Scariest graph I've ever seen-- What does it mean?

[spacehabitats]

This is the graph of *
"Non-Borrowed Reserves of Depository Institutions"

Notice that for the last fifty years the cash reserves of Federal reserve banks have barely twitched. Through all of these "recessions", no problem.
Now it has dropped like a stone. Is this what a "run on the bank" looks like?
What gives?

* Source is St Louis Fed Economic Research.

 

[Truth Warrior]

If you don't even know what it means, why is is it the scariest graph you have ever seen?

 

[spacehabitats]

Fear of the unkonwn.

If you don't even know what it means, why is is it the scariest graph you have ever seen?

Fear of the unknown.:o

It seems obvious that somebody knows something very important that I don't understand.

And that is scary.

All of the talk about how we shouldn't panic is especially scary when I see completely unprecedented movements like this.

I think that what is going on here is that the fractional reserve (the amount of money the Fed banks are supposed retain as cash reserves) has all of a sudden disappeared.

Do YOU know what this means?

 

[Truth Warrior]

Fear of the inknown.:o

It seems obvious that somebody knows something very important that I don't understand.

And that is scary.

All of the talk about how we shouldn't panic is especially scary when I see completely unprecedented movements like this.

I think that what is going on here is that the fractional reserve (the amount of money the Fed banks are supposed retain as cash reserves) has all of a sudden disappeared.

Do YOU know what this means?

Not exactly. I don't tend to pay much attention to the Fed and the Keynesian idiocies. It's ALL bullshit.

BTW, thanks for the explanation.

 

[Bruno]

the old "reverse hockey stick" graph. doesn't look good

 

[HOLLYWOOD]

If you don't even know what it means, why is is it the scariest graph you have ever seen?

Isn't this how the politicians work on the American people, I meant Sheeple? Instituting fear or the unknown, to forward their OWN agendas.

What one should be asking... WHY, with all the INFLATION over the decades, there wasn't any increase in U.S. government Reserves?

Look's like ANOTHER entity, as a CAUSE to our current effects.

As usual, people cannot see through or into these problems. Then again, wasn't that the whole gist, not to have any transparency for US and other to discovery this major problem? Save those dormant/worthless FED reserve bucks and blow them on any over-inflated greed scheme.

You betcha!

 

[Truth Warrior]

Isn't this how the politicians work on the American people, a I meant Sheeple? Instituting fear or the unknown to forward their agendas.

What one should be asking, WHY, with all the INFLATION over the decades, there wasn't any increase in Reserves?

Look's like, ANOTHER entity, as a CAUSE to our current effects.

As usual, people cannot see through or into these problems. Then again, wasn't that the whole gist, not to have any transparency? Save those dormant reserve bucks and blow them on any over-inflated greed scheme.

You betcha!

Yep, pretty much.<IMHO>

S.O.S.

 

[voytechs]

If you don't even know what it means, why is is it the scariest graph you have ever seen?

I'm not sure what it means either, but my gut feeling is telling me to hide under the desk for some reason.

 

[spacehabitats]

Yes They use fear and panic...

Isn't this how the politicians work on the American people, a I meant Sheeple? Instituting fear or the unknown to forward their agendas.

What one should be asking, WHY, with all the INFLATION over the decades, there wasn't any increase in Reserves?

Look's like, ANOTHER entity, as a CAUSE to our current effects.

As usual, people cannot see through or into these problems. Then again, wasn't that the whole gist, not to have any transparency? Save those dormant reserve bucks and blow them on any over-inflated greed scheme.

You betcha!

You are absolutely correct that the Conspiracy uses fear and panic to push their agenda.

They are doing that now in Congress to railroad the bailouts,etc.

But I did not get this graph off of CNN.

Nobody in the MSM is talking about THIS graph.

All I am hearing on NPR is "Remain calm", ""Don't touch your 401K", "Everything will work out in the long run",

Meanwhile the "smart money" is apparently gettin' out of Dodge.

Where they are going I'm not sure.

 

[Truth Warrior]

I'm not sure what it means either, but my gut feeling is telling me to hide under the desk for some reason.

That's the reaction they want.

Problem --> Reaction --> Solution.

 

[StilesBC]

This isn't to say the banks have zero reserves. It just means that they are having to borrow them all from the Federal Reserve.

We already know that if banks were to all mark their assets to market, a large proportion of them would be insolvent (including nearly all of the large 'money center' banks). Even while hiding all of their garbage in level 3 SIVs where they can price things however they wish, they have no reserves. The still have to borrow them. So when you hear of banks 'writing down (or off) assets' they are using those borrowed reserves to offset the losses. They then have to borrow money from the Fed so they can pay their depositors when people go to an ATM on Friday for weekend spending money.

That act of borrowing money is what is behind the Fed's numerous lending programs announced in the last year (TAF among others). They pledge all sorts of troubled assets to the Fed (who believes they will eventually rise in value - fat chance) in exchange for something the bank can use as 'reserves'.

So the money most people have in their savings accounts is no longer there at the bank. It's already been lost. The Fed is keeping these banks on life support by lending them money in the short term - hoping the value of their garbage assets will rise - giving the bank profitability again. It won't happen. The banks are 'zombified'. Eventually they will go out of business and the Fed (and the taxpayer by extension) will get stuck with the losses.

