Money shortage in US dollars: an unprecedented difference in personnel changes

category:Finance
 Money shortage in US dollars: an unprecedented difference in personnel changes


In addition, it is closely related to the changes in the Feds debt and its interest rate instruments.

Firstly, after the outbreak of the financial crisis in 2008, in order to eliminate the negative impact of the deposit reserve of the Federal Reserve on its interest margin, since October 2008, the Federal Reserve began to pay interest on the deposit reserve of banks (before the crisis, the Federal Reserve did not pay interest), the interest rate is the excess reserve interest rate (IOER), corresponding. Even if banks deposit their funds in the Federal Reserve, they can also earn interest income. During the crisis, this operation will undoubtedly help banks to repair their balance sheets.

Secondly, since June 2018, there has been a significant change in both the Feds interest rate increase and its interest rate reduction operation this year. The Fed has gradually lowered the excess reserve rate (IOER) below the Federal Fund Rate (EFFR). After the interest rate cut in September, the target range of the Federal Fund Interest Rate has dropped to 1.7. 5-2%, while the excess reserve rate (IOER) dropped to 1.8%. Until June 2018, IOER had been consistent with the upper limit of the target range of the federal funds rate. By September 18, the excess reserve balance of banks had fallen from $2 trillion in early June 2018 to $1.4 trillion, peaking at $2.8 trillion in October 2014.

The Relation between Excess Deposit Reserve Balance and Interest Spread (EFFR and IOER)

Third, since December 2018, however, the spread between the effective federal funds rate and IOER in the United States has changed from negative to positive, reflecting the tremendous changes in dollar positions of financial institutions such as banks. The continuing state of extreme adequacy during the anti-crisis period has ended, and when this change occurs, banksexcess deposit reserve balances open. It started at less than $1.8 trillion. On September 17, the spreads suddenly soared to 25 basis points, the liquidity of the dollar money market appeared money shortage, and the effective federal funds rate (2.30%) seriously deviated from the central target range of the Federal Gold Rate (2.125%).

Obviously, the Feds judgment on market liquidity should be so deviated that it rushed to restart positive repurchase on September 17, and temporarily injected nearly $100 billion of liquidity into the market by combining overnight and 14-day positive repurchase instruments before October 10, but with an excess reserve of $18 trillion. The balance is the standard, and the provisional arrangement of $100 billion may not be enough to completely eliminate the shortage of dollars. Since the New York Federal Reserve is responsible for monitoring and operating market liquidity, the underlying cause of the Feds possible failures should be the New York Reserve.

In May of this year, there was a major personnel change within the New York Federal Reserve, but at that time almost all markets were attracted by international trade frictions, which might be ignored. At the end of May 2019, Simon Potter, head of the New York Federal Reserve Market Trading Group, abruptly announced his resignation, along with Richard Dzina, head of the New York Federal Reserve Financial Services Group, which means the No. 1 plunge protection group to safeguard the stability of the U.S. financial market. The second most important person left the Federal Reserve at the same time. There were rumors in the market that Simon Porter was fired by John C. Williams, the current chairman of the New York Reserve.

Simon Porter and Chad Ginna were both important ministers of William Dudley, the former chairman of the New York Reserve. In their resignation announcements, they disclosed some information about them:

Simon Porter joined the New York Federal Reserve in June 1998. He served as Director of the New York Federal Reserves Economic Research Department and Co-Director of the Research and Statistics Group. He became head of the Market Trading Group in June 2012. Porter played an important role in the Federal Reserves financial stability work, including contributing to the design of the Bank of America stress test in 2009.

Chad Gina joined the Federal Reserve of New York in June 1991 as a bank examiner. In July 2015, he became Vice President of Executive Services and Head of Financial Services, responsible for managing Fedwire, the key network of the United States Payment System Center.

It can be seen that Porter and Gina are responsible for the market transactions and market monitoring of the New York Stock Exchange, which is equivalent to the most important manipulator between the Federal Reserve and Wall Street. And since Porter was in charge of trading in the NYSE market, the VIX index, which represents market volatility, has remained at a historic low (an important sign of market stability). And immediately after the two resigned, the Federal Reserve began to drive banks out of excess reserves.

As for John Williams, the current chairman of the New York Reserve and former chairman of the Federal Reserve of San Francisco, he has been questioned by the market, especially his claim that he does not care much about short-term fluctuations in the market. His latest public statement that the Federal Reserve may cut interest rates by 50 basis points in September has exacerbated market fluctuations, and since then the Federal Reserve has not. The rumor had to be publicly refuted. John Williams, who took over the chairmanship of the New York Reserve in June 2018, should be a Federal Reserve official deeply trusted and valued by Powell, who was nominated by Trump and the first Federal Reserve chairman in 30 years who did not receive a doctorate in economics, but came from Trump since Powell took charge of the Federal Reserve. The pressure on artists is growing so that the market is increasingly questioning the independence of the Federal Reserve. Therefore, in view of the dollar shortage, besides looking for objective reasons, peoples subjective reasons can not be ignored. From Trump of the White House, Powell of the Federal Reserve, and Williams of the New York Reserve, we can still smell an unprecedented difference behind a series of names. Source: Wang Xiaowu_NF, Responsible Editor of Peng Mei News

As for John Williams, the current chairman of the New York Reserve and former chairman of the Federal Reserve of San Francisco, he has been questioned by the market, especially his claim that he does not care much about short-term fluctuations in the market. His latest public statement that the Federal Reserve may cut interest rates by 50 basis points in September has exacerbated market fluctuations, and since then the Federal Reserve has not. The rumor had to be publicly refuted. John Williams, who took over the chairmanship of the New York Reserve in June 2018, should be a Federal Reserve official deeply trusted and valued by Powell, who was nominated by Trump and the first Federal Reserve chairman in 30 years who did not receive a doctorate in economics, but came from Trump since Powell took charge of the Federal Reserve. The pressure on artists is growing so that the market is increasingly questioning the independence of the Federal Reserve.

Therefore, in view of the dollar shortage, besides looking for objective reasons, peoples subjective reasons can not be ignored. From Trump of the White House, Powell of the Federal Reserve, and Williams of the New York Reserve, we can still smell an unprecedented difference behind a series of names.