by Karl Denninger
The market is flat-out ignoring what are clearly emergency measures being taken by The Fed.
There’s only one thing worse than an emergency, and that’s an emergency that people are actively trying to hide.
What am I referring to? That The Federal Reserve has been frantically adding reserves to the financial system in an amount that is utterly stunning, running well north of $400 billion over the last four months.
A quick primer is in order here. “Repo” transactions are undertaken all the time in the financial system. The purpose of them is to balance reserves between banks. Let’s say you buy a $250,000 house. On the day you close $250,000 leaves one financial institution (your lender or, if it’s a cash deal, your bank) and is wired to the seller (through the title company, which deducts the various fees and such that are due.) That’s a large hunk of cash that leaves one place and goes another.