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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