Things that make you go: "Hmmm" - Interest paid on outstandings Treasuries vs. Fed Funds rate

[c1ue]

Sources:

http://www.federalreserve.gov/releas...l/H15_FF_O.txt

http://www.treasurydirect.gov/govt/r...ir_expense.htm

Interest paid vs fed funds rate.bmp

[Ben]

Re: Things that make you go: "Hmmm" - Interest paid on outstandings Treasuries vs. Fed Funds rate

What is the Fed Funds rate?

[vinoveri]

Re: Things that make you go: "Hmmm" - Interest paid on outstandings Treasuries vs. Fed Funds rate

Sources:

http://www.federalreserve.gov/releas...l/H15_FF_O.txt

http://www.treasurydirect.gov/govt/r...ir_expense.htm

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The tight correlation over the last decade suggests that the banking system (cartel, shadow system, whatever) has been buying and holding gov debt, no?

Gary North has made the observation that with the Fed Reserve Act, the US gov gave to the banking system the power to create money, and in exchange for the privilege, received a promise by the cartel to always make a market in and buy whatever debt the UST needs to sell.

[c1ue]

Re: Things that make you go: "Hmmm" - Interest paid on outstandings Treasuries vs. Fed Funds rate

What is the Fed Funds rate?

This is the rate at which banks pay in order to get money from the Fed:

http://en.wikipedia.org/wiki/Federal_funds_rate

This rate is what the FOMC sets in its nearly monthly meetings back in the quaint era where the number would actually change.

The tight correlation over the last decade suggests that the banking system (cartel, shadow system, whatever) has been buying and holding gov debt, no?

I'm not sure how tight the correlation is - but certainly there is some resemblence. This may be, however, more due to the recent phenomenon of 'shortening' of average Treasury durations - i.e. buying more on the short end rather than long.

However the key point I was hoping to illustrate is how the burgeoning debt and its attendant interest payments itself is something the government possibly needs to manage.

[marvenger]

Re: Things that make you go: "Hmmm" - Interest paid on outstandings Treasuries vs. Fed Funds rate

with no respect for capital reserves and double enrty bookkeeping it becomes corruption citi as to who gets bailed out and there's far less respect for getting your money back if you're a bank and therefore who gets loans. Who would play the game?

On the other hand, these guys have a monopoly and some new upstart currency competitor is going to have significant operational and service offering disadvantages.

So the monopoly holder is going to milk it and milk it with high costs as skilfully as they can.

How skillful are they?

So far i'm giving them pretty high points.