[haidut]

>Personally I think the Fed is keeping interest rates down to defuse a massive geopolitical conflict that is closer to blowing than anyone realizes, but that doesn't explain why banks are worried about getting stiffed by each other.

And what might that massive geopolitical conflict be?

[omegaworks]

Hong Kong

[haidut]

Thanks. There could be others. The bombing of Saudi Arabian oil fields and a war with Iran comes to mind. Let's see what the OP had in mind. Maybe it is something else entirely.

[motohagiography]

It's orthogonal and I'd rather not clutter or derail one of the most interesting threads I've seen on HN, wrt these details of repo operations.

I'm still of the mind that liquidity in effect means, "no buyers or participants," because banks have doubt about the stability of their counterparties - with the possibility that liquidity just isn't available at a suppressed interest rate. Even though the Fed rate and the overnight rate are different beasts, I'm asking by assertion whether the Fed rate is affecting the overnight rate, which is causing the liquidity problem because of the underlying idea banks are worried about what's on their counterparties balance sheets and they aren't compensated for it in the overnight rate.

I shouldn't have included the startup joke, as I think that clouded it.

I'm suggesting the liquidity problem is an unexpected knock on effect of the fed rate suppression due to the geo issue that forced their hand on low rates. The geo issue I was thinking of has been deferred for the moment, but for this discussion, the real question is whether there is a domestic issue where the banks are worried about each others stability.

If competent people are sure it's just Q3 taxes and an artifact of the business cycle, this thread is still really valuable.

To say it's a play by Mnuchin to kick start another round of QE would be consistent with the geo issue, but we're well into wagging the dog conspiracy stuff at that point.