- published: 09 Nov 2008
- views: 100919
In the United States, federal funds are overnight borrowings between banks and other entities to maintain their bank reserves at the Federal Reserve. Banks keep reserves at Federal Reserve Banks to meet their reserve requirements and to clear financial transactions. Transactions in the federal funds market enable depository institutions with reserve balances in excess of reserve requirements to lend reserves to institutions with reserve deficiencies. These loans are usually made for one day only, that is, "overnight". The interest rate at which these deals are done is called the federal funds rate. Federal funds are not collateralized; like eurodollars, they are an unsecured interbank loan.
Federal funds transactions by regulated financial institutions neither increase nor decrease total bank reserves. Instead, they redistribute reserves. Before 2008, this meant that otherwise idle funds could yield a return. (Since 2008,the Fed has paid interest on reserves, including excess reserves.) Banks may borrow these funds to avoid an overdraft (that is, the balance going below reserve requirement) of their reserve account, or in order to meet the reserves required to back their deposits. Federal funds are definitive money, meaning that they are available for immediate spending, while checks and many other forms of money must be cleared by banks and typically take several days before becoming available for spending.
How open market operations effect the rate at which banks lend to each other overnight. More free lessons at: http://www.khanacademy.org/video?v=IniG1KkPS2c
More on the mechanics of the Federal Funds rate and how it increases the money supply. More free lessons at: http://www.khanacademy.org/video?v=rgqFXkLAc-4
Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Fed Funds Rate” In the US, the federal funds rate is "the interest rate" at which depository institutions actively trade balances held at the Federal Reserve, called federal funds, with each other, usually overnight, on an uncollateralized basis. The current Fed funds rate is effectively zero. To combat the financial crisis of 2008, Former Federal Reserve Chairman Ben Bernanke lowered to this level by aggressively dropping it ten times in 14 months. Obviously, this is the lowest the Fed funds rate can go. The highest was 20% in 1979 when former Fed Chair Paul Volcker used it as a tool to combat inflation. For more on the Fed funds rate highs and lows, see Historical Fed Funds R...
This is a good day to talk about the Fed funds rate and Fed funds rate futures. Traders can buy and sell futures based on the Fed funds rate and expectations for changes in that rate. If you think the Fed will raise rates in the future you would sell these futures and if you think the Fed will lower rates, you would buy these futures contracts. These are a great way for institutional traders to hedge interest rate risk and speculate on changes in the future.
SUMMARY: What is the Federal Funds Market? How does The Federal Reserve set interest rates? CHALLENGE QUESTIONS: 1) If the Fed Funds Rate has been pushed to zero, and The Fed is supporting the rate by paying interest on reserves, what is the difference between a 1-Year Treasury at 0.25%, and a 1-Year Reserve Deposit at 0.25%? 2) If Treasury only printed money and drove the Fed Funds rate to a permanent zero, would inflation be driven by interest rates, or fiscal policy? CORRECTIONS & AMPLIFICATIONS: 1) In the examples in the video, I set the rate on 1-year Treasuries to the same as the Federal Funds Rate to prove a point that they are closely related. However, both The Fed Funds Rate and Treasuries rate fluctuate in a [narrow] range day-to-day. The Fed Funds Rate might fluctuate between...
We are starting to price back in a December Rate hike by the Federal Reserve, slowly but surely we are coming off the zero bound for this market event.
Economics of Money and Banking
Discount Rate vs Fed Funds Rate vs Prime Rate?
Here I introduce the Taylor rule, a rule of thumb for determining the target Fed Funds rate.
SUMMARY: What is the Federal Funds Market? How does The Federal Reserve set interest rates? CHALLENGE QUESTIONS: 1) If the Fed Funds Rate has been pushed to zero, and The Fed is supporting the rate by paying interest on reserves, what is the difference between a 1-Year Treasury at 0.25%, and a 1-Year Reserve Deposit at 0.25%? 2) If Treasury only printed money and drove the Fed Funds rate to a permanent zero, would inflation be driven by interest rates, or fiscal policy? CORRECTIONS & AMPLIFICATIONS: 1) In the examples in the video, I set the rate on 1-year Treasuries to the same as the Federal Funds Rate to prove a point that they are closely related. However, both The Fed Funds Rate and Treasuries rate fluctuate in a [narrow] range day-to-day. The Fed Funds Rate might fluctuate between...
In 2001, Logan Marr and her sister were taken by Maine CPS, after the grandmother called the state to say she thought the child was not safe in her mother's care. And Before it was over, Logan was dead, after being bound to her high chair with over 40 feet of duct tape, for being angry that they took her away from her mother. The state social worker, turned illegal foster mother who killed her, Sally Schofield, is now doing 20 years in prison for manslaughter. See the vid here on showing why these things happen. Under DHHS DOUBLE BILLING and Federal funding fraud!!! The state gets paid millions to do this by the feds, and MAINE and many other states have been using children and families for over 20 years as federal funding cash cows, by double billing them for all child services, and other...
Today we start the session with our fundamental analysis of the currency markets. We also look at gold. However, after a miss on the ADP report, we get into a detailed discussion and then a full blown lecture about the interbanking system, the Fed Funds rate and the interest charged by the Fed at the discount window. In this video you will actually learn how to look at the market from the point of view of a banker. We develop a bank balance sheet and look at how the manager would make management decisions about loans and reserves. From this, you will learn more about how the central bank has an impact on an economy. I also discuss what I think the Fed will do BEFORE they raise interest rates. Hey forex traders, join our live trading strategy sessions here: https://po.tradersway.com/...
Great interview with Dr. Jim Willie, Editor of the Hat Trick Letter that can be found on www.GoldenJackass.com Topics: 1) Lost US leadership globally, with Petro-$ gone and USMilitary retreat - numerous hidden consequences to the dismantled Petro-Dollar Standard - rising USD exchange rate (not from strong economy) has slammed a few areas - US energy sector in absolute wrecked tatters (bankruptcies, debt defaults) - US export trade in standstill (empty Calif shipping containers) - assaults on Wall St bank balance sheets, with derivative losses (covered by Hidden QE) - led to Russian Military inclusion in northern Middle East front - Russia saw threat to Tartus Naval Base, to Turkey and Bosporus entry, to Russia front - duplicity of the ISIS/ISIL entire movement and position by USGovt - g...
All across the US, police departments are nothing but a organized Gang of Thieves. This video will show you just a few ways police and government officials are outright robbing the public of there property and money. Most police departments Totally Depend on abusing the Civil Asset Forfeiture law. In some parts of the country this abuse of power is totally out of control and it's getting much worse with each passing year. In 2002, this was a $220 million dollar “equitable sharing” of funds, 20% Feds, 80% police keep. 2010, over $500 million. 2015, this is a $4+ Billion dollar per year “equitable sharing”, Let's call it what it really is, legal robbery by government. By 2017, $5 Billion. Do you see a problem here ? With so much money being made, this problem is only going to get much worse...
The beer gang discuss "Audit the Fed," Immigration, DHS funding and much more!