Pecuniary Paucity

Last week, the overnight repo rate, the rate at which banks and other financial players lend to each other against super-safe collateral jumped to 10% from 2%! While this also happened during the dark days of the Lehman Brothers collapse in 2008, the reasons are different. Then, it was fear of a bank collapse, now it’s simply an accidental shortage of reserves due to one-off factors and mild Fed mismanagement.