Why not find out then?

The blunt fact is that the US market has run out of overnight security available within what is called the repo markets (see those explainers for details).

The official line is that US corporations owed tax this week, and $78bn of cash for a bond sale had to be settled at the same time.

Let me be clear, I have no better clue on this issue than anyone else: no one seems sure whether these excuses are good or not. But I am goi9ng to take a punt and say I suspect not: this has not happened in the last decade and tax settlement and bond sales have happened before, and I can be fairly sure coincidentally.

Perhaps the duty of an academic is to try and find out?

The WSJ article also contains other sobering information. Specifically, post-crisis regulatory “reforms” have made the funding markets more rigid/less-flexible and supple. This would tend to exacerbate non-linearities in the market.

We’re from the government and we’re here to help you! The law of unintended (but predictable) consequences strikes again.

Hopefully things will normalize quickly. But the events of the last two days should be a serious wake-up call. The funding markets going non-linear is the biggest systemic risk. By far. And to the extent that regulatory changes–such as mandated clearing–have increased the potential for demand surges in those markets, and have reduced the ability of those markets to respond to those surges, in their attempt to reduce systemic risks, they have increased them.

The cause being the fuck ups by the know nothings attempting to regulate markets last time around.

2 comments on “Why not find out then?

  1. Perhaps the duty of an academic is to try and find out?

    Not when it has the potential of contradicting the narrative.

    Besides, do you really think Richard Murphy possesses the intelligence or the skill set to actually find out? I don’t.

  2. I can’t say i really understand the repo markets but no doubt the potato sees this as a sign of impending recession.The obvious answer is more regulation and moar tax per the potato i presume (i refuse to swim in the sewer of his blog) as every fule knoes this solves all problems

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