M1 Money Multiplier tanking

[cjppjc]

Re: M1 Money Multiplier tanking

It will be like is written in the Book of Greenscam 666:15-21:


Quote:

15Now when Depression came, the tax-cheat bankster buddies went to him and said, “Wall Street is a deserted place, and it's already bled dry. Send the banks and the hedgefunds away so that they can go into the country and loot taxpayers for themselves.” 16But The Chosen One said to them, “They don't need to go away. You give them something to re-capitalize” 17Turbo Tax Timmy told him, “We don't have anything here except five credit facilities of the alphabet soup and two clowngress approved bailouts.” 18He said, “Bring them to me.” 19Then he ordered the crowds of hungry investors to sit down on the Wall Street grass. Taking the five alphabet soup facilities and the two bailouts, he looked into Ben Bernanke's eyes and blessed them with Hope and Change. Then he broke the credit facilities in pieces and gave them to his Fed cronies, and the cronies gave them to the capital hungry crowds. 20All of them recapitalized and were filled with taxpayer money. Then the cronies picked up what was left of the credit facilities, twelve baskets full of AAA marked-to-market securities. 21Now those who had pocketed the taxpayer money were about 5,000 banksters, besides pension funds and and small accredited investors.

I laughed so hard.

[Guest]

Re: M1 Money Multiplier tanking

$#* - Alright, where did you get the inspiration for this marvelous parable?

This is pretty obvious. It will be everything related to the economic "miracles" performed by the Chosen One after the New New Deal sermon in the Rose Garden: infrastructure, renewables, reindustrialization. It will be like is written in the Book of Greenscam 666:15-21:
Quote:

15Now when Depression came, the tax-cheat bankster buddies went to him and said, “Wall Street is a deserted place, and it's already bled dry. Send the banks and the hedgefunds away so that they can go into the country and loot taxpayers for themselves.” 16But The Chosen One said to them, “They don't need to go away. You give them something to re-capitalize” 17Turbo Tax Timmy told him, “We don't have anything here except five credit facilities of the alphabet soup and two clowngress approved bailouts.” 18He said, “Bring them to me.” 19Then he ordered the crowds of hungry investors to sit down on the Wall Street grass. Taking the five alphabet soup facilities and the two bailouts, he looked into Ben Bernanke's eyes and blessed them with Hope and Change. Then he broke the credit facilities in pieces and gave them to his Fed cronies, and the cronies gave them to the capital hungry crowds. 20All of them recapitalized and were filled with taxpayer money. Then the cronies picked up what was left of the credit facilities, twelve baskets full of AAA marked-to-market securities. 21Now those who had pocketed the taxpayer money were about 5,000 banksters, besides pension funds and small accredited investors.

[Supercilious]

Re: M1 Money Multiplier tanking

$#* - Alright, where did you get the inspiration for this marvelous parable?

Thanks, but it's not as good as the rubber chicken graphical parable :p

As far as interbank lending, the actual data shows that it has bounced back since the Fed started paying interest on reserves, plus a bit of a lag.

That is somehow inconclusive since all values of prime rate, funds rate an IOR are basically zero.

And although its true that the Fed has life or death powers over banks, and that anyone who gets "out of line" will likely not survive (like Bear Stearns who wasn't on board during the LTCM period), I think they have way bigger fish to fry.

I agree here.

The real problem remains that the majors and many other banks are just plain insolvent by any reasonable measure, and that the line the Fed & Treasury & various politicians are walking is mostly about trying their damnedest to keep confidence in the system up.

There are two different issues here. One is market confidence that is lost and the second is the fact that major banks are insolvent. That's why the manipulation of risk perception is so important. Without a strong dollar, all the guarantees for Citi and other zombies are worth nothing.

All the various programs like the PDCF, CPFF, TAF, TSLF, etc. can do is deal with symptoms and although they have actually achieved change towards the positive in things like LIBOR and liquidity in the commercial paper markets, confidence and real insolvency (aka, the bankrupt but still walking due to Fed supplied canes) remain the real problems... and have as of yet to be realistically addressed.

Yup and it seems the basic idea is to call the tide back so we will not see who is naked and the perception of risk will be created only by those few caps with the "Minion of the Fed Team, Sponsored by the Government" logo

In plain English, much more SHTF is ahead in the financial and confidence areas.

And the incoming SHTF can be averted only by gross government intervention in the joke that remains now out of the free markets. (of course one may question if such intervention can work, but that is another issue).

