The repo man

RYAN   By Guest Blogger Ryan Lewenza
.

No I’m not talking about the person who comes by and repossess your sketchy friend’s car and TV from time to time. Today I’m talking about the arcane but important ‘repo’ or repurchase market. I hope you have your coffee ready as I’m going to cover a dry but critical part of the financial markets.

What is the repo market?

The repo market involves financial institutions swapping cash for government securities on a short-term basis. Below is an illustration of a repurchase agreement. One financial institution (Bank A) needs cash for one day (maybe some of their big clients withdrew money from their bank account accounts) and they enter into a one day agreement to sell US treasury securities for cash with another institution (Bank B), and promises the next day to buy back the securities at a slightly higher price. The slightly higher price is the repo rate, or the rate at which two financial institutions borrow/lend with each other, often on an overnight basis. This happens every single business day as banks with excess cash lend it out for a day or a week to a bank that requires cash.

Some years ago I used to work on the trading floor at one of the big Canadian banks and I remember how at the end of the day these specific traders would be on the phones with other banks’ lending out hundreds of millions of dollars of bank capital for just one day. I got to see firsthand how this all worked and while it’s not the most exciting thing, I learned how important this function was for the banks and financial markets.

A Repurchase Agreement Example

Source: Wikibanks

Why is the repo market important?

First, as briefly noted above, it allows financial institutions with lots of securities to borrow cheaply, and allows institutions with spare cash to earn a rate of return of their funds at low risk. It’s low risk to the lender since they own the securities, which are pledged against the loan. So if the other institution fails to pay back the short-term loan, then the lender just keeps the securities.

Second, the repo market allows the Federal Reserve and other central banks to conduct their monetary policy and help maintain a functioning financial system. So the repo market allows financial institutions to lend between themselves and for financial institutions to borrow/lend capital with the central bank (e.g. the Fed). This is particularly important during times of financial stress like the 2008 financial crisis or more recently during the Covid-induced recession and market meltdown last March.

This little known market sees $2 to $4 trillion in daily trading of these repurchase agreements so it’s a big deal. Essentially, the repo market is the grease that keeps the economy chugging.

Without it trade doesn’t happen, corporations don’t pay their employees and you don’t have some ‘benjamins’ to spend on your main squeeze.

And when it does go south, as we saw in September 2019, it can have huge consequences for the markets and economy.

In mid-September 2019 the repo rate spiked to an intra-day high of nearly 10%, as financial institutions with excess cash refused to lend it out. The repo rate typically tracks the Federal Reserve’s overnight benchmark rate, which at the time was 2% to 2.25%. What caused the repo rate to spike that day and completely detach itself from the Fed’s benchmark rate?

It’s believed that two events in mid-September 2019 led to this scary spike in the repo rate. First, was that quarterly taxes were due for corporations so there were large cash withdrawals from the banking sector. Second, it was settlement date for previously purchased US Treasury securities, so again cash was needed to pay for these securities. These two events led to a shortfall of cash in the financial system, which caused the repo rate to spike violently on the day.

The Fed was then forced to respond and clean up the mess. The Fed announced that they would better support the repo market by offering $75 billion in daily repos, which was subsequently increased to $120 billion of daily lending. Basically the dam and had sprung a leak and the Fed had to come in and fix it up. If they hadn’t and the dislocations continued then we could have been looking at something far worse, possibly the start of another financial crisis.

US Repo Rate Spiked in September 2019

Source: Bloomberg, Turner Investments

For now the repo market is functioning well and not much of a concern. However, there are some out there that believe the repo market is at risk from all the central bank money printing and QE. Sure there will be the occasional blip but the Fed stands ready to step in during any times of stress so I’m not too concerned at present.

Now you know a bit about the repo market. You’re welcome!

Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Vice President, Private Client Group, of Raymond James Ltd.

 

67 comments ↓

#1 LewenzaCountry aka Prince Polo on 03.27.21 at 9:47 am

Despite your clarification that this isn’t about repo men, I’m still going to post this JCVD (Street Fighter) quote:

Victor Sagat: This isn’t over, Guile. I own this city.
Colonel Guile: Well, I’m the repo man, and you’re out of business.

