11 sats \ 4 replies \ @kr 18 May 2022 \ parent \ on: Reverse repo operation hits all time high... Again bitcoin
i'm new to the topic, how do reverse repos increase the money supply?
is there any material you suggest reading?
Also, if you're interested in learning more about Finance/Economics (in a straight-forward way), I would highly recommend Investopedia.com. Google anything related to finance, (e.g Reverse Repos - https://www.investopedia.com/terms/r/reverserepurchaseagreement.asp) and they will provide very good content
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I'm also new to this and have no idea what I'm talking about, but I heard Greg Foss explaining it in some podcast with Preston Pysh and that explanation made sense (the concept itself doesn't make much sense, but the explanation did). I can't find which one that was unfortunately :(
I also have this for reference: https://www.zerohedge.com/markets/repo-crisis-looms-feds-reverse-repo-usage-soars-351bn-fifth-highest-ever
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Ah I see, are you sure it was a conversation about reverse repos and not repos?
At first glance through this Fed article, it seems like reverse repos actually reduce reserve balances, though I'm unclear on how that affects money supply.
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RROs are the banks giving back money to the Fed because the banks have no other places in th economy to deploy/loan the funds out to.
The bank will give money back to the Fed, effectively reducing the money supply (temporarily)
Here is a basic summary of a RRO:
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