I’m not sure why Trump continues incessantly to harangue the Fed about cutting the Fed Funds rate. The Fed is printing money and sending it to the stock market via the banks. It’s a much more effective policy tool to accomplish Trump’s number one policy agenda, which is to drive the stock market inexorably higher.
I put “repo” in quotes because the term is a thin veil for what is indisputably the return of “QE” money printing. The statement posted on the Fed’s website announcing the $60 billion per month T-bill purchase operation “explained” that the move is “to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation.”
I use quotes around “explained” because the policy statement is nebulous. The non-reserve liability on the Fed’s balance consists primarily of the money it prints and releases into circulation. Increasing “non-reserve” liabilities is a fancy term for “printing money.” The T-bill “operation” is funded by printing money. The Fed transmits this money into the banking system – not the real economy – by purchasing the T-bills. Presumably as the T-bills mature, the Fed receives the new T-bills printed and issued by the Treasury used to refinance the existing T-bills. The T-bill operation permanently injects money into the financial system.
I surveyed some friends/colleagues who know at least as much as I do about money market fund operations. None of us can figure out the nature of the potential “money market pressures” referenced by the Fed. Perhaps the Fed fears a run on money market funds by corporations and the public? Anyone…Bueller?
The original repo operations in September were supposedly to address third quarter-end liquidity pressures because corporations need cash to pay taxes. Since the passing of the third quarter, the repo operations have escalated to more than double the size of the original repo operation.
I’m not the only one who has noticed the Fed’s furtive behavior. Pam and Russ Martin – Wall Street on Parade – encountered the same roadblock I ran into this past weekend when I tried to pull up the Markets & Policy Implementation and the repo operations web pages: “Site Maintenance – the page you are looking for is temporarily unavailable.” The pages were “temporarily unavailable” all weekend.
I have yet to encounter one reasonable explanation for the reimplementation of money printing – money printing which accelerates in size and frequency almost weekly. Make no mistake, the Fed-apologetic Wall Street analysts have no clue what’s happening or why.
We know that the Fed used printed and Taxpayer money to bail out the banks in 2008. These “Too Big To Fails” would have collapsed without the bailout. The Fed is going out of its way – with help from the Wall Street and media sycophants – to obscure the truth. But it’s pretty obvious, at least to me, that big bank balance sheets are starting to melt down again.
Some entities obviously have a solvency issue. They have massive payments to make but no room to borrow. The Fed is their last chance saloon. The identity of the insolvent entity/ies is secret. Is it a bank? A derivative blow out? More important is the recognition that the flow of credit is disrupted and that massive solvency issues are in the process of taking the world economy down. But there is a much bigger, darker story hidden in the background. It is about a highly criminal US establishment that has looted the country in secret for many years. At least $21 trillion has been printed in secret and stolen, just between 1998 and 2015. In order to hide this horrendous criminality, a financial coup happened in 2018. It is called FASAB 56. US government books are now secret to make it impossible to detect the stealing.
Nice analysis. Hey, I’m in Denver area. Let’s grab a coffee sometime. You should have access to my email from this comment.
A difficult investigation, I’d say – trying to pinpoint the problem. Kinda like determining which racket, run by the mob, exposes them the most to criminal prosecution. They got so many, it’s hard to know where to start.
Let’s face it, banking today is criminal racketeering – albeit, state condoned. I don’t believe any of their financial reporting since, in my opinion, it’s fraudulent. In reality, we have no idea how solvent they are. We also can’t believe the regulators take on this, because they are captive to these criminals.
So take your pick. I’d check d) – all of the above.
Hello Dave, I would like to add an explanation to my posting. The reason for the repo operations, the money printing etc is the extraordinary hollowing out of the US and global economy through systematic looting by the globalist powers. The USA is a rich country that been robbed blind by organised crime. This criminal network needs to be removed to have any realistic chance of an economic revival.
The best explanation I’ve heard is from Lee Adler: http://wallstreetexaminer.com/2019/10/repo-market-bank-regulations-and-the-slings-and-arrows-of-outrageous-leverage/
Basically, the US Treasury is flooding the world with new supply of Treasuries and the banks are stuffed to the gills; now the Fed is bailing them out.
The debt ceiling was fixed until August, so the Treasury wasn’t issuing any debt. This was around the time the curve was most inverted. But then the ceiling was suspended and the issuance floodgate opened. The curve uninverted and the Fed is now scrambling to keep the entire curve from blowing out.
Doesn’t explain why the big banks with $1.3 trillion in excess reserves
are not using it to pick up some extra overnight yield in the repo market
vs getting paid IOER. The Treasury excuse is not valid. Besides, it’s not
the banks’ job to fund new Treasury issuance. It’s the market’s job.
The Fed is printing money because bank balance sheets are melting down under
the stress of questionable loan quality they are stuck with. For example:
To some extent it is the banks’ job to fund the Treasury issuance. Primary dealers are required to bid at Treasury auctions.
As for banks with excess reserves not loaning out, they can earn 1.8% guaranteed from the Fed. If some other bank needs money real bad, the lending bank might not be paid back, i.e. there is some risk. Also, if the repo rate spikes, people might believe the Fed is losing control of interest rates, making the Fed look bad, so the Fed steps in and fixes repo rates.
You haven’t convinced me.
We are now entering options expiry week. Comex options on gold/silver expire on: Monday Oct 28. Look for a smash down on PMs on Monday so all the options expire worthless as the marketmakers pocket and ensure their profit.
Gold went to $1,520 today and then the Cabal smackdown to $1,504 before it went up a few bucks to end Friday. If anyone thinks they have lost control, I don’t think so. They took the stock market to around the record all-time highs.
Market rigging is doing just fine…..with an infinite supply of dollars from the Fed at their fingertips they can do anything anytime.
Depends on your definition of “control”.
Do you imagine that *they* were happy seeing gold shoot up a couple of hundred dollars an ounce in recent months?
That’s a rhetorical question, which further begs the question how much control do they actually have?
Dave, Hope this helps with your research.
Yep – I look at that page quite frequently
Best idea not to panic, , for Masters it’s accumulation time.
It’s good idea to follow and accumulate more shares in good mining companies
Greetings Dave, I think the Martens’ came up with a partial answer today. It crossed my mind as I read your piece. I figure that eventually the really big money will sacrifice the banks and that they are pulling their holdings out gradually. I ran this by Charles H. Smith a few years ago. The fact that now since derivative holders are the senior creditors on all bankruptcies is especially significant to me. (Ellen Brown on 2005 Bankruptcy Act) I’m assuming that individuals or trusts can hold derivatives as well.
Also I came across this today, which may have significance. https://www.dandodiary.com/2019/08/articles/d-o-insurance/the-fed-has-a-message-for-banks-about-do-insurance/