From what I (tried to) understand about bank reserves it's also mostly a "pretension regulated" matter?
For the USD mandated part it's posting collateral that is considered "safe" - but SVB has laid bare the risks in not hedging appropriately for short-term liquidity risk, since it seems hedges are not checked together with collateral - a…
From what I (tried to) understand about bank reserves it's also mostly a "pretension regulated" matter?
For the USD mandated part it's posting collateral that is considered "safe" - but SVB has laid bare the risks in not hedging appropriately for short-term liquidity risk, since it seems hedges are not checked together with collateral - and in EU you have Basel III, which supposedly is considered more stress-resistant. Not sure how collateral holds up there, but my guess is it just takes a big enough event of liquidity dry-ups and that's that as well and we're back in 2008 but with a much larger altitude in debt leverage? ECB is way in deeper on so many levels due to the setup of a central currency with no central budgeting. If another Greece happens - next up, Italy potentially or maybe France then that's that.
Generally, how much more can you regulate before breaking something else and making the taxpayer the lender of last resort whenever something new pops up you didn't really think possible and you'll need to write a bigger check, not knowing if you'll ever see the whole sum coming back?
And tearing down existing financial instruments or MMF liberties you'll be fighting uphill against lobbies of "market liberalization" agenda people who were responsible for a lot of what happened in past systemic events in liquidity - either finding a "gaming the regulation" approach or working actively on syphoning arbitrage off of it.
This really is "living in interesting times" as per the chinese proverb I guess...
From what I (tried to) understand about bank reserves it's also mostly a "pretension regulated" matter?
For the USD mandated part it's posting collateral that is considered "safe" - but SVB has laid bare the risks in not hedging appropriately for short-term liquidity risk, since it seems hedges are not checked together with collateral - and in EU you have Basel III, which supposedly is considered more stress-resistant. Not sure how collateral holds up there, but my guess is it just takes a big enough event of liquidity dry-ups and that's that as well and we're back in 2008 but with a much larger altitude in debt leverage? ECB is way in deeper on so many levels due to the setup of a central currency with no central budgeting. If another Greece happens - next up, Italy potentially or maybe France then that's that.
Generally, how much more can you regulate before breaking something else and making the taxpayer the lender of last resort whenever something new pops up you didn't really think possible and you'll need to write a bigger check, not knowing if you'll ever see the whole sum coming back?
And tearing down existing financial instruments or MMF liberties you'll be fighting uphill against lobbies of "market liberalization" agenda people who were responsible for a lot of what happened in past systemic events in liquidity - either finding a "gaming the regulation" approach or working actively on syphoning arbitrage off of it.
This really is "living in interesting times" as per the chinese proverb I guess...