Posted on 07/01/2009 2:55:37 PM PDT by FromLori
"Someone" paid 7% for overnight money on the Fed Trading system last night (that "someone" was a bank, by the way.)
This will be claimed to be "ordinary" end of quarter distortions for closing the books.
Don't believe it for a second.
Let's put this in plain language: The discount window is open for any bank that has good collateral at less than 1/10th of that interest rate.
Therefore there is absolutely no reason for any institution to go into the Fed Funds market for overnight money at 7% unless they have no good collateral to post against it and thus cannot go to the window.
So who is it? No idea. And while the amount borrowed overnight at that rate may be tiny, that's not the point - the point is that the last time we saw anything that dramatic was just before it all went "boom" last year.
Yes, I'm sure that end-of-quarter had something to do with it. In fact, I'd be stunned if it did not.
However, as I noted, there's no reason for anyone to pay that if they have good collateral to post at the discount window, given that you can do so for 1/10th or less the price.
Keep your nose to the ground and your eyes open.
Someone (or more than one someone) is in trouble.
I was reading over there on the tickerforum that every time something like this happened recently, shit has hit the fan. If I had lost a bunch of money in the markets early this year, I think I would cut my loses now, and head for the exists before it happens again.
I already did that a while back I do not trust it at all. See the aig article? hmmmm
So get yourself a good CTA with a total return strategy and watch thme make a killing shorting S&P index futures
This is the beginning of at least one of them.
The Case for Economic Depression, Credit Destruction
http://www.marketoracle.co.uk/Article11720.html
I don't know who might be right, but I wouldn't be surprised to see some end of the quarter manipulation to boost asset values for a quarterly report.
ping
Lots of market manipulation going on so that is a distinct possibility.
Good riddance. Humanity thrives and grows on productivity, risk, and innovation, not debt and a faux government-mandated status quo.
Adios fiat currency. Adios fiat lifestyles.
Ahoy 2nd Renaissance.
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