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Replies to #20590 on Cycle Trading

Duma

12/16/19 10:44 AM

#20591 RE: spdpro #20590

I gleamed a small amount of understanding from doing some reading this morning. Say I am Chase bank and I have the cash that is required by the Feds. But up comes my 4Q tax payment, so I have to use all my cash to pay the taxes. So to get more cash back into my reserves, I repo some of my government bonds But if nobody has any cash that they want to loan to me, the fed rates start to climb quickly as they did in Sept all the way to 10%. So to not lose control of the short term Fed rates, the Feds have to print more money and make it available.

If the Feds don't do this, then my only option as a bank is to start selling my Government bonds. The Feds can't let that happen because that would flood the market with bonds, drive the price down and thus interest rates would rise.

All governments are so far in debt that there is no way they can let interest rates rise. So the only solution to the problem is to print print print. Buy ink stocks, they are going up.

My best guess.