[cobran20]

Interesting graphs.

Mish's Blog

[wulfgar]

Who knows, if reincarnation is true then Mish might get a brain in his next life.

The reserves are simply IOU's from the FED, they cannot be cashed unless the toxic assets can be sold in the market place.

How did the banks get the reserves at the FED? Quite simple the banks traded their mark to fantasy toxic assets with the FED. But this is done on a repo basis, which means the banks eventually have to take back the toxic assets.

FED liabilities 1.2 trillion "deposit" of member banks. Asset held against the liability.........1.2 toxic assets.

How can the banks cash out the reserves unless there is a real market for the toxic assets and somebody is willing to pay real money for the toxic waste?

All that is occurring is interbank loans are being guaranteed by the FED. So if a bank has spare cash it won't be reluctant to lend the cash on the O/N market. If the bank owing cash crashes then the FED will refund the losses to the lending bank.

This is an attempt to improve liquidity, it doesn't itself increase the quantity of the cash on the market. It is instead an attempt to keep the cash that is in the market moving. Really it is just kicking the can down the road.

Yes, startling proof that Mish has no brain.