This is a special edition of Macrovoises with hedge fund manager Eric Townsend.

The premier financial podcast targeting professional finance, high net worth individuals, family

offices, and other sophisticated investors.

Now for this special edition of Macrovoises, here's hedge fund manager Eric Townsend.

Macrovoises All Stars episode number 32 was recorded on July 15, 2019.

I'm Eric Townsend. All-Star Jeff Snyder is back with us today and it wouldn't be Jeff Snyder

without a slide deck. Listeners, you can find the slide deck download link on our homepage

at macrovoises.com in the description of this interview. Jeff, you've got a great slide deck

that has a whole bunch of information about the juxtaposition of Fed funds and IOER.

Why don't we start by defining these terms? What is the Fed funds rate that's been around

for a long time and then we'll come back in just a second to IOER?

Well, the Federal Funds rate, the effective Federal Funds rate, is the weighted average

of these transactions, actual transactions that take place in what's called the Federal

Funds market, which is a specific piece of a global money market system.

Now, the Federal Reserve traditionally had instituted its monetary policy by moving a target

within this Federal Funds market called the Federal Funds Target. That ended back in

December of 2008. What happens today is the Federal Reserve fires a range within which

it allowed the effective Federal Funds rate to move. It's a 25 basis point range where

they set an upper bound and a lower bound and within that the Federal Reserve says,

well, if as long as the Federal Funds effective rate stays within that range, we're okay

on monetary policy. Okay, Jeff. So the Fed funds rate is the rate which banks charge other

banks for short term, unsecured loans when banks are lending to each other. And the Federal

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