I do have a nagging feeling that I'm missing something about the high level of "excess" reserves...

I have too. I believe it may be more than simple spring loading the next stage of credit expansion. From the latest BASE and M1 data it seems the next MULT point will be again below 1

Give that man a trendy new kewpie doll, complete with tinfoil hat. ;)

Who are you talking about? Rahm doesn't need a kewpie doll, because he has the White House keys and he is busy playing with the Oval Office Banking Puppet. I don't need a kewpie doll because I have all the Fed and Treasury collection of voodoo dolls to play with (while I wear my tinfoil hat )

Originally Posted by $#*
So far the Fed seems preoccupied only to provide ammo for the banks without giving any firing orders. I believe that in this environment banks will start lending only if the FFR is increased :eek: the discount rate is increased and the IOR is kept to the floor at near 0.

Yes, that's part of the additional power the Fed has gotten from the ability to pay interest on reserves.

But there are many more factors that affect banks lending, a few being that many are insolvent, credit standards are much tighter now and many fewer qualify, and there's also just plain demand -- as in why borrow at any interest rate when we're in a deep recession/depression, deflation exists and there are so very few places to invest that will produce a positive real return.

Correct, that's why we need the Chosen One to show us the path towards the next bubble. The next thing would be to modify the risk perception of the new golden sector. The herd can be easily prodded in the right direction.

Lots of wiggle room & opinions here, but I generally agree.

Out of the roughly $9.7 trillion that has been allocated to be spent by the Fed &Treasury, "only" about $2.7 trillion has actually been spent... and of that, about half is pretty easy to reverse... and the other half is real money creation.

It's not a huge surprise from here that we're still in overall deflation - $1.35 trillion is just plain not enough to offset debt deflation or losses in the shadow banking system.

Actually I believe the actual pure printing that cannot be put in reverse is less than $1.35 trillion. A lot of reversible and neutral operations are disguised as printing. Look for example at the AIG operations. The Fed is getting the collateral at 50% of face value. One may argue that such operation is reversible if that collateral can be sold at more than 50c on the dollar when the money tide returns.

If you have some clear data showing the actual printing (and maybe some charts ) I would be grateful.

Sorry - been severely under the weather, and also working on new charts, etc.

I hope you get better soon because I have chart withdrawal syndrome and that makes me write very long posts.

[bart]

Re: M1 Money Multiplier tanking

That is somehow inconclusive since all values of prime rate, funds rate an IOR are basically zero.

True, but it does speak to better general stability as well as a return to close to normalcy in interbank lending.

There are two different issues here. One is market confidence that is lost and the second is the fact that major banks are insolvent. That's why the manipulation of risk perception is so important. Without a strong dollar, all the guarantees for Citi and other zombies are worth nothing.

Indeed, and I'd also say that IOR has been somewhat successful at contributing to the appearance of confidence. Its pretty rickety though, and the real risk picture is seeping through to the public at large, as witness the recent NYT & WSJ articles on AIG and who is really getting paid.

Yup and it seems the basic idea is to call the tide back so we will not see who is naked and the perception of risk will be created only by those few caps with the "Minion of the Fed Team, Sponsored by the Government" logo

We're tracking very well here.


Originally Posted by bart
I do have a nagging feeling that I'm missing something about the high level of "excess" reserves...

I have too. I believe it may be more than simple spring loading the next stage of credit expansion. From the latest BASE and M1 data it seems the next MULT point will be again below 1

Indeed it was below 1.0 at .957.
My nagging feeling about excess reserves is that the Fed has some other purpose for them, and I'm just too dense to see it. My best guess so far, but it doesn't quite click, is that its related to the Fed's fear of real bank runs.

Who are you talking about? Rahm doesn't need a kewpie doll, because he has the White House keys and he is busy playing with the Oval Office Banking Puppet. I don't need a kewpie doll because I have all the Fed and Treasury collection of voodoo dolls to play with (while I wear my tinfoil hat )

You've been holding out on me?!?! - no wonder my most recent requests are on back order! :eek:

Actually I believe the actual pure printing that cannot be put in reverse is less than $1.35 trillion. A lot of reversible and neutral operations are disguised as printing. Look for example at the AIG operations. The Fed is getting the collateral at 50% of face value. One may argue that such operation is reversible if that collateral can be sold at more than 50c on the dollar when the money tide returns.

