Don’t fear the repo
Grant’s Current Yield Podcast
Grant's Financial Publishing, INc.
4.6 • 693 Ratings
🗓️ 3 October 2019
⏱️ 25 minutes
🧾️ Download transcript
Summary
George Selgin, director of the #Cato Institute's center for monetary and financial alternatives, calls in to discuss remarkable recent events in the banking system and the potential implications.
@GeorgeSelgin
1:21 A money market which fails to clear
5:45 Interest on excess reserves: Unintended consequences
11:24 Too much collateral = too much debt?
15:50 More QE on the way
20:10 Fixes to fixes to fixes
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Transcript
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| 0:00.0 | Ladies and gentlemen, this is current yield, Grant's interest rate observer of the air. |
| 0:09.0 | I am Jim Grant and with me as always Eric Whitehead at the control panel, the great Evan Lorenz, |
| 0:14.5 | deputy editor of Grants, Phil Grant, who manages and indeed operates our almost daily grants, daily bulletin. And with us today is |
| 0:24.9 | George Selwyn, who is a very young chap to be an emeritus professor of anything, but he is, |
| 0:30.7 | in fact, that in addition to being a senior fellow and director of the center of monetary |
| 0:37.1 | and financial alternatives at the Cato Institute in |
| 0:40.0 | Washington. He's also a zoologist, writes a motorcycle and all sorts of study. Author, many books, |
| 0:46.2 | not least a current one called Floored. And the subtitle is as provocative and as thoughtful as |
| 0:52.8 | the author. And here's the subtitle, |
| 0:54.3 | how a misguided Fed experiment deepened and prolonged the Great Recession that came out last year. |
| 0:59.5 | But it is timely as tomorrow. So George, welcome. Welcome to this podcast. |
| 1:03.7 | Thanks for having me, Jim. I'm really excited to be speaking with you. |
| 1:07.1 | Yeah, well, that's great. Well, George, as you know, I know you're a most worldly academic. You are a scholar, but also quite alert to affairs on Wall Street. And as you well know, a couple of Tuesdays ago, the most improbable thing happened. The market would not seem to clear in something called repurchase, a repo, recondite corner of the money |
| 1:29.1 | markets, which suddenly basked in the glow of publicity. So 10% was the rate quoted to lend against |
| 1:37.1 | the seemingly armor-plated collateral of the solemn obligations of the United States. Treasury, |
| 1:42.5 | called Treasury notes, secure bonds, bills, what have you. |
| 1:45.6 | And, you know, every other rate in the money market is like 2%, less, more. |
| 1:49.6 | This sore thumb of a repo rate pops up, and the Fed did know what to do. |
| 1:54.5 | George, what is going on? |
| 1:56.0 | Well, first of all, I'm going to toot my horn by pointing out that I anticipated these problems, though |
| 2:02.7 | not their severity, as long ago as mid-2018. |
| 2:08.5 | And what I said back then was that an occasion will come, given the Fed's plans at the time, |
... |
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