Yikes!!!! An alarming Chart from the Federal Reserve- I need some explanations

[Ichingcarpenter]

From the Federal Reserve Bank of St. Louis!!!!!!!!!

http://research.stlouisfed.org/fred2/series/BOGNONBR


OK, if this doesn't look troubling then someone explain this

[ensho]

1. last gray area doesn't make sense

nt

[Ichingcarpenter]

7. I'm not seeing much solvency holding up reserves

Their chart can't be accurate.

[catnhatnh]

8. Has to be a reaction to 9/11 N/T

[jpljr77]

18. Nah, actually it was the dot-com bubble bursting

The U.S had negative growth in three non-consecutive quarters in 2000 and 2001 (Q3 2000, Q1 2001 and Q3 2001). Sept 11th attacks were in the later part of the Q3 2001 quarter, and may have impacted growth for that quarter, but the damage was already done by the bubble bursting.

[catnhatnh]

19. I bow to your knowledge....

...I just looked at the chart and made a WAG (wild assed guess). As a non-investor, I'd forgotten the timing. Thanks....

[jpljr77]

20. Hey, no problem

And you're actually partially right, kind of. The stock market was what took the big hit after 9/11. And since there is no such thing (apparently) as an economics-educated reporter, they tend to run stories about "recession" when the market's down rather than when there are two consecutive quarters of negative GDP growth -- the definition of recession.

So please note that when you're reading the news this week/month/year...you can't even talk about recession until after the numbers for Q2 2008 come out, unless they downwardly revise Q4 2007's number (0.6% in the black), which they might.

[catnhatnh]

21. I was in fact a reporter (small time) in a previous incarnation.....

...we tend to be english and humanities majors and explaining math, science, or economics to us is pretty much like explaining the aesthetics of xylophone music to chimpazees or the importance of the Consitution to the current regime....

[alfredo]

22. There was a short downturn because of the tech bubble that bush made

worse by not stepping in to help when Enron and other vultures were battering California.

forgot to add: when there were recessions during Dem presidencies they appeared less severe and shorter. Republicans like them because it gives capitalist more power over workers.

[Old and In the Way]

2. Looks like all of the liquid reserves have been sucked up to deal with the current

investment banking crisis. Either that, or the US economy just flat-lined.

[Ichingcarpenter]

32. I wonder how much they have left to play with this puppy?

I know this is help for Wall Street but no help for Home street.

[Dhampir Kampf]

3. What do you not understand about it? nt

[nadinbrzezinski]

4. It is troubling, they have run out of room to maneuver

essentially

Read Disaster Capitalism? I bet they're chumping at the bit to disassemble the rest of the social net

This is by design

[bicentennial_baby]

5. I'm reading The Shock Doctrine right now...

:scared:

[htuttle]

6. I believe it means the banks are out of money...sort of

Or rather, every dollar that they want to lend out, they need to borrow from someone else first (such as the Fed...which functionally means the Chinese).

It used to be that they would have to keep a reserve of unborrowed funds, but no longer, apparently.

[ayeshahaqqiqa]

9. I predict a HUGE shaded area to be added

only it will be black, for depression.

[marions ghost]

10. seems an anomaly

to have a spike in the "recession' line after 2000. What's that about?

[Better Believe It]

11. More Info

Here some more information at the following link. Perhaps someone can explain it.

http://www.federalreserve.gov/releases/h3/Current/

[Ichingcarpenter]

14. Welcome to DU Better Believe It.......If you look at the data

From Feb. of 2007 it went from a positive $42,424 billion
to March 2008 to a negative -$17,176 billion

[marions ghost]

24. kind of a steep drop?

--a little more than ouch, maybe :argh: :popcorn: not smiling tho

[Ichingcarpenter]

12. No clue and what is with the blue line?

I know the Fed added in temporary reserves to the banking system since August

Link: http://search.us.reuters.com/rsearch/rcomSearch.do?blob=Fed+added++in+temporary+reserves+to+the+banking+system+&site=US&srch_Tab=&srch_Results=&srch_MoreResults=

[PDJane]

13. It means that it's time.

Start with throwing the current bums out, then:

1. Nationalize the Federal Reserve and the banks.

2. Re-institute strict controls on the money supply and the practice of banks in general.

3. Remove the legal fiction of corporate personhood.

4. Insist on having corporations pay for what they take and pay for cleaning up the commons.

[dtotire]

30. Federal Reserve

While the Federal Reserve Bank is operated independently, it is subject to regulation. The chairman is appointed by the President. Its profits are limited to 6% and anything above that is returned to the Treasury. I don't think it would be a good idea if it were run by politicians. It doesn't print money. The Treasury prints the bills, and sells them to the Fed for the cost of printing them.

[PDJane]

33. I am aware of this,

but it is still a mostly private institution. The trouble with that is that every once in a while someone gets a bright idea for a new scheme and the taxpayer ends up footing the bill to keep the whole system from sliding into oblivion when the system goes overboard.

Since this is the case, making the central bank accountable to the taxpayer would seem to be a better idea.