If you have some clear data showing the actual printing (and maybe some charts ) I would be grateful.

Unfortunately I don't - that $1.35 trillion figure came from a rough scratchpad that I keep in Excel on a Fed summary page, and the current number is right around $1.1 trillion.

The money that I'm counting as real printing, as well as money that's easily reversible, is highly subject to opinion. But things like the stimulus checks, the H.O.M.E program and TARP money to date are quite difficult to reverse and that totals around $800 billion.

[Supercilious]

Re: M1 Money Multiplier tanking

True, but it does speak to better general stability as well as a return to close to normalcy in interbank lending.

Why should we assume the Fed is truly interested in a better general stability and a return to close to normalcy in interbank lending?:eek: That is a strange idea

Its pretty rickety though, and the real risk picture is seeping through to the public at large, as witness the recent NYT & WSJ articles on AIG and who is really getting paid.

I would argue that what is seeping to the public at large is not the real risk picture, but the real picture of government/Fed sponsored fraud of transferring taxpayer money to the Fed's minions which were counterparties to AIG's bad paper. Had let AIC going down, now they would be busy pouring the same money directly into Goddamn Sucks, JP Muggerman and Deutche Bankrupt.

Originally Posted by $#*
I have too. I believe it may be more than simple spring loading the next stage of credit expansion. From the latest BASE and M1 data it seems the next MULT point will be again below 1

Indeed it was below 1.0 at .957.
My nagging feeling about excess reserves is that the Fed has some other purpose for them, and I'm just too dense to see it. My best guess so far, but it doesn't quite click, is that its related to the Fed's fear of real bank runs.

I don't know bart.... It's still a puzzle for me. If they were just related to prevention of bank runs they wouldn't have needed such a complicated mechanism of Circle Jerk Finance (TM). I have the nagging sensation that they are preparing for another unexpected move, another financial rabbit pulled out of Turbo Tax Timmy's hat or Bernanke's ... basis as a scholar of the Great Depression

Can they be so stupid to try a selective implosion of the non-minion banks all over the world? That would be an extremely risky and audacious move that can backfire big time if they lose control. Plus the Fed would have to start issuing their own debt and the treasury to start printing big time in order to pull such a scam. There is nothing else I can think of, to justify this increase of excess reserves with the Circle Jerk Finance (TM) toy other than a pre positioning move for an aggressive controlled detonation of the global financial system. And that is too much tinfoil even for me!

So I guess it must be something else .

You've been holding out on me?!?! - no wonder my most recent requests are on back order! :eek:

What???!!! My requests are also on back order. It must be a very popular hobby, lately

Unfortunately I don't - that $1.35 trillion figure came from a rough scratchpad that I keep in Excel on a Fed summary page, and the current number is right around $1.1 trillion.

The money that I'm counting as real printing, as well as money that's easily reversible, is highly subject to opinion. But things like the stimulus checks, the H.O.M.E program and TARP money to date are quite difficult to reverse and that totals around $800 billion.

I understand that, but one may make an "angels on the pinhead" fine point. If trash paper is liquid now (can be sold) at 30c on a dollar and a sector selective inflation (or a controlled inflationary shock) will bring it in later at a liquid threshold at 70c on a dollar, then, if the Fed buys $1 trillion worth of trash at a Mark-to-Make-believe of 50c on the dollar, then the whole transaction has only a $400 billion printing equivalent now, and later, it may have a $400 billion mopping-up (deflationary equivalent). The thing is that the price arbitrage of mortgage has been destroyed by gross government intervention and the whole system has been fubared into a world of monetary and financial surrealism. Normal rules of defining precisely what is printing and what is not are very difficult to use these days when everything is so muddied.

[Supercilious]

Re: M1 Money Multiplier tanking

Bart, I've just red the latest entry in Setser's bog. Very interesting stuff mainly by what it implies compared to actually what he says directly.

Actually to little is said directly such as:

Still, those looking for a direct (rather than indirect) link between central bank reserve growth and boom in lending to US households can find a link here. A fraction of central bank dollar reserves were held in deposit in European banks – and another fraction was invested in onshore and offshore dollar-denominated money market funds. European banks used those sources of dollar “funding’ to buy securities backed by loans to US households. The growth in their balance sheets undoubtedly explains the huge increase in cross border flows (outflows from US money market funds financed the inflows associated with European banks purchases of US securities) during the boom years – and large corporate debt purchases through the UK.[...]

