For starters, it didn't go missing and for the most part wasn't spent or even actually exist. Loan guarantees and overnight loans are a whole different ball game. If provide a $1B overnight loan for you 10 times, I haven't spent $10B dollars. Same if I had guaranteed $100B. Save for a default, I haven't spent anything (actually I made money). The reason why the Fed didn't announce which banks were in trouble is stunningly obvious, which is why outside of internet conspiracy circles this video isn't big news.
As I understand, when the fed increases a bank's lending window, it is not actually giving more money to the bank. It is akin to increasing the credit limit of the bank. If the bank actually does borrow up to the increased limit, it pays interest on that loan.
That jives with what I've read as well. Also a number is incremented in the database, no currency is actually printed. So when it's returned no currency has to be taken out of supply.
For whatever reason, overnight loans are standard which grossly inflates totals over a period of time (I think it's just conspiracy theorists that use totals like that as they count on people not knowing it's an overnight loan that has been returned). A billion dollars a night for a year is $365B. It doesn't take long at all with a handful of large accounts before you hit $9T.
For starters, it didn't go missing and for the most part wasn't spent or even actually exist
Correct.
At the same time, I believe the size of the Fed's intervention in the banking system and continuing support of the Fed and treasury for "too big to fail" institutions and loans is an ongoing and problematic trend.
It is disheartening to see this situation analyzed through ignorant grandstanding rather than serious analysis - ie discussing the situation without distinguishing between credit and cash.
Because expanding the credit within the economy in an unlimited fashion is still a very problematic dynamic even without any ostensible increase in the cash.
For more the topic, I'd recommend Doug Noland's Credit Bubble Bulletin at prudentbear.com.
> It is disheartening to see this situation analyzed through ignorant grandstanding rather than serious analysis - ie discussing the situation without distinguishing between credit and cash.
I could not agree more. There are absolutely questions that need answered, but I can't take seriously anyone who has such an incorrect grasp or is intentionally being misleading.
> If provide an overnight loan for you 10 times, I haven't spent $10B dollars.
No, but you had to have had $10B to transfer.
> Same if I had guaranteed $100B.
No, but someone had to believe that you had access to $10B in case the guarantee was needed.
> Save for a default, I haven't spent anything (actually I made money).
"I made money" doesn't follow. Whether or not you made money depends on the terms. And, even if you did make money, it doesn't follow that it was a good deal. (The risk may have been greater than the return. The fact that you haven't been in an accident doesn't imply that not wearing seat belts is a good idea.)
No, I would have had to have just $1B (it gets tossed back and forth--with interest given to the Fed). Also, the Fed doesn't need the $1B, it can create it and then destroy it when it's deposited back. It's electronic these days, so a number is incremented and decremented in a database.
