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Reverse repo is when the Fed loans treasuries to banks, typically at very low rate and no more than one day. This avoids the need for the Fed to sell its short

Reverse repo is when the Fed loans treasuries to banks, typically at very low rate and no more than one day. This avoids the need for the Fed to sell its short term treasuries on the open market. coming from a programmers mindset, my immediate reaction was "this seems like a hack, whats the root cause of the issue, we should fix that instead"... i wonder what us the root cause? or in economics, i guess its never so straightforwards...?

f38zf5vdt 5y ago
Whenever I delve into this stuff in depth it feels like people are explaining the world's most complicated PID controller for dealing with the human economy, which is itself a product of human psychology. Since no one understands the latter, it seems like economics is just the constant over-fitting of mathematics to the incomprehensible.
- lvs 5y ago
  It is definitely a process with an incredibly long lag. What's amazing is that some of these control loops have only been operational since 2008 and/or 2013.
MR4D 5y ago
I work in finance. It IS a hack, and a bad one, too. I expect this will end badly as they keep kicking the can down the road. A recession - a real one - would help us rest this problem, but the Fed is afraid of hosing all the 401k retirement money in the process.
imtringued 5y ago
>"this seems like a hack, whats the root cause of the issue, we should fix that instead"... There is nothing to fix. You have an aging population that pays back loans and never takes any new ones on. This contracts the money supply. Business profitability shrinks as less people spend their money and more save it instead. Given a limited number of dollars saving cannot continue forever. At some point you have saved every dollar there is. The only way you can save even more money is by creating new dollars. It's an entirely human made problem. If you stop saving beyond the point where it makes sense the problem goes away. Telling people to stop saving doesn't work because their decision to save is just the result of being at the end of their life. The other solution is to make the dollars real. E.g. by investing the money and letting the dollars in your bank account represent a physical resource somewhere on the planet. This approach suffers from a problem: Companies are saving as well. The interest rates on credit are too high to justify investments. You can just sit on cash for a risk free loss vs the uncertainty of investing into a market that is shrinking in profitability as people stop spending money. So the only answer left is to let the government take on the debt so the retiring people and companies don't have to. If the government decides to be "financially (ir)responsible" it can just kick the problem back to the private sector by running a balanced budget or even a surplus. Without negative interest rates the problem will not resolve itself and zero sum games start dominating until the only acceptable solution is a war. At that point we get to decide whether we want to kill people in our country or go to another country and kill people there.
- thu2111 5y ago
  That seems backwards: people at the end of their life aren't saving, they're spending the money they saved via pensions earlier in their life.
  - imtringued 5y ago
    >people at the end of their life aren't saving, >they're spending the money they saved via pensions earlier in their life. I'm confused. You are contradicting yourself. Saving isn't just the accumulation of money. Saving is the act of keeping money in your bank account. Unless you spend the entirety of your pension, the money you haven't spent is saved until you die.
    - thu2111 5y ago
      By that definition anyone with a bank balance above zero is saving money, but that's not the normal definition of the term. Saving money does normally mean the accumulation of money.

f38zf5vdt 5y ago

Whenever I delve into this stuff in depth it feels like people are explaining the world's most complicated PID controller for dealing with the human economy, which is itself a product of human psychology. Since no one understands the latter, it seems like economics is just the constant over-fitting of mathematics to the incomprehensible.

lvs 5y ago
It is definitely a process with an incredibly long lag. What's amazing is that some of these control loops have only been operational since 2008 and/or 2013.

MR4D 5y ago

I work in finance. It IS a hack, and a bad one, too. I expect this will end badly as they keep kicking the can down the road. A recession - a real one - would help us rest this problem, but the Fed is afraid of hosing all the 401k retirement money in the process.

imtringued 5y ago

>"this seems like a hack, whats the root cause of the issue, we should fix that instead"... There is nothing to fix. You have an aging population that pays back loans and never takes any new ones on. This contracts the money supply. Business profitability shrinks as less people spend their money and more save it instead. Given a limited number of dollars saving cannot continue forever. At some point you have saved every dollar there is. The only way you can save even more money is by creating new dollars. It's an entirely human made problem. If you stop saving beyond the point where it makes sense the problem goes away. Telling people to stop saving doesn't work because their decision to save is just the result of being at the end of their life. The other solution is to make the dollars real. E.g. by investing the money and letting the dollars in your bank account represent a physical resource somewhere on the planet. This approach suffers from a problem: Companies are saving as well. The interest rates on credit are too high to justify investments. You can just sit on cash for a risk free loss vs the uncertainty of investing into a market that is shrinking in profitability as people stop spending money. So the only answer left is to let the government take on the debt so the retiring people and companies don't have to. If the government decides to be "financially (ir)responsible" it can just kick the problem back to the private sector by running a balanced budget or even a surplus. Without negative interest rates the problem will not resolve itself and zero sum games start dominating until the only acceptable solution is a war. At that point we get to decide whether we want to kill people in our country or go to another country and kill people there.

thu2111 5y ago
That seems backwards: people at the end of their life aren't saving, they're spending the money they saved via pensions earlier in their life.
- imtringued 5y ago
  >people at the end of their life aren't saving, >they're spending the money they saved via pensions earlier in their life. I'm confused. You are contradicting yourself. Saving isn't just the accumulation of money. Saving is the act of keeping money in your bank account. Unless you spend the entirety of your pension, the money you haven't spent is saved until you die.
  - thu2111 5y ago
    By that definition anyone with a bank balance above zero is saving money, but that's not the normal definition of the term. Saving money does normally mean the accumulation of money.