#2 Dharma Bum on 03.27.21 at 9:53 am

REPO MAN!
“A lot o’ people don’t realize what’s really going on. They view life as a bunch o’ unconnected incidents ‘n things. They don’t realize that there’s this, like, lattice o’ coincidence that lays on top o’ everything. Give you an example; show you what I mean: suppose you’re thinkin’ about a plate o’ shrimp. Suddenly someone’ll say, like, plate, or shrimp, or plate o’ shrimp out of the blue, no explanation. No point in lookin’ for one, either. It’s all part of a cosmic unconsciousness.”

https://www.youtube.com/watch?v=X4HQyqc-aVU

#3 Tarot Card on 03.27.21 at 10:20 am

Thanks for the blog Garth
Thanks for the post Ryan
I always thought this was a function of the central bank?

A very good article on Repo market. Never really understood why one bank would have so much excess cash and another be so short. You would think Banks would be able to forecast trend lines on changes in cash requirements? 2 to 4 trillion a day, man that’s allot of cash. It begs the question what the heck did we do in the 80s? Remember the old paper deposit slips. Ha ha
What did they do move trucks of cash from one bank to another ha ha
And now we can deposit cheques and transfer money on our phones.
I don’t even remember the last time I paid cash for anything, oh ya I forgot we chewed on that discussion last year.
Have a great weekend!

#4 Axehead on 03.27.21 at 10:25 am

Cool to learn something new. Thanks Ryan.

#5 Dan in Nanaimo on 03.27.21 at 10:32 am

One small glitch in the matrix with continuous QE is that now the digital ‘printing presses’ have been initiated in earnest, and at all costs, it’s not possible to stop.

Think heroin, think crystal meth, in pure unadulterated and unlimited supply.

Infinite QE and easy money has become the new religion, the ultimate opiate for the masses… only problem is that serious addictions almost inevitably lead to ruinous unintended consequences.

#6 joblo on 03.27.21 at 10:53 am

Hmm….
“In mid-September 2019 the repo rate spiked to an intra-day high of nearly 10%, as financial institutions with excess cash refused to lend it out. :

Davos WEF Jan 2020, Wuhan virus pandemic March 2020….?

#7 WTF on 03.27.21 at 12:12 pm

The truth really hurts

https://twitter.com/i/status/1373331703192780803

#8 DON on 03.27.21 at 12:35 pm

Realizing that the repo market needed QE as a bandaid is concerning. Capitalism needs a daily dose of socialism to stay alive. We are at this point of acceptance now. Forget about repairing the leaking ship…just use papier mache to plug the holes.

The foundation is now QE? Holy shit batman.

#9 Roial1 on 03.27.21 at 12:39 pm

One day spike????

Doesn’t That mean that the shareholders of the lending banks got a HUGE spike in dividends???

#10 TurnerNation on 03.27.21 at 12:40 pm

This weblog says ‘pandemics’ are temporary. Fine. But what’s going on has nothing to do with that and all do with the new world order. Tourism has been ended.
– Britain new 5000 pound fine if you dare leave the country. Yep a virtual Berlin Wall.
– Australia, NZ also under country arrest/no leaving.
– Kanada, more and more airport hotels being converted into paid Kamps for returning citizens; downtown hotels being turned into permanent homeless shelters.

What’s next for Kanada? Hang on tight as the occupiers absolutely decimate what’s left of this Former First World Country. LAND – the spoils of this WW3.

1 .B.C. Bring Cash. You will own nothing and be happy?? Yep Land is the spoil of this WW3 we are in. Hence the travel/movement restrictions. Getting used to #stayhome.

https://www.vicnews.com/news/british-columbians-in-for-a-big-adjustment-with-aboriginal-title-settlement-lawyer-says/
British Columbians are in for a big shock when ownership of large parts of the province switches from the Crown to First Nations, says Aboriginal rights and title lawyer Jack Woodward. … Woodward is currently representing the Nuchatlaht First Nation, which has received a trial date of March 15, 2022 from the B.C.2 days ago

2. That’s only the beginning of the screws they could tighten. As noted the other week here. This UN rule would it be use to end mining, O&G land use? Or to kick people off their land, herded into the ‘Smart Cites’?

https://parl.ca/DocumentViewer/en/43-2/bill/C-15/first-reading
SUMMARY
An Act respecting the United Nations Declaration on the Rights of Indigenous People
Whereas the Declaration emphasizes the urgent need to respect and promote the inherent rights of Indigenous peoples of the world which derive from their political, economic and social structures and from their cultures, spiritual traditions, histories, philosophies and legal systems, especially their rights to their lands, territories and resources;

……
Always our TRAVEL rights. This is real simple. Control over our Feeding, Breeding and Movements/Travel.
New rolling permanent Economic lockdowns were just unleased on Ontario too. The goal is ending our travel, life in your UN Smart City:

“The White House is mulling a tax on vehicles’ mileage to pay for a proposal to revamp the nation’s infrastructure expected in the coming days, Transportation Secretary Pete Buttigieg said on Friday.

