QUOTE(ChicagoBear @ Mar 24 2008, 11:37 PM)
Hi Doc,
I’m reading the Fed report and have a few questions to throw down:
(all opinions welcome)
Really, just how bad are the Treasury’s finances? Is it spiraling out-of-control? What will happen when interest rates go up? Where do you see this going? When do we start getting worried?
Is that $781b in the ABCP market toast? Is this literally a huge ticking time bomb, or is it possible that this market becomes liquid again?
Is it correct that the Fed Liquid Asset chart does not contain the $28.8b PDCF? Would it be useful to make 2 charts – add a weekly chart showing the PDCF? It might add perspective?
I'll catch up in the morning.
Buenos Nachos!
The Treasury can continue the game until market confidence is broken, which could be at any time. I don't know what would happen at that point. In many ways we are just like Argentina, but in other obvious ways we are not. As Russ calls it, we run the Godfather Protection racket. So maybe the endgame is bailouts by our FCB creditors. In that case there will be a lot of pain, but I suppose the US will still be around in 50 years, only a lot poorer and with a lot less power.
As for the ABCP market, I don't know the answer. I know that a whole hell of a lot of it is toast. At times I have guessed one third. Just a pure wild guess. Maybe it's more. No one understands that market.
The chart includes the PDCF. See Thursday's 2 reports. One before the PDCF, and the other after. The shocking amount of the PDCF outstanding forced me to change the way I present the reports. I have asked the Fed to start reporting the PDCF information daily as they do the OMO. Kind of a joke I guess, that I even bothered, but I did speak to someone and write to that person asking that the request, and the reason for it be passed along.
QUOTE
The Fed's daily publication of open market operations has been rendered less than useful by the lagged reporting of the PDCF. It is no longer possible to know the full impact of the Fed's daily interactions with the Primary Dealers virtually in real time as it had been prior to this point. This seems to run counter to Chairman Bernanke's initiatives to make the Fed's actions more transparent, and to communicate its policies and actions more effectively to the marketplace.
Why isn't the Fed publishing the results of the PDCF nightly auctions in a similar format to the OMO so that other market participants can see the full impact of all the operations conducted between the Fed and PDs as it has done in the past when OMO were the sole means of injecting or withdrawing reserves daily? Is such reporting under consideration?
...my real hope here is that this question find its way to the decision makers so that the books could be opened on this data on a daily basis as they are with OMO.