I think if most Americans understood this, they'd be keeping their deposits under their mattresses. The real danger is that a number of banks go out of business at the same time, thereby preventing the FDIC from being able to cover all the losses. And then there is a run on the banks. And with 8 Trillion (I think) in deposits, and only 1.2 Trillion in physical dollar bills - well, you can see the problem that would create.

This rush for physical cash is why I think deflation is the bigger concern to the financial system in the near/intermediate term. For more info, read my blog.

 

[Feelgood]

You sure this isn't the graph for the current Congressional poll numbers?!

 

[spacehabitats]

Thanks.

This isn't to say the banks have zero reserves. It just means that they are having to borrow them all from the Federal Reserve.

We already know that if banks were to all mark their assets to market, a large proportion of them would be insolvent (including nearly all of the large 'money center' banks). Even while hiding all of their garbage in level 3 SIVs where they can price things however they wish, they have no reserves. The still have to borrow them. So when you hear of banks 'writing down (or off) assets' they are using those borrowed reserves to offset the losses. They then have to borrow money from the Fed so they can pay their depositors when people go to an ATM on Friday for weekend spending money.

That act of borrowing money is what is behind the Fed's numerous lending programs announced in the last year (TAF among others). They pledge all sorts of troubled assets to the Fed (who believes they will eventually rise in value - fat chance) in exchange for something the bank can use as 'reserves'.

So the money most people have in their savings accounts is no longer there at the bank. It's already been lost. The Fed is keeping these banks on life support by lending them money in the short term - hoping the value of their garbage assets will rise - giving the bank profitability again. It won't happen. The banks are 'zombified'. Eventually they will go out of business and the Fed (and the taxpayer by extension) will get stuck with the losses.

I think if most Americans understood this, they'd be keeping their deposits under their mattresses. The real danger is that a number of banks go out of business at the same time, thereby preventing the FDIC from being able to cover all the losses. And then there is a run on the banks. And with 8 Trillion (I think) in deposits, and only 1.2 Trillion in physical dollar bills - well, you can see the problem that would create.

This rush for physical cash is why I think deflation is the bigger concern to the financial system in the near/intermediate term. For more info, read my blog.

So this is a kind of "run on the Fed" by insolvent banks akin to civiilian depositors making a run on their bank?

Why now?

Who tripped the trigger?

Its not like these various factors appeared overnight.

Excuse my cynacism, but I don't feel comfortable with the official explanations that these things "just happen" to cascade by accident at a given time.

It kind of reminds me of the "panic of '89", Great Depression, etc. triggered intentionally by international bankers to set us up for the current financial system.

 

[HOLLYWOOD]

This isn't to say the banks have zero reserves. It just means that they are having to borrow them all from the Federal Reserve.

We already know that if banks were to all mark their assets to market, a large proportion of them would be insolvent (including nearly all of the large 'money center' banks). Even while hiding all of their garbage in level 3 SIVs where they can price things however they wish, they have no reserves. The still have to borrow them. So when you hear of banks 'writing down (or off) assets' they are using those borrowed reserves to offset the losses. They then have to borrow money from the Fed so they can pay their depositors when people go to an ATM on Friday for weekend spending money.

That act of borrowing money is what is behind the Fed's numerous lending programs announced in the last year (TAF among others). They pledge all sorts of troubled assets to the Fed (who believes they will eventually rise in value - fat chance) in exchange for something the bank can use as 'reserves'.

So the money most people have in their savings accounts is no longer there at the bank. It's already been lost. The Fed is keeping these banks on life support by lending them money in the short term - hoping the value of their garbage assets will rise - giving the bank profitability again. It won't happen. The banks are 'zombified'. Eventually they will go out of business and the Fed (and the taxpayer by extension) will get stuck with the losses.

I think if most Americans understood this, they'd be keeping their deposits under their mattresses. The real danger is that a number of banks go out of business at the same time, thereby preventing the FDIC from being able to cover all the losses. And then there is a run on the banks. And with 8 Trillion (I think) in deposits, and only 1.2 Trillion in physical dollar bills - well, you can see the problem that would create.

This rush for physical cash is why I think deflation is the bigger concern to the financial system in the near/intermediate term. For more info, read my blog.

THe Problem with 'Mark to Market' who determines the price?

This IS exactly the 'Mark to Market' scheme ENRON used to HYPER INFLATE their assets by setting their own pricing.

We all know how that turned out!

 

[thomaspaine23]

This is the graph of *
"Non-Borrowed Reserves of Depository Institutions"

Notice that for the last fifty years the cash reserves of Federal reserve banks have barely twitched. Through all of these "recessions", no problem.
Now it has dropped like a stone. Is this what a "run on the bank" looks like?
What gives?

* Source is St Louis Fed Economic Research.

What it means is this :

http://www.reuters.com/article/ousiv/idUSTRE48O9B920080925

"NEW YORK/LONDON (Reuters) - U.S. banks and money managers borrowed a record amount from the Federal Reserve in the latest week, nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression."

The fed has just lent all its reserves and then some. Hell they just lent almost a
TRILLION dollars last week alone.

700Billion aint gonna cut it boys and girls.

 

[CitizenPlain]

Lack of available funds to loan out.

...