By the way, US banks were net borrowers from the rest of the world – but most of their borrowing came from a few Caribbean islands – and those islands borrowed heavily from “non-bank” counterparties in the US. The BIS doesn’t think this represents a true external flow: “this could be regarded as an extension of US banks domestic activity since it does not reflect (direct) funding from non-banks outside the United States.”
The subprime crisis in August 2007 put these funding arrangements under stress. And they effectively collapsed after Lehman, leading to a scramble for dollars – or a “dollar shortage.” In the fourth quarter, the US government was a net LENDER to the rest of the world. Inflows from central banks were dwarfed by the $400 billion in swap lines the US provided European central banks. That is rather strange; deficit countries usually aren’t net lenders … but, well, a lot of institutions really were desperate for dollars.
The main source of stress on European banks came from the withdrawal of money market funding and the difficulties obtaining currency swaps. But it seems like European banks also lost another source of dollar funding: the world’s central banks.
Emerging economies were facing their own liquidity shortage – and emerging market banks in particular. Their home central bank helped them out. Countries with lots of dollar reserves though didn’t need to turn to the Fed for dollars. They could withdraw dollars from European banks and put them on deposit in their local banking system.

And please look at graph 6 on page 77 in the BIS paper about the money market funds:
http://www.bis.org/publ/qtrpdf/r_qt0903g.pdf

Is it possible the increase in reserves represents in fact a pressure buffer generated by Fed interposing itself as a valve on the capital flows feeding the European banks (and probably other friendly nation's banks from the coalition of the swapping?)

So, what exactly the alphabet soup did and when exactly the crunch has started?

[bart]

Re: M1 Money Multiplier tanking

Why should we assume the Fed is truly interested in a better general stability and a return to close to normalcy in interbank lending?:eek: That is a strange idea

*rimshot* ;)
The only reason I brought it up is that you originally mentioned it, and that it has "recovered" to a more normal range. It's only one stat among many, but also does show that IOR has had a measurable effect.

I would argue that what is seeping to the public at large is not the real risk picture, but the real picture of government/Fed sponsored fraud of transferring taxpayer money to the Fed's minions which were counterparties to AIG's bad paper. Had let AIC going down, now they would be busy pouring the same money directly into Goddamn Sucks, JP Muggerman and Deutche Bankrupt.

I think we're saying close to the same things.

I don't know bart.... It's still a puzzle for me. If they were just related to prevention of bank runs they wouldn't have needed such a complicated mechanism of Circle Jerk Finance (TM). I have the nagging sensation that they are preparing for another unexpected move, another financial rabbit pulled out of Turbo Tax Timmy's hat or Bernanke's ... basis as a scholar of the Great Depression

I don't think its so much that they think it will prevent bank runs, but rather that it provides a bit of a floor for the banks if one happens, and also provides a warm fuzzy feeling for those who aren't looking at the full picture as well as signalling an anti deflation stance.

As an aside, the Fed is far from the only CB who has expanded base money. The ECB, BoE and BoJ are also showing huge base growth.

It'll become to me clear one day what my specific but undiscovered concern is about the base expansion. It sometimes feels like its on the tip of my tongue, and its mildly frustrating that it won't gel.

Can they be so stupid to try a selective implosion of the non-minion banks all over the world? That would be an extremely risky and audacious move that can backfire big time if they lose control. Plus the Fed would have to start issuing their own debt and the treasury to start printing big time in order to pull such a scam. There is nothing else I can think of, to justify this increase of excess reserves with the Circle Jerk Finance (TM) toy other than a pre positioning move for an aggressive controlled detonation of the global financial system. And that is too much tinfoil even for me!

So I guess it must be something else .

Just as a really out there tinfoil hat enabled possibility, they could be used as a pledge to the IMF so they can issue more SDRs...

I understand that, but one may make an "angels on the pinhead" fine point. If trash paper is liquid now (can be sold) at 30c on a dollar and a sector selective inflation (or a controlled inflationary shock) will bring it in later at a liquid threshold at 70c on a dollar, then, if the Fed buys $1 trillion worth of trash at a Mark-to-Make-believe of 50c on the dollar, then the whole transaction has only a $400 billion printing equivalent now, and later, it may have a $400 billion mopping-up (deflationary equivalent). The thing is that the price arbitrage of mortgage has been destroyed by gross government intervention and the whole system has been fubared into a world of monetary and financial surrealism. Normal rules of defining precisely what is printing and what is not are very difficult to use these days when everything is so muddied.