In an interview with CNBC, Buttigieg said a tax on miles driven ‘shows a lot of promise,’ as President Joe Biden’s administration faces pressure to find ways to fund infrastructure improvements, a goal that has eluded the past two presidential administrations”

#11 Ken on 03.27.21 at 12:49 pm

Buddy can you spare some change…

#12 Do we have all the facts on 03.27.21 at 1:10 pm

Given the root cause of the 2007/08 financial crisis in the US I was wondering about the qualifications and political connections of the Canadian institution responsible for the classification of the high quality liquid assets that must be held by financial institutions to support the repo market in Canada.

If the housing market in Canada was to correct and the number of mortgage defaults was to increase would it result in a reclassification of mortgage backed securities and tightening of the repo market?

Just curious based on how an increase in mortgage defaults spooked financial institutions and tightened liquidity in the US.

#13 Zana on 03.27.21 at 1:20 pm

The game is rigged:

https://www.youtube.com/watch?v=rDtVABEzcy4

#14 Concerned Citizen on 03.27.21 at 1:29 pm

“We’ll do whatever it takes.”

When you hear that from central banks – as we have since 2009 – you’d best be worried, not relieved. They are unambiguously fuelling huge asset bubbles that create huge wealth inequality and growing populism. When I hear a central banker say they’ll do more, whatever it takes, etc., that means they’ll make the rich richer while increasing the cost of living for the other 99%.

#15 Penny Henny on 03.27.21 at 1:34 pm

#165 twofatcats on 03.26.21 at 10:39 pm
In Southern Ontario at this point you will be better off dropping out of high school in Grade 10 to flip houses instead of going to university or trade school.

House below sold in May 2019 for $427K. Back on the market today for $980K.

https://housesigma.com/web/en/house/Vwod7vrW9J275mGN/17-Colbeck-Drive-Welland-30732226

https://www.zolo.ca/welland-real-estate/14-colbeck-drive
////////////////

Sorry Charlie those are two different houses. See the numbers one is 14 and the other is 17.
The big difference is that the one going for $980,000 has more than twice the lot (86×377) compared to (75×145) and it backs onto the Welland river.
Waterfront property!

#16 Penny Henny on 03.27.21 at 1:37 pm

#170 Cowtown Cowboy on 03.26.21 at 10:52 pm
B&D now up 9.03% ytd….yum yum
//////////////

Hey Stone, you posted under the wrong name.

#17 Travelbug on 03.27.21 at 1:41 pm

#9 – Roial1
Why should these spikes affect the dividends to shareholders? They just contribute to the massive profits the banks make. Dividends are determined by the boards and based on overall profitability, me think.

#18 mike from mtl on 03.27.21 at 1:45 pm

I admit to not fully understanding why a repo market needs to exist apart from the potential to skim a few points from transactions. Stocks and options regularly get cleared without needing the Fed to intervene. Seems to be playing hot potato doing what is a sort of clearing house but not using cash, interest linked t-bills and possibly leverage.

Probably one of the those it works, until it doesn’t.

#19 Don Guillermo on 03.27.21 at 1:50 pm

#192 millmech on 03.27.21 at 9:18 am
One of the Liberals election promises to lower housing costs, another one was to balance the budget.
*************************************

It’s the budgets own bloody fault for not balancing itself!

#20 Sail Away on 03.27.21 at 2:12 pm

#19 Don Guillermo on 03.27.21 at 1:50 pm
#192 millmech on 03.27.21 at 9:18 am

———–

One of the Liberals election promises to lower housing costs, another one was to balance the budget.

———–

It’s the budgets own bloody fault for not balancing itself!

———–

Exactly! Just like Jill and Jody and Bill, the budget had every opportunity to do its job properly. Nothing to do with J… again.

#21 the Jaguar on 03.27.21 at 2:18 pm

“There was a financial collapse. It started happening in 2019 around August when it turned out that the United States Government debt which is supposed to be the most secure financial investment in the world, couldn’t be used as collateral for overnight loans without having to pay something around 10 percent interest. This is in a zero percent interest rate environment.

So suddenly it turned out that all this debt was actually useless as collateral and was in danger of just being treated as waste paper by major banks. And the Fed had to step in and open up all the spigots and it hasn’t been able to close them. Ever since it’s just been hemorrhaging money. Supposedly money, but really it’s just more debt. But the entire notion of debt as something you pay back has evaporated. We are now in a brave new world where you can endlessly “quote unquote'” borrow at zero percent or even negative interest rates and this can go on forever without triggering hyperinflation. But certainly it will.

