Thursday, August 21, 2014

The puzzle of low rates, solved

The issue in a previous post was why the one year rate is too low to match the two year rate, yet the deposit rate on excess reserves matches quite well. The answer is a currency swap.

The only legal way the Fed can pay the New York debt cartel is thru the deposit on reserves.  So the debt cartel  have simply started using Treasury bills as cash in their trading accounts, and real cash is kept on reserve earning the higher, subsidized rate. So the real one year rate is .25, earned only by the Fed member banks on deposits, and the one year Treasury is traded like interest bearing cash.

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