US Banking Crisis - Part 1

The credit crisis of 2007 and 2008 explained in a 3 part series.  Fed funds futures and  money supply are discussed in part 1.

The speaker discusses the impacts of the credit crisis on the futures market.  He reviews the fed fund futures which tracks the movement of the fed funds interest and anticpates changes in this rate.  He talks about how this indicator is reflective of the economic condition.  As rates fall, the system is strengthened with new liquidity. 

He then moves on to discuss the aggregate reserves of depository institutions and the monetary base.  Banks need to keep a certain amount of reserves on deposit as part of the fractional reserve banking system.  It has been very effective in growing the economy for several decades.  He covers the two types of reserves held by banks; borrowed and non-borrowed.  Non borrowed represents the cash position that a bank has while borrowed represents the amount of money borrowed by the bank from the Fed.  The speaker discusses a trend of higher borrowed assets and lower non-borrowed assets.  He believes this is a warning sign of bad things ahead. 
Tim Ord
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