Now the reason that all of this started happening is the same reason as everything happens. There was a shortage of energy. The swing producer in the oil world was the United States with Shale oil and suddenly it turned out that party couldn’t go on forever because all the best ‘plays’ were played out. And in very rough numbers the investment in US Shale was around a trillion dollars and all it ever made was about 700 billion. That’s not a business plan . ”
-Dmitry Orlov

But hey…. Who needs oil, pipelines, national unity and the like? We’ve got Real Estate, which is what Canadians care most deeply about. Comes with bragging rights for small minds.

Guess we’ll see how that ‘plays out’. Amen.

#22 TurnerNation on 03.27.21 at 2:28 pm

– What the ? A telecommunication company wanting control over our Feeding/food?

https://www.telus.com/en/about/news-and-events/media-releases/telus-launches-fresh-new-telus-agriculture-business
TELUS Agriculture currently supports more than 100 million acres of agricultural land.

………………..
Why homes cost a million bucks.
$800,000 borrowed at 1.7%, 25 year amort, 4000/yr prop tax is only $3606.26/mo
I say ‘only’ as, a couple previously renting each small condos in Toronto at 1800/mo would have paid $3600/mo on rent. Bingo. Put 1 or 2 hundo down and there’s your million dollar base-bae.

—————————-
What does the future hold?

– Shut down small business. New System, 101 new rules to accomplish . In only one year a medical dictatorship.

Michigan Senate passes bill that would tie restaurant closures to COVID-19 cases (mlive.com)

— Byebye sports and culture. It must go in Kanada. Post national state you see. Work only Comrades.

Greater Toronto Hockey League cancels rest of 2020-21 season due to COVID-19 (cbc.ca)

Public Health cools Blue Jays optimism over summer in Toronto(sportsnet.ca)

“Ontario to allow haircuts, outdoor fitness classes
A headline that would have been indistinguishable from one written about North Korea in 2018. Imagine needing the government’s permission to get a haircut”

————
–BTW the kick off of the New System in March 2020 was the final step in A.I. running this world.
Would you be surprised if it was running the script all Former First World Countries are following?

Teleperformance, a France-based outsourcing service giant with a workforce of 380,000 sprinkled across some 34 countries, is deploying “specialist” webcams to more closely monitor its home-working employees. An AI-powered digital watcher will check up on workers, ensuring they aren’t checking their phones, surfing the web, leaving their desks, or otherwise slacking off, according to the Guardian, which the company counts among its clients.

Amazon delivery drivers have to consent to AI surveillance in …www.theverge.com › amazon-delivery-drivers-ai-survei…
3 days ago — In February, Amazon announced it would start installing AI-powered cameras built by tech firm Netradyne in its delivery vans. These cameras …

#23 Stone on 03.27.21 at 2:31 pm

#16 Penny Henny on 03.27.21 at 1:37 pm
#170 Cowtown Cowboy on 03.26.21 at 10:52 pm
B&D now up 9.03% ytd….yum yum
//////////////

Hey Stone, you posted under the wrong name.

———

Not me. Must be someone with penis envy.

#24 Catalyst on 03.27.21 at 2:43 pm

I appreciate the color however I just don’t buy the excuses given. Like tax payments and treasury auctions are not exogenous shocks, they are known months in advance and these are institutions that have this stuff mapped out for much longer time frames.

The current rate being glued to zero also gives me pause. There is so much spare capital right now that banks literally don’t know what to do with it. A restraint on revenue growth used to be capital but now the restraint is qualified borrowers of which there are scant.

#25 FJ Powell, FJ Yellen, FJ Biden on 03.27.21 at 2:58 pm

The repo market is on the brink of collapse.

Worse than the autumn of 2019

https://youtu.be/fttA-rNRYG4

More central bank criminal intervention.

#26 espressobob on 03.27.21 at 3:01 pm

Not the sort of thing most of us retail investors study, but interesting just the same.

Good read Ryan.

#27 baloney Sandwitch on 03.27.21 at 3:15 pm

Interesting – wonder if the spike in the repo rate was a pre-monition of the Covid-19 crash. The same weird behaviour preceded the GFC.

#28 Econ 101 on 03.27.21 at 3:23 pm

Repo…just another four letter word in banking, Ryan! ;)

#29 NSNG on 03.27.21 at 3:35 pm

I will gladly pay you Tuesday for a billion dollars today.

