Bennie’s Rule

Professor Bernanke is giving his testimony to Congress. Blah...Blah...Blah.

Here are some interesting graphs from the Fed itself. They have to do with Bennie’s new monetary “rule” of force feeding “liquidity” into the marketplace. It seems that banks were reluctant to use the Discount Window to borrow reserves because it would be a sign of weakness. So Bennie decided to just auction off reserves to the highest bidder thereby forcing liquidity into the market and providing cover for the banks themselves. We can see below the effect since December of 2007.



This must be so pleasurable for the old economics professor to see the upward sloping “supply curve” of money. And as we can see below this is a “new rule”.