Situation Continues To Deteriorate As Worries About Greek Crisis Intensify

Tuesday, February 10, 2015
By Paul Martin
February 10, 2015

With the crude oil market pulling back and worries about Europe intensifying, today one of the legends in the business sent King World News a power piece that warns the global economy is continuing to deteriorate as worries about the Greek crisis intensify.

By Art Cashin Director of Floor Operations at UBS

February 10 (King World News) – Not Your Father’s Rate Raise – As Wall Street watches carefully to see if “patient” is removed from the next FOMC statement and breathlessly await Janet Yellen’s Humphrey/Hawkins testimony, there is very little discussion of the likely unusual manner and methodology of a rate hike in today’s banking system.

The various QEs and other Fed stimuli have flooded the banking system with so much money that we are awash with “excess free” reserves. In fact, it appears that there are over $2.57 trillion in these reserves that are well over the reserves that are required by the Fed. In order to keep that huge excess from turning into something mischievous, the Fed is currently paying the banks the princely rate 0.25% to keep the reserves in the Fed’s vaults.

It seems to me that given the current situation that the Fed’s most likely means of raising rates would be by hiking the rate they pay for the excess free reserves. Since the banks could then earn the new rate risk free, they would demand a slightly higher rate to lend to business and the public

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