Wimpy III,
CEO, Humongous Bank

#30 Ponzius Pilatus on 03.27.21 at 3:36 pm

#3 Tarot cards
A very good article on Repo market. Never really understood why one bank would have so much excess cash and another be so short. You would think Banks would be able to forecast trend lines on changes in cash requirements? 2 to 4 trillion a day, man that’s allot of cash. It begs the question what the heck did we do in the 80s? Remember the old paper deposit slips. Ha ha
———-
Good points.
I worked for a Credit Union in the 80’s and we had a system of forecasting our cash needs, which worked quite well.
But as a backup, we had an arrangement with a bank branch nearby, and they usually helped us out, when we were short.
About to about 50 k. Two people were sent to pick the cash up. Just in case someone decided to take off with the money and send us a postcard from Mexico.
It all ended when they were robbed.
The robber(s) were never got. Most likely an inside job.

#31 cuke and tomato picker on 03.27.21 at 3:49 pm

Lots of Canadians are happy that NFLD elected a liberal
majority.

#32 Barb on 03.27.21 at 3:53 pm

I think it was a year ago the IMF “suggested” that banks stop paying dividends. Hmm.

#33 Ponzius Pilatus on 03.27.21 at 3:58 pm

The MBS debacle of 2008 has shown us that the security of financial transactions is only as strong as the underlying security offered as collateral.
Having said that, as a former inspector with FICOM, I can attest that the Federal and Provincial regulatory bodies in Canada are up the task of keeping our banking system safe.
The same cannot be said about the US banking system.

#34 Don Guillermo on 03.27.21 at 4:09 pm

#195 GreaterFool on 03.27.21 at 3:43 pm
I bet $ for one pair socks that the help from Socks’ government will be “try to ‘help’ newbie buyers with more incentives – throwing gas on the conflagration”, they have never disappointed us
************************************
They will do whatever it takes to buy the most votes with total disregard for the future of Canada.

#35 Tarot Card on 03.27.21 at 4:25 pm

THanks Ponzius Pilatus

Always need a story on a Saturday. I heard about the old Class B banks having support from a big bank and then the big banks get support from the central banks.
In my mind that’s why T bills were for?
All for interesting reading on Saturday.

Funny I was reading another story today when The US went off the gold standard, imagine they used to fly planes of gold from Fort Knox to Settle country accounts
Gosh how times have changed.

#36 Wrk.dover on 03.27.21 at 4:46 pm

Money supply: too big to tend

#37 Mickey on 03.27.21 at 5:05 pm

#31 cuke and tomato picker on 03.27.21 at 3:49 pm
Lots of Canadians are happy that NFLD elected a liberal
majority.
———
Doubtful many Canadians care what a province representing 1.48% of the country’s total population vote for provincially.

#38 Ordinary Blog Dog on 03.27.21 at 5:14 pm

Who knew! Never heard of this before. Thanks.

#39 Handsome Ned on 03.27.21 at 5:22 pm

I had to deal with that guy on the picture several times due to Vancouver parking nazis. I remember getting towed parking in a bus zone when transit was on strike. Homeless guys jam stuff in downtown meters so they can fish out your twonie that gets stuck. You still get towed even though the meter is broken. I heard all the meter maids are named Karen.

#40 Dolce Vita on 03.27.21 at 5:27 pm

Firstly nice explanation Ryan. I read as LIBOR back then. I like your Repo better.

——————————-

Variants —> Exponential.

Today entered latest new variant cases into my daily chart and go this:

https://i.imgur.com/GOEOGwB.png

Added the Trend Line formulae and got a CHILL down my spine, not ’cause the formulas are long, no not at all.

It’s because they’ve gone 4th Order Polynomial (x^4). So what’s the big deal?

Well the Exponential Function is ≈ x^4.34 (4.34294481948018 for purists).

https://i.imgur.com/ll55PA6.png

Up until today Trend Lines were 3rd Order, x^3, a LONG WAYS from Exponential.

Means Variants as of yesterday CLOSER to go Exponential than Linear.

GOOD/BAD news is that the daily new variant cases Trend Line can only explain 50% of the data but “visual inspection” says it’s looking more and more like Exponential.

BAD news is that the cumulative Trend Line definitely, near 100%, is closer to Exponential than Linear.

———————-

Still Canada, N’EST PANICKER PAS.

If the UK can do this with their variant, B.1.1.7 (93% of variant cases in Canada):

https://i.imgur.com/WfDOitH.png

Well, so will Canada.

