Tag Archives: Federal Reserve

Goldman Spots A Huge Problem For The Fed, by Tyler Durden

Will the Federal Reserve conjure up enough of its debt to buy the government’s upcoming mountain of debt? From Tyler Durden at zerohedge.com:

Last week, the Treasury shocked the world when it announced that in the current quarter (the 3rd of the fiscal year), the US will need to sell a mindblowing, record $3 trillion (pardon, $2.999 trillion) in Treasurys to finance the US money helicopter.

This, after selling $807 billion in the first half of the fiscal year, and another $677 billion in the quarter ending Sept 30.

And since it is just