According to economist Edin Mujagic, if banks start borrowing money at the so-called Federal Reserve Discount Window, that’s a sign that something is up. “When they come to lend there, the names of the banks are one of the Fed’s best kept secrets.”
Basically, the US Federal Reserve is a bank where banks can borrow money, Mujagic explains the playing field. “And within that system are all kinds of loan counters. And if that discount window had been a physical counter, it would have been hidden by the main entrance. Somewhere in an alley. Banks only come there if they really can’t get money anywhere else in the financial markets.’
And just because there’s a stigma surrounding that counter, it’s interesting to notice when it gets busy, according to Mujagic. “You can see it as the first sign that something is up,” he continues. When banks come to borrow money, the names of those banks are one of the Fed’s best-kept secrets. In normal times, nobody goes there at all, but if something extraordinary happens in the world, it’s patronage.’
crisis
Mujagic cites October 2008 as an example. “At that time people were borrowing about $100 billion a week. Or how about March 2020, at the start of the pandemic, when it cost $50 billion a week. But normally no one comes by.’
It is all the more surprising that this situation has recently changed again. “For the past few weeks, lending has been just over $10 billion a week, so we have figures coming in again – wearing hoodies and sunglasses. It’s very little compared to March 2020, but you shouldn’t be watching it. You have to compare it to normal weather, and then nobody comes. So the fact that there are now banks lending money there is remarkable.’
Foreigner
Mujagic even takes it a step further and calls it weird. “For months, maybe even years, you’ve heard from all sides that there’s anything but a shortage of cash in the United States,” he continues. “So if you can’t fund yourself as a bank in the normal way, that could be a harbinger of a problem to come.”
Emphasize that it may be an omen and is not direct. Because we don’t know. But I’d keep an eye on that before the start of 2023, because if that loan counter’s activity picks up, you can slowly but surely think about the conclusion that there might be something underlying to the American banking landscape.’
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