The one to worry about is the Brazil variant, P.1 (3.4% of variant cases in Canada) as it can reinfect and somehow, no one know why yet, get around existing antibodies (it’s the one devastating Manaus, BR and beginning to devastate the rest of BR…it got out of Manaus).

Earlier Article on P.1
https://www.nature.com/articles/d41586-021-00121-z

More Recent on P.1
https://www.cnbc.com/2021/03/24/covid-variants-could-fuel-another-surge-heres-what-you-need-to-know.html

-FWIW, Fingers Crossed

#41 Billy Buoy on 03.27.21 at 6:09 pm

Thx. Been reading about this on Zero hedge over the past 2 years.

#42 Dolce Vita on 03.27.21 at 6:18 pm

On last post, likening Trend to Polynomial lines, explanation why I chose 4.34, for argumentative Math people lacking common sense, look at Y-Axis label:

https://twitter.com/bsant54/status/1375934096619278342

Think it thru (Hint: UK numbers). Brain before mouth.

——————-

Canada will beat variants down or REPO them if it has to (very low rate, assets unfortunately human).

#43 Ponzius Pilatus on 03.27.21 at 6:31 pm

#34 Don Guillermo on 03.27.21 at 4:09 pm
#195 GreaterFool on 03.27.21 at 3:43 pm
I bet $ for one pair socks that the help from Socks’ government will be “try to ‘help’ newbie buyers with more incentives – throwing gas on the conflagration”, they have never disappointed us
************************************
They will do whatever it takes to buy the most votes with total disregard for the future of Canada.
—————
Why do you care?
You live in Mexico.

#44 Nonplused on 03.27.21 at 6:35 pm

#18 mike from mtl on 03.27.21 at 1:45 pm
I admit to not fully understanding why a repo market needs to exist apart from the potential to skim a few points from transactions. Stocks and options regularly get cleared without needing the Fed to intervene. Seems to be playing hot potato doing what is a sort of clearing house but not using cash, interest linked t-bills and possibly leverage.

Probably one of the those it works, until it doesn’t.

———————————–

Probably because banks are not allowed to give out cash they do not have whether physical or digital. Since banks tend to hold the bare minimum they can in cash and instead prefer interest bearing instruments, if they have a large amount of withdrawals they might not be able to meet it without selling some stuff. Conversely if they have a large amount of deposits they will want to put it to work as quickly as possible. So you could think of the repo market as just a mechanism for moving the money from where it was deposited to where it was withdrawn.

The only time the repo market “prints” new money is when the central bank buys the assets. But then the money either has to come back into the vapor from which it came or the CB keeps the assets. So the money is still good, because it is backed by the assets the CB retains.

#45 Steven Rowlandson on 03.27.21 at 6:53 pm

I would not be surprised if the repo man get’s a workout repossessing everything people can’t pay for. Some one has to pay or they don’t play.

#46 Sail Away on 03.27.21 at 7:14 pm

#30 Ponzius Pilatus on 03.27.21 at 3:36 pm

…about 50 k. Two people were sent to pick the cash up. Just in case someone decided to take off with the money and send us a postcard from Mexico.

It all ended when they were robbed.

The robber(s) were never got. Most likely an inside job.

————

Same year you installed the pool?

#47 Don Guillermo on 03.27.21 at 7:15 pm

#43 Ponzius Pilatus on 03.27.21 at 6:31 pm
#34 Don Guillermo on 03.27.21 at 4:09 pm
#195 GreaterFool on 03.27.21 at 3:43 pm
I bet $ for one pair socks that the help from Socks’ government will be “try to ‘help’ newbie buyers with more incentives – throwing gas on the conflagration”, they have never disappointed us
************************************
They will do whatever it takes to buy the most votes with total disregard for the future of Canada.
—————
Why do you care?
You live in Mexico
*********************************

You’re right. I shouldn’t care and don’t need to but can’t help myself. I just do. Too bad others that should care don’t.

#48 westcdn on 03.27.21 at 7:45 pm

My understanding of the Repo Market crisis was mainly due to Jamie Dimond of JP Morgan refusing to lend his bank’s cash into the market. Obviously he smelled opportunity to fatten his bank’s bottom line. The result was an immediate shortage of cash in the market. We all know what happens when demand greatly exceeds supply. I think Jamie earned his recent heart attack for that action, if true.

#49 Flop... on 03.27.21 at 8:01 pm

When I want to learn about something, I always see if anything was mentioned in the worlds greatest encyclopedia, that would be rock music in the 1970’s.

