Walker's World: A tale of two banks

UPI ^ | 4/13/09 | Martin Walker

[T-Bird45]

Tucked away inside the small print of the latest Federal Reserve report on its balance sheet is a jaw-dropping nugget of information. A year ago, American banks had $1.8 billion on deposit with the Fed above and beyond the regulatory requirements. This month, these excess deposits have soared to $771.2 billion.

[T-Bird45]

Very interesting reading and worth a click-thru to read the full article -- looking forward to comments from those more familiar with this topic. This does look like the start of what would have been in earlier days a war, either economic or actual. I think there is historic precedent, at least.

[NVDave]

Bingo.

This is what I’ve been telling people as to why we’re not seeing inflation for all the money that the Fed has been injecting into the banking system. All that money isn’t going anywhere — it is just piling up on the balance sheets of these banks. Hundreds of billions of the stuff.

And the reason why these banks aren’t in any hurry to lend it out? Because the Fed is paying interest on reserves held above regulatory requirements. In other words, the bankers are getting a return (low, but entirely without risk) for just piling up money and watching it do nothing.

[J Aguilar]

A war against China, I guess, because here in Europe we are very happy with our euro and the stability it provides.

[Oldexpat]

Today the Fed bought T-notes because the Chinese have slowed or stopped their purchases..
When these Bank funds start finding their way back into circulation..we will be in for landmark inflation.
The question is where do we hide our money from this tornado?

[J Aguilar]

Gold.

[wmfights]

When these Bank funds start finding their way back into circulation..we will be in for landmark inflation.

I don't think we will see the hyper inflation that a lot of people are predicting. The banks have been eliminating credit and that is going to offset the increased number of dollars. We are moving towards a low credit economy where you will have to have the dollars to purchase something.

[darth]

Farmland. I saw people make great returns in the 1970s stagflation.

[SunkenCiv]

A year ago, American banks had $1.8 billion on deposit with the Fed above and beyond the regulatory requirements. This month, these excess deposits have soared to $771.2 billion.

[Ultra Sonic 007]

Ping of interest.

[expat_panama]

[ printing out for review over morning coffee...]

[the invisib1e hand]

So lemme get this straight. The future tax revenues -- that's the blood sweat and tears -- of untold generations of Americans has been mortgaged and put on the balance sheets of banks today. And there are millions of people out of work today.

This doesn't strike me as a good plan, friends.

[Toddsterpatriot]

Thanks.

This month, these excess deposits have soared to $771.2 billion.

Where else are they going to put the money? T-Bills? GM bonds? They're still afraid of more mark-to-market losses. And now they earn interest on those reserves, in the past they earned zero.