Precisely! Its more than a little dicey to determine what is real long term money creation and what isn't.

At least we do know with tools like the FDI, and to a lesser extent my BKX adjusted total money supply charts, that we're still in deflation mode... which by definition leads to the conclusion that the money creation so far has not been enough.

[bart]

Re: M1 Money Multiplier tanking

Bart, I've just red the latest entry in Setser's bog. Very interesting stuff mainly by what it implies compared to actually what he says directly.

Actually to little is said directly such as:
And please look at graph 6 on page 77 in the BIS paper about the money market funds:
http://www.bis.org/publ/qtrpdf/r_qt0903g.pdf

Is it possible the increase in reserves represents in fact a pressure buffer generated by Fed interposing itself as a valve on the capital flows feeding the European banks (and probably other friendly nation's banks from the coalition of the swapping?)

So, what exactly the alphabet soup did and when exactly the crunch has started?

Yep - I track swaps on the Fed's H.4.1 report every week. If the Fed hadn't provided dollars like they did, the USDX would have skyrocketed and the crisis would have been much worse. And its wildly ironic about the US actually having been a net lender in 4Q 2008 too... "The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings." ;)

And yes, the reserves growth certainly did help finance the swaps too.

I'm not sure what you're asking with "So, what exactly the alphabet soup did and when exactly the crunch has started?" though. Would you please clarify?

This may help too:

[Supercilious]

Re: M1 Money Multiplier tanking

Yep - I track swaps on the Fed's H.4.1 report every week. If the Fed hadn't provided dollars like they did, the USDX would have skyrocketed and the crisis would have been much worse. And its wildly ironic about the US actually having been a net lender in 4Q 2008 too... "The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings." ;)

Yep, and US being a net lender in q4 i believe is a sign of things to come.

And yes, the reserves growth certainly did help finance the swaps too.

Yup.

I'm not sure what you're asking with "So, what exactly the alphabet soup did and when exactly the crunch has started?" though. Would you please clarify?

I believe the shadow banking system hasn't grown only in parallel structures with the classic banking system. It has infected regular banks too, and money markets were responsible with the financing of SIV-ed banks, and rolled over short term debt has replaced CD's and deposits in many contaminated structures. This financing flow was also very difficult to control through Fed's existing tools.

Maybe I'm seeing things, but Lehman's collapse and the Fed's movements in financial CP that preceded that collapse, look now more like an operation of financial plumbing bypass, in which the Fed has interposed itself as a control valve on the financing stream of the shadow(ed) banking system. It would be interesting to see some charts comparing the total evolution of the volume of the alphabet soup with treasury sales + printing.

I can't see the Fed remaining in this role for ever (they have at least to keep some appearances) and the control-valve role will be passed slowly to the minions (Citi, JPM , GS etc) and the minions will become the new flow through valves for financing the shadow(ed) banking system. Of course some form of TALF will be kept in the future insure nobody steps out of the line and the minons will be able to insure that the flows they control will never 'break the buck'.

That's why we may see a miraculous shrinking of the Fed's balance sheet and a decrease in excess reserves once the minions begin to run their role as flow-through valves. We can also expect the minons to start doing really well by gouging the profits of the end sectors of the shadow banking system (hedgefunds). Maybe it was all just a struggle to subdue the shadow baking system under the Fed's authority, some kind of financial civil-war, since the independence and decentralization of the new kids on the block was becoming a threat for the old control monopoly. Well, the horde of wild kids has been ambushed and pushed into a pen under the strict control of the old enforcers. I don't know....

(By the way, if I'm right MULT is a joke until things don't return to the new normal of extended control.)

[Supercilious]

Re: M1 Money Multiplier tanking

New data is out:2009-03-25 , 0.903

This is what happens when the Fed treats the economy with a dollar enema :eek:




Looking at the life jacket issue and assuming the excess reserves remained relatively constant:

Now
Mult 0.903
M1 1565.6
BASE=1725

Feb
MULT= 0.885
EXCRESNS 643.5
M1=1568.3
BASE=1749

It would result that now the real MULT is about 1.44 while in February (for which we have good data) was 1.41. from the Base M1 charts my guess is that excess reserves were higher at the beginning of March and considering the M1 was 1.6 before the Circle Jerk Finance(TM) circus started, one may think the timid recovery has started.

