Assessment: In case anyone thinks that federal Reserve money printing is over scroll down to the end …
The Fed’s QE may be over, and QT may be just starting (it won’t last long), but don’t think the Fed free money giveaway is ending any time soon. In fact, for a handful of happy, mostly anonymous counterparties, the real free-money bonanza has just begun!
Case in point: the Fed’s reverse repo facility. While one can debate for hours why there is a record $2.330 trillion in cash parked at the Fed’s overnight facility and what it means for systemic plumbing problems, the fact is that there is a record $2.33 trillion in cash parked at the Fed’s overnight facility, doing nothing.
“And the merchants of the earth will weep and mourn over her, for no one buys their merchandise anymore” Revelation 18:11
Well not nothing: it was nothing when rates were zero, but at 1.55% which is the current reverse repo rate, that $2.33 trillion is a golden goose for the 108 counterparties that are parking cash at the facility, a mixture of money market funds, banks, GSEs and various other financial intermediaries.
How big is this particular Golden Goose? The chart below shows the payment in interest that the Fed makes day on this record $2.33 trillion in funds: as of today it amounts to just over $100 million every single day! That’s right, more than $100 million in interest payments on funds parked with the Fed, which is by definition the world’s only risk-free counterparty!
But wait, there’s more!
Remember excess reserves? Well, technically excess reserves ended in March 2020 when the Fed reduced reserve requirement ratios to zero, thus converting the trillions in reserves held at the Fed from “excess reserves: to plain old “reserves” and which as of today amount to $3.13 trillion.
Whatever they are called now, however, reserves parked at the Fed (which is technically an incorrect phrase since the reserves are created by the Fed) also collect interest, and as of today, the Fed’s Interest on (Excess) Reserves rate, or IOER, is 1.65%. This translates into $141 million in daily interest payments every single day to the various banks (mostly foreign) whose reserves are parked at the Fed!
Read More @ Zero Hedge HERE