Reply #8: Are you really really sure?!

[jordi_fanclub]

"Repos, correlation and Fed intentions and hopes (http://www.nowandfutures.com/articles/20060426M3b,_repos_&_Fed_watching.html)

So that's what repos are - simply a loan that the Fed makes to banks. The interest rate varies and has been as low as 1% and never higher than the Fed Funds3 rate. The term of the loan varies too - from one day all the way out to what the Fed calls permanent, which means it’s of infinite length (it never comes due or has to be paid back per our current understanding).

What do the banks do with those cheap loans of literally billions of dollars?
Well - they either lend them out or invest them or both... and since inflation in its simplest form is creating too much money - it usually is inflationary. Repos are literally money created out of thin air.

The loans the banks make multiply the money via the magic of "fractional reserve banking", and the investments the banks make very frequently go into the stock market - and that's why there's a strong relationship between repos and the stock market."


Or in "pictures":