[WildspitzE]

Re: M1 Money Multiplier tanking

New data is out: 2009-03-25 , 0.903

Not for M1.

[Edit note:] Hit enter by mistake: But you can calculate it given that you know two of the three variables, M1 should have gone down given the Bank hoarding (decrease in MULT).

[Starving Steve]

Re: M1 Money Multiplier tanking

This just means people are pulling out of banks. As someone said - a good time to be a burglar.

Why would anyone want to keep money in a money market or a bank or a treasury bill when interest rates are zero? I pulled-out, and maybe you should too.

I expect to be paid for risk, even a small risk. Zero interest rates don't cut it with me, especially with weak currencies and the threat of de-valuation.... Let's give Bernanke and the rest of the central bankers a message.

[Supercilious]

Re: M1 Money Multiplier tanking

Not for M1.

[Edit note:] Hit enter by mistake: But you can calculate it given that you know two of the three variables, M1 should have gone down given the Bank hoarding (decrease in MULT).

IMHO the excess reserves are generated by the Circle Jerk Finance (TM) and artificially lower the MULT, by inflating BASE with money that really doesn't exist.

[LargoWinch]

Re: M1 Money Multiplier tanking

Why would anyone want to keep money in a money market or a bank or a treasury bill when interest rates are zero? I pulled-out, and maybe you should too.

I expect to be paid for risk, even a small risk. Zero interest rates don't cut it with me, especially with weak currencies and the threat of de-valuation.... Let's give Bernanke and the rest of the central bankers a message.

Steve I agree with you up to a point.

The advantage to having cash in a bank savings account are (among others):

a) Cannot be stolen and insured by the FDIC up to $250K.

b) Can be accessed from anywhere (ATMs even out of the country etc.).

c) Can be moved electronically and rapidly converted into other paper assets if you have access to a brokerage account.

d) No risk of principal (in $nominal) loss

e) Medium of exchange for everyday expenditures (no one is accepting gold for telephone bill at the moment)


Now, again, do not get me wrong; currencies are being devalued and "cash is trash" in the long-term...but that is another story.

[WildspitzE]

Re: M1 Money Multiplier tanking

IMHO the excess reserves are generated by the Circle Jerk Finance (TM) and artificially lower the MULT, by inflating BASE with money that really doesn't exist.

I haven't made my way through the entire thread, and so I apologize if what I say comes across as a repost.

By hoarding, I didn't mean to imply that the banks were hoarding actual cash, I was using it as a colloquialism re: behavior.

Of course, the money doesn't really exist. These amounts are all [pretty much] digits, computer book entries. That's the "beauty" of fiat money, it "doesn't matter" if it's paper or digits (that debit/credit accounts). Remember these guys: http://en.wikipedia.org/wiki/Pay_By_Touch ?

Being simplistic, all the MULT is measuring is the ratio between the digits that the banks create in/put into or that exist in the accounts of its clients (purchasing securities, lending), vs. the "high powered" digits that the Fed has put into or exist in the bank's account with the Fed.

To put it in another simplistic way: Digits are fungible, and can be created out of thin air. Thus the banks, pursuant to regulation (as there is no physical limitation), are allowed to conjure (into its clients accounts) as many digits as they want up to a mutliple of the amount of digits that the Fed has created in the bank's Fed account. The MULT is measuring how much the banks have conjured in relation to what the Fed has conjured.

If the MULT is below 1, then the bank has created less digits than the Fed has created in its account. Substantially less digits than allowed are flowing or have flowed out of the banking system into the economy - digits put to work. Until such digits do, then yes, the effect is pretty much a big circle jerk

That said: The interest the Fed pays on the "high powered" digits (as if the bank had deposited "money" in the Fed Bank) is interesting in the circle jerk theme - especially since the timeline to use this initiative was moved up.

The banks have digits that they need to pay in the way of expenses, financing costs, and to "cover" losses. If such expenses are greater than what it has coming in based on the digits it "put to work" (lent) then the bank experiences a slow death. Not to worry, the Fed will provide the bank with an income source (source of additional digits) to cover the expenses (drain of digits).

I wonder if the Fed will change its tune to force the banks to find a new source of income ( by puting the digits to work into the economy) and charge the banks a fee on it's digits (rather than pay interest on them)?

I guess I should have said, "they're being stingy with their digits".