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The Fed's plans to drain liquidity from the banking system, prevent inflation

The Fed plans to use "reverse repos" to drain liquidity from the banking system.

What's a reverse repo? It is quite simple. Let's start with the regular Treasury auctions. The primary dealers (dealers approved by the Fed) and indirect bidders, usually foreign and other investors, bid on Treasury notes and bonds. That leaves the primary dealers with an inventory on hand; that is, unless they then can resell it to other investors.

Continue reading The Fed's plans to drain liquidity from the banking system, prevent inflation

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Last updated: May 28, 2012: 05:28 PM

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