Wednesday, June 04, 2008

Fed, can you spare a dime?

$50 billion here, $100 billion there, pretty soon you're talking about real money.

Yikes. That can't be good.

H/T Ezra Klein at The American Prospect who labels it "Chart of the Day: Holy Shit Edition" (and gives h/t to Nick Beaudrot).


Scooter said...

All the arguments in the thread following the Ezra post are the typical comments. Somebody made a great point though about how it was the deflation that killed us in the 30s.

What I'm not getting about the chart is that banks (I assume that is what is meant by Depository Institutions) borrowed virtually nothing from the Fed since 1913 and then, what is that about 2006-7, it spiked to $140B? I'm not buying it.

Isn't the whole point of the Fed lowering or raising interest rates to increase or lower the money supply as banks borrow from the Fed and from each other and thereby assist in easing inflation or making more capital available or whatever the issue du jour is?

Why would the borrowing be right at zero with occasional tiny hiccoughs for all those years?

Wouldn't we have seen a dip in the late 70s when those interest rates were so high.

Stephanie said...

Don't know answers to any of your questions, Scooter. I don't even have theories. Was hoping you'd know all about it. In my ignorance, I'm afraid it does show that we're in completely uncharted waters w/r/t bank solvency.

Stephanie said...

This looks to me like the data the chart is made from:

Scooter said...

While I like to pretend I have a grasp on basic economics, monetary policy is something else altogether.

I have received some basic materials from an Econ. prof. at UT (he's a leftie but I respect him and he told me he's provided arguments from both sides) but I haven't yet delved.