As it stands, there will be nationalization of some banks in the UK, notably in Ireland, in order to prevent the same kind of problems and Bear Stearns has been experiencing.

[bicentennial_baby]

15. I found this blog about it:

http://www.nakedcapitalism.com/2008/02/ubs-raises-concern-about-negative-non.html

And this too:

http://blogs.wsj.com/economics/2008/02/08/non-borrowed-reserves-false-alarm/

[Ichingcarpenter]

16. Thanks interesting read:

"What if the Fed's rate cuts aren't motivated by the desire to stave off
recession, rather they're to prevent a major banking crisis. Not one of
escalating subprime losses or monoline downgrades, but actually a sheer lack of cash. The Fed's not telling anyone what it's up to because it doesn't want to cause panic, but the evidence is actually there in its own data..." that from the first link

I really thought the Wall Street Journal explanation was dubious since it came from JP Morgan Inc.
but I found one the comments interesting.



Thomas Jefferson once wrote:
“If the people of the United States ever allow the banks to issue their currency, first by inflation, and then by deflation, the banks and the corporations that grow up around them will deprive the people of all property, until the children wake up homeless on the continent their fathers conquered. The issuing power should be taken from the banks, and returned to the people, to whom it properly belongs.”

[truedelphi]

26. thanks for posting the T Jefferson quote

I have been looking for it.

Yet people constantly praise having the Federal Reserve - without it, says they - we would have continual banking panics.

Hmm, The Fed was chartered in 1913 and some sixteen years later we had the Great Depression.

Then after the post WWII recovery, we were okay for a long while - until the vietnam war and oil prices created the recession of 1979 to 1982, then the stock market crash occurred in 1987, followed by (at least in CA) a recession from 1989 to 1992 ("It's the economy, stupid") and then another CA recession in 1995-97, when FINALLY housing took off along with the dot com bubble.

Now we are in catastrophic mode. Gosh, this ride with th4e Fed has been so appealing.

Not.

Congress is supposed to see to the managing of the economy - and to the prining of the money - not Greenspan and Bernanke

[Hissyspit]

27. Comment from the WSJ blog: "Where is George Orwell..."

Where is George Orwell when we need him for this blog “Non-Borrowed Reserves: False Alarm”.

How about this Orwellian beauty: “The drop is purely technical, a function of how the Fed has chosen to classify the money lent through its new Term Auction Facility.” Isn’t that a sweet way to deal with a drop from $42 billion to negative $2 billion.
Purely technical, my good man. Why it’s just a matter of how you classify things…how you view things. If you stand on your head and look at the world, up is down, and down is up.

The key quote: “But like the discount window, the money was lent directly to banks rather than primary dealers, and against a wide range of collateral rather than just Treasurys and agency securities.”

Yes, my good man, a wide range of collateral rather than just stodgy old low-yielding Treasurys and agency securities. The Fed can make great returns by taking these high-yielding, mortgage-backed CDOs as collateral.

So, the Fed is lowering lending standards…precisely the behavior that created the subprime fiasco. The Fed is supposed to set the standard for good behavior, for a sound and sober central bank. But don’t be alarmed. It’s just a technicality…just a matter of how you classify things.

Comment by tom a taxpayer - February 9, 2008 at 12:27 am

[MilesColtrane]

17. The steep drop starts last December.

That's when the Fed opened the Term Auction Facility. It's purpose is to increase the available amount of credit to banks.

Most bank's cash reserves are about the same as before, but now those reserves are mostly cash borrowed from the Federal Reserve.

As collateral the fed began accepting those mortgage-backed CDOs from banks, the same instruments that got them into liquidity trouble.

Rather than let some banks fail and reimburse the depositors, Bernanke has chosen to prop them up at the risk of the integrity of the dollar.

[marions ghost]

25. thanks for that explanation

some of us need some catching up on the specifics...

[Hissyspit]

28. I remember the opening up of the TAF, but isn't it a bad sign that he had to do this to prop them up

Wall Street Journal wants you to believe it is business as usual.

[MilesColtrane]

29. It's not bad if it works to keep them open, and if it doesn't send the dollar into an inflationary..

...spiral.

But, the Magic 8 Ball™ says, "Unlikely".

There's another 30 billion, or so, in subprime adjustable rate mortgages that reset their rates in May. That probably means another wave of foreclosures as families struggle to keep up with food and gas prices.

Bernanke's tinkering to keep the housing bubble afloat has screwn us into a harsh situation, and he's shown that he's unwilling to take the steps so we can begin to climb out it.

[LeftHander]

34. More discussion needed K&R....

I am worried that his is a sign of TAF propping up the banks as opposed to simply "opportunism".

The FED's made the banks an offer they could not pass up?

Or are they desperately trying to save their ass.

[dysfunctional press]

31. very shrewd thinking...

this way, when the banks DO fail, the government can reimburse depositors with worthless paper.

[Trailrider1951]

23. It's easy:

Mucho dinero went pfffffft! in the latest bank greedfest.