In this week’s Off The Cuff podcast, Chris and Wolf Richter discuss:

• What is the repo rate?
• Why did the rate suddenly skyrocket?
• Why a liquidity crisis is so dangerous
• Will the Fed really start up QE again?

Something completely unexpected happened this week. Banks started running out of cash reserves. As a result, the cost for them to borrow money overnight — the repo rate — suddenly skyrocketed, taking the banking system and the Federal Reserve by surprise.

While the situation appears under control for now, it is not a good sign nor a healthy one for the financial system.

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