On a daily basis, trillions of dollars flow between financial market participants in securities, derivatives, and foreign exchange contracts.| Monetary Mechanics
Part 9: "Securitization" – Repo as a Driver of Securitization| Monetary Mechanics
Part 8: "Liability Management" – Repo as a Liability Management Tool| Monetary Mechanics
In this issue of Monetary Mechanics, I am going to do something a little different.| Monetary Mechanics
In the previous issue of Monetary Mechanics, I offered a high-level overview of the various scenarios that could occur as the Federal Reserve begins to unwind its balance sheet. In addition, I also demonstrated how different scenarios would have different effects on the primary liabilities of the Federal Reserve (reserve balances, the overnight reverse repo facility, and the Treasury General Account).| Monetary Mechanics
Since the Federal Reserve is on the brink of beginning its quantitative tightening (QT) program, beginning June 1, I thought that I should dedicate an issue of Monetary Mechanics to the mechanics of quantitative tightening, just like I did for the mechanics of quantitative easing before back in| Monetary Mechanics
In Issue #36 of Monetary Mechanics, I introduced the idea that blockchain-based finance (i.e. decentralized finance a.k.a. DeFi) is a fundamental improvement in the accounting of economic transactions that facilitates the expression of a whole series of novel financial functions. This expansion in financial functions will undoubtedly be commensurate with the historic explosions in the volume and variety of economic activity that are associated with the Renaissance, the Industrial Revolution, ...| Monetary Mechanics
In the previous issue of Monetary Mechanics, I provided an overview of the economic sanctions that have been placed upon Russia by the West, focusing primarily on the ramifications of the exclusion of select Russian financial institutions from the rest of the global cross-border payments infrastructure, through the ejection of these Russian financial institutions from SWIFT and the dollar-denominated correspondent banking network.| Monetary Mechanics
On February 22, 2022, the United States imposed its first tranche of economic sanctions against Russia, after Vladimir Putin recognized two regions of Ukraine as independent states and launched a “special military operation” that has turned into a full-scale invasion of Ukraine.| Monetary Mechanics
While I am admittedly far from an expert on supply chains and commodities markets, I believe that, given the recent escalation of the Russia-Ukraine conflict, it would be interesting and timely for me to share some of the research that I have done, as well as my opinions, on this topic.| Monetary Mechanics
In J.P. Morgan’s Q4 2021 earnings call, there was mention of something that surprised me greatly – the implementation of Basel IV. In Issue #26 of Monetary Mechanics, I covered some (but not all) of the most important features of the most recent suite of financial legislations and regulations governing large dealer bank balance sheet construction and behavior in the post-GFC period. Here is a brief review below for the people who have not yet read that.| Monetary Mechanics
Part 7: "Liability Management" – Commercial Paper (CP)| Monetary Mechanics
Part 6: "Liability Management" – Bank Holding Companies (BHCs)| Monetary Mechanics
And Does it Drive Inflation in the Real Economy?| Monetary Mechanics
In this issue of Monetary Mechanics, I am going to talk about the effect of the explosion in sponsored repo on the broader short-term interest rate complex, as well as how it fits into the broader development of money markets in the post-GFC financial system.| Monetary Mechanics
With the start of the new year, the transition from the London Interbank Offered Rate (LIBOR) to the Secured Overnight Financing Rate (SOFR) is now officially underway, and I believe it would be timely to talk about some of the nuances involved in the process of transitioning away from LIBOR and towards SOFR as the new standard reference rate for a multitude of different financial contracts and securities.| maroonmacro.substack.com
Milton Friedman’s interest rate fallacy is one of the most mystifying and counterintuitive facts in modern finance.| maroonmacro.substack.com
