Tag Archives: Federal Reserve

Repo the Domino

08 Tuesday Oct 2019

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These things are coming almost too fast to keep up with. My TPC column, which will be published after I schedule this post, though not necessarily before the post hits, is called “Repo-ing the Economy.” It’s more about the fun and games of the Fed’s dark sorcery. Now, this.

Some investors are concerned that recent turmoil in a key short-term cash market where banks borrow to fund operations could exacerbate difficulties trading bonds.

Spikes in the cost of overnight loans using repurchase agreements, or repos, could hit bond trading in two ways, investors and analysts said. Rising repo rates make it more expensive for securities dealers to borrow money and to hold government bonds—actions they take frequently to facilitate client trades and manage their risks.

In the repo market, where banks and money-market mutual funds typically lend cash for periods as short as one night in exchange for safe collateral such as Treasurys, rates surged as high as 10% last month from about 2.25% amid an unexpected shortage of available cash in the financial system.

Couple this with what’s going on with China’s cash crash and you get the feeling that a global financial meltdown is upon us – now, not in the future. Bank run, anyone?

And the “Money” Just Flows…

05 Saturday Oct 2019

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From the sorcery. More and more and more Fed funny money! For the banks, not you.

The New York Federal Reserve Bank said Friday it will continue to inject billions into the US financial plumbing on a daily basis through November 4, extending the operations by three weeks.

The effort, begun in mid-September, is aimed at preventing a spike in short-term interest rates, the New York Fed said in a statement.

Rates spiked last month as banks struggled to find the cash needed to meet reserve requirements, prompting the Fed to pump billions into US money markets.

It announced daily operations which were due to end October 10, but even then demand exceeded supply on some days.

In Friday’s announcement, the New York Fed said it will continue to offer up to $75 billion a day in repurchase agreements — exchanging secure assets for cash for very short periods — as well as 14-day “repo” operations twice a week of at least $35 billion each.

Economists say an array of conditions converged to dry up liquidity in the banking system — including quarterly corporate tax payments and a surge in government debt sold to investors, which drained cash out of banks.

Like I said the other week: The dog ate my liquidity, Mrs. Wall Street!

Seriously, this is serious. My calculator’s “zero” button broke. What are they shooting for? $3 Trillion? $4 Tr? 5??? The Moon? And, does this possibly have an end? Other than the inevitable, I mean.

Might have a TPC column lining up here.

The Bankster Speaks

28 Saturday Sep 2019

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With a forked tongue. Liars gonna lie.

Proposals to curb immigration will weigh on economic growth in the United States where the existing workforce is growing more slowly as the population ages, Dallas Federal Reserve president Robert Kaplan said on Thursday.

“If you think you are actually going to cut the number of immigrants and grow GDP, those two things do not go together … You need to grow the workforce,” Kaplan said.

He suggested the United States consider reforms that would allow more immigration based on surveys of needed skills. “Trade and immigration loom very large as opportunities for the U.S. to grow faster as opposed to threats.”

Kaplan. Kaplan. Why does that name??? Nevermind. Wouldn’t it be weird if there was some way to increase the workforce without invasion? Crazy, I know.

About the NY Fed Funny Money – From TPC

24 Tuesday Sep 2019

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“Robbery in Progress at 33 Liberty Street!”

…Said no policeman ever.

“In globalist Amerika, banks rob you!” – old Russian joke (and true).

So, early last week, interesting news broke that the New York Federal Reserve Bank was deploying a little cash in order to maintain interest rates. When one eases quantitatively, the quantities are relative. It turns out “a little” equals about (or, easily could equal about) $2,300,000,000,000 (two trillion, three-hundred billion dollars). Chump change, right? Back to the climate hoaxes and football rape telethons!

But, this is serious. On Monday, September the 16th, the NY Fed started pumping $75 Billion per day into the commercial banks. This will continue through and until October 10th. That’s $1.875 Trillion right there. As a bonus, the crooks, er, the Fed will also spring $420 Billion in REPO BUCKS!!! (like a lottery game or something)(14 days X $30 Billion per day) in an attempt to gift yet more free fake money to the constituent ownership of the Fed. If this seems to you a tad self-serving, then you’re on to something.

All of this is happening during what we are assured are the very best of economic times. And, again, it’s all taking place in a span of less than a month. !Poof! Just like that the banksters have another $2.3 Trillion to play with, waste, or hoard. Temporally – and this is really fun stuff – $2.3 Trillion was the value of the entire economy as recently as 1950. In other words, what took previous generations 174 years to accumulate, the Fed just summons up out of the Dark Crystal instantly. This is why I now refer to what passes as practical economics as “sorcery.” There’s no other label that fits.

What’s the deal with the rates? The Fed, in acts of utter desperation to forestall a depression or worse, is lower borrowing rates towards zero. Then, they’ll go negative. How far into negative territory doesn’t really matter. Interest rates are the cost, the price of borrowing money – how much the money is itself worth as a stand-alone item. Negative rates indicate a situation worse than worthlessness, of positively detrimental values. The total fulfillment (and beyond) of Gresham’s Law.

The news suggests how bad things are. If the Fed adjusts rates downwards, but then has to bribe the banks to take the cheaper money, then that means the effective rates are already even lower and falling. It’s like robbing Peter, so they can afford to rob Paul. Literally anyone else would be in jail. Ask Bernie Madoff. Excuses aplenty will be quietly provided. The dog ate my liquidity, Mrs. Wall Street! You may safely believe whichever of them you like. Just know that all of it is a sham.

