Repo has shrunk by a Trillion dollars. Where has all that money gone? Is it buying all new government debt? Seems the domestic market is forced to absorb it all as the international market stops buying. That means liquidity is being pulled out of the market, so should we expect the stock market to tank soon?
repo is the followup of the excess reserves trick. The monetary central planning creates, and destroys, money. There's nothing more to it. Excess reserves was money that was, with the exception of a small percentage of it (the cost of paying banks to NOT lend it out), never ment to be lend out. Repo is the same principle, not the total matters, but the difference between the repo and the reverse repo. For example, I take a paper, write $10 gazillion on it, I give it to you, then I buy it back for $10 gazillion +$1, or -$1, depending on whether I want to increase, or decrease the amount money. The net difference is not $10 gazillion but $1.