I’m pretty sure Blue Oyster Cult wrote a song about this subject.

Don’t Fear The Repo…

M46BC

https://m.youtube.com/watch?v=Dy4HA3vUv2c

#50 espressobob on 03.27.21 at 9:48 pm

#49 Flop

Speaking the 70s along with all my crazy friends, we where there on a hot summer night. The s&p consisted of blotters and lines of whatever.

https://www.youtube.com/watch?v=oeBDwxZ8xaY

#51 crowdedelevatorfartz on 03.27.21 at 10:51 pm

I’ve always wondered where MY e transferred money disappears for 24 , 48 , 72 hours out of my account and to another account….where it takes several days to appear.

The cash is instantly gone from me and takes days to appear elsewhere.

Quite an interest free cash scam

#52 crowdedelevatorfartz on 03.27.21 at 11:04 pm

Well lets see what happens to the real estate market now…….

https://www.reuters.com/article/us-hongkong-security-canada-insight/canada-calling-hong-kong-residents-shift-billions-abroad-after-clampdown-idUSKBN2BH3KR

#53 Hilroy on 03.27.21 at 11:58 pm

Why don’t they just call it Pawnbroking ?

#54 Nonplused on 03.28.21 at 1:21 am

How to understand engineers:

https://www.youtube.com/watch?v=aW2LvQUcwqc

I’m sure economists are similar.

#55 Hardy beans on 03.28.21 at 1:23 am

“medical treatment can only be administered for the benefit of the person it’s administered to.”

International Law

You can’t force someone to take any type of medical treatment such as a vax for someone else’s protection- otherwise I could force Garth to any sort of medical treatment I deem he needs for my own protection.

And Garth imagine the long list of medical treatments all your political friends would have for you, and then ban your blog or your pretty face from public if you don’t get your passport for them all.

Just sayin…

Behave, and roll up your left sleeve. – Garth

#56 BillyBob on 03.28.21 at 5:19 am

#21 the Jaguar on 03.27.21 at 2:18 pm

But hey…. Who needs oil, pipelines, national unity and the like? We’ve got Real Estate, which is what Canadians care most deeply about. Comes with bragging rights for small minds.

Guess we’ll see how that ‘plays out’. Amen.

——————————

Yes. As the article points out, humanity’s place at the top of the species ladder is largely derived from the ability to harness fossil fuels.

The author claims to be optimistic about the chances of reverting back to “relying on the daily influx of energy from the Sun”, but I’ve yet to learn of any renewable (“replaceable” as Nonplused calls them) that didn’t require massive ongoing inputs of…fossil fuels. Never mind the myriad uses that have NO replacement in renewables.

Barring some miraculous breakthrough – soon – Alberta’s energy deposits will be consumed yet. No amount of carbon taxes or truculent pipeline policies will trump the developed world’s desperation to hang on to their current affluence, and the developing world’s desire to achieve it.

https://www.bbc.com/news/science-environment-56544239

#57 Wiley Toronto on 03.28.21 at 6:33 am

Nicely explained Ryan. I am always trying to better understand our banking system.

#49 FLOP Needs less cowbell!

m50on

#58 Do we have all the facts on 03.28.21 at 7:05 am

Let me see if I have this back scratching system right.

Financial institutions are encouraged to create billions of dollars of debt obligations. Once created they collateralize these debt obligations through the issue of ‘high quality’ securities. They then offer a major portion of these high quality, often government guaranteed, for sale to investors.

Under the eye of an International watchdog the financial institutions in Canada are required to keep enough high quality liquid assets on hand to cover potential liquidity requests for a 30 day period.

However the Bank of Canada has indicated that in the event that the high quality liquid assets held by financial institutions to support the repo market were to decline in value the central bank would purchase assets from financial institutions to restore liquidity and keep the repo market from locking up.

This presents a scenario where rising interest rates could reduce the value of high quality liquid assets and where the Bank of Canada would move to protect financial institutions from significant losses to assure the repo market continues to function.

This is how it looks to me on paper. Please tell me that protecting selected financial institutions from potential losses is not current government policy.

In 2008 Bear Sterns was protected by the Federal Reserve while Lehman Brothers was cut loose. Does the Bank of Canada have a list of who they will protect when the value of high quality assets begins to decline.

Just curious!

#59 G on 03.28.21 at 8:26 am

Despite huge controversy surrounding the science of solar geoengineering, the Microsoft founder is helping fund a plan to reduce the effects of greenhouse gases by shielding Earth from the sun

Is anyone going to stop this unwise mad man already!

