It is QE Infinity! The New York Fed’s funny money giveaway program was supposed to end on Monday. Instead, today the WSJ treats us to uncannily shoddy journalist revelations of a continuing nature.
The New York Fed added $115.14 billion to financial markets via temporary operations on Thursday.
The liquidity additions came in two parts. One was an overnight repurchase agreement with eligible banks totaling $80.14 billion, and the other was via a $35 billion 14-day repo. Eligible banks didn’t take all the liquidity offered by the Fed in the one-day operations, but in submitting $41.15 billion in Treasurys and mortgages for the latter operation, their interest in securing liquidity exceeded what the Fed was willing to provide on Thursday.
Fed repo interventions take in Treasury and mortgage securities from eligible banks in what is effectively a short-term loan of central-bank cash, collateralized by the bonds. The Fed’s injections are aimed at ensuring that the financial system has enough liquidity and that short-term borrowing rates remain well-behaved.
Recent Fed market interventions aren’t designed to serve as stimulus. While the sizes of recent operations are large, the practice of adding and subtracting liquidity from short-term markets to manage short-term interest rates goes back decades. The Fed is also buying Treasury bills to increase the size of its balance sheet and to add permanent liquidity to the financial system, and it hopes that effort will reduce the need for large temporary interventions.
Not a stimulus, just a behavior modification. Okaaaaay. Adding massive permanent liquidity (to a supposedly healthy system, well-behaved) in lieu of temporary interventions. Hmmmm.
Make of all that what you will. At this point, the dates, numbers, and words simply cannot be trusted. It was $165 Bn per day for 50 days. Now, is it $165 Bn for 53? Or, is it $115 Bn for 53? Or something else forever? Splitting the crazy differences … $140 Bn for 51.5 days = $7,210,000,000,000.00*. Or, they are now printing the fiat at the rate of 1 2019 GDP every five months. Or! 1 2019 SLFR BASE every three weeks. King Midas would be jealous.
*If it is 165/53, then we’re at $8.745 Trillion through today.