…

THE WHOLE CRASS MESSAGE AT TPC!

Very, Very Small Liquidity Crisis

20 Friday Sep 2019

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What the hell is going on in NYC? Why aren’t the police down at 33 Liberty Street making arrests? Something is very wrong.

The New York Federal Reserve Bank said Friday it will inject billions into the US financial plumbing on a daily basis for the next three weeks in an effort to prevent a spike in short-term interest rates.

The Fed will offer up to $75 billion a day in repurchase agreements — exchanging secure assets for cash for very short periods — through October 10, it said in a statement.

In addition, it will offer three 14-day “repo” operations of at least $30 billion each.

And, this started on Monday (not starting today or next Monday) – 25 days of crisis cash? Plus another ten days of REPO BUCKS!!! (Like something out of the “education” lottery, no?) Run those numbers and this adds up to a $2.3 TRILLION DOLLAR* BAILOUT of the G-D banks! Out of thin air! I ain’t buying any of the excuses – bond-buying sprees, CDS collateralization, Antonio Brown getting cut, whatever. This is financial sorcery running amuck. The Goldman Sachs says we’re in for a rough October. No kidding, guys.

*$2.3 Tn, again just *POOF* created out of nothing, is almost enough to pay off all existing student loans and all credit card balances. Remember that, Ma and Pa Debtor, when the government runs up even more debt, on your backs, for another, larger future bailout, while telling you “we all have to do our parts” to help the “Too Big To Fails.” Remember and vote or something. Hold your breath.

Swapping Fake Money for Fake Money

18 Wednesday Sep 2019

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The NY Fed found a rabbit in its hat of tricks – more cash for the commercial banks.

The New York branch of the U.S. Federal Reserve added billions more in liquidity to gummed-up intrabank lending markets Wednesday, following the first intervention in more than a decade only yesterday, as a worrying spike in overnight borrowing costs continues to perplex investors and complicate today’s Fed rate decision.

The New York Fed offered $75 billion in cash to broader markets, in exchange for eligible collateral such as U.S. Treasury bonds or mortgage-backed securities, in order to hold the Fed’s key rate inside its target range of between 2% and 2.25%. It accepted its full allotment, even as bids totaled $80 billion, lowing the range from 2.6% to 3% prior to the operation to 2.25% to 2.6% immediately afterwards.

The New York Fed was forced yesterday to inject $53.2 billion after overnight borrowing costs surged close to 10%, thanks in part to the hefty burden of primary dealers in the Fed system taking down nearly $45 billion each day in gross U.S. Treasury bond issuance, and reducing spare cash — known as excess reserves — at the same time. In fact, excess reserves have fallen by $171 billion so far this year, according to Fed data, and are down $1.4 trillion from 2014 levels.

All in exchange for Fed-enabled Treasurys. A very sickly little rabbit, probably rabid. Today and yesterday… Have you even heard of this cash crisis? Surely this is nothing that negative rates can’t cure!

The Fed’s Cool New Tool!

12 Monday Aug 2019

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Introducing the amazing new Countercyclical Capital Buffer!!!!!!

Federal Reserve officials are weighing whether to use a tool that could reduce the risk of a credit crunch in a downturn.

The tool is known as the countercyclical capital buffer. It allows the Fed to require banks to hold more loss-absorbing capital should the economy show signs of overheating, or to keep less of it during bad economic times. The buffer applies generally to banks with more than $250 billion in assets, including firms such as JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc.

The Fed’s board of governors so far hasn’t used the tool, approved in 2016. Its rule on the buffer says it should turn it up when economic risks are “meaningfully above normal” and reduced when they “abate or lessen.”

Now, some Fed officials are debating whether it is time to use the tool, which could provide banks with additional lending firepower in a subsequent downturn. It isn’t clear when they might make a decision.

I have obtained an exclusive image of this cool new tool:

Screenshot 2019-08-12 at 10.35.26 AM

Destroy the Economy to Save it

06 Tuesday Aug 2019

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Financial sorcery at work.

“The American lifestyle and economy depend on a vast number of implicit guarantees — systemic forms of entitlement that we implicitly feel are our birthright,” he wrote in a post on Monday. “Chief among these implicit entitlements is the Federal Reserve can always save the day.”

In either an inflationary spiral or deflationary collapse of self-reinforcing defaults, Smith warned that the Fed’s “save” would destroy the economy.

“Other than the phantom ‘wealth’ of real estate and stock bubbles, the vast majority of the ‘wealth’ generated by the Fed’s actions of the past 20 years has flowed to the top 0.1%,” he said. “This will become self-evident once the phantom gains of speculative bubbles vanish.”

Nah. Good times are here to stay – forever…

Utterly Confused

01 Thursday Aug 2019

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It’s so hard to predict where the sorcery will go next.

Major Wall Street economists were largely in agreement that the Federal Reserve would cut rates by a quarter point heading into the second day of its two-day meeting on Wednesday afternoon.

But after a confusing news conference by the Fed chief, their forecasts for future rate policy are now all over the place.

The Fed cut its key interest rate by a quarter-point for the first time since 2008. But then Powell said after that this was just a “midcycle adjustment,” causing the stock market to drop and rates to firm.

The middle of the greatest “bull market” in human history, when (fake) money is surely in high demand, is just the time to cut interest rates! Let me tell you… What will the Fed do next? Cut ’em again. Again, after that if necessary. They’ll take it as low as they can – and, there is no downward limit – in an attempt to keep the ride going just a little longer. I think they have one of those toy eight balls to help guide their deliberations. Voodoo is more science than art, you know.