I don’t know about you but I like eating food that required energy from the sun. Come to think about it all food and plant growth is due to energy from the sun.

Do you have any solar panels? this mad plan will reduce output from them too.

If he’s allowed to block dim the sun not only will food plants grow slower reducing food for everyone, but all plants will reduce CO2 uptake.

Less sun also means less vitamin D can be made in your skin. Seems D helps your immune system fight all virus. But maybe it’s part of the plan of mad men to reduce population.
Gates said it himself, look up TEDX 2010 talk Bill Gates prefers using vaccines to reduce population growth.
Less sun for food growth and vitamin D might help his mad plan to reduce population move along.

Will some military shot down his balloons before they dim the sun, and throw him in jail already??? I’m not holding my breath. Humans aren’t as smart as we think we are. But what do I know.

#60 KNOW IT ALL on 03.28.21 at 8:58 am

COVID is NOT giving up.

Variants spreading in the GTA like wildfire.
Brazil at 100k new cases /day.
Mexico’s hospitals at 150% capacity. So many just dying at home.
Germany/Europe going into lockdowns again fearing a 3rd wave more powerful than the last 2.

It will take YEARS to vax and rid the world of Covid.

#61 InterestedButNotThatInterested on 03.28.21 at 9:09 am

#51 CrowdedElevatorFartz – I’ve seen another interesting bank instrument recently with Instacart where you order groceries for $200 but the picker can’t find $20 worth of items so your final bill is $180. Instacart has already put a hold on the $200 and charges you $180 for the revised order.

The first couple of times I used Instacart I got the hold released right away but recently the hold takes at least 5 business days to release??? This is one scenario of many where a temporary hold is put on funds and the bankers have interest free cash to invest multiplied by millions of daily transactions.

I know this practice used to happen with hotels and such when it took time to reconcile but these e-transactions are instantly reconciled.

There’s no reason to hold your funds but for their own gains.

#62 Ryan Lewenza on 03.28.21 at 9:12 am

Hilroy “ Why don’t they just call it Pawnbroking ?”

Because they wear suits. Just kidding. It’s just short-term lending between financial institutions. No one sees it and few people know about it but it’s there and it’s important. – Ryan L

#63 Neo on 03.28.21 at 9:18 am

“For now the repo market is functioning well and not much of a concern. However, there are some out there that believe the repo market is at risk from all the central bank money printing and QE. Sure there will be the occasional blip but the Fed stands ready to step in during any times of stress so I’m not too concerned at present.”

Really Ryan…I mean really? SMH

#64 Ryan Lewenza on 03.28.21 at 9:23 am

westcdn “My understanding of the Repo Market crisis was mainly due to Jamie Dimond of JP Morgan refusing to lend his bank’s cash into the market. Obviously he smelled opportunity to fatten his bank’s bottom line.”

I haven’t heard about this before. I would be surprised if the case since other banks could have easily stepped in and it seems like a big risk to the financial system for a few extra dollars of profit. – Ryan L

#65 the Jaguar on 03.28.21 at 10:02 am

@#55 BillyBob on 03.28.21 at 5:19 am

A good article. I liked these bits:

“Without fossil fuels, no rapid mass transportation, no flying, no surplus consumer food production, no cell phone made in China, brought to Southampton by a giant container ship with 20,000 containers. All of that is fossil fuels,” he says.
‘Some 5% of the world’s natural gas supply is used to create ammonia-based fertilisers, for example, without which half the world’s population would starve.’

We’ll see how it all turns out, but we’re still standing here Alberta. Floods, forest fires, numerous body blows to an industry that has created a lot of jobs and improved many lives haven’t been easy.

But we also have agriculture. Apparently we supply a lot of beef and other agricultural products. We have three gorgeous National Parks ( Banff, Jasper, Waterton) which the tourists seem to love. And there’s a strange rumour that when Alberta prospers, the country prospers. Go figure.

With folks like NonPlused, Don Guillermo, and Dharma Bum’s kid living down the street, why go anywhere else? We’ll save a place near Longview for BillyBob.

#66 Elcheapo on 03.28.21 at 10:51 am

But Ryan, with respect, noobmaster6969 who comments regularly in the Globe and National Post says central banks and fiat currencies are the cause of all our problems! I don’t know who to trust anymore!! /s

#67 Kitty Kaboom on 03.28.21 at 6:50 pm

Thanks for the lesson on functions of the financial markets Ryan! Lets make this an every weekend thing mini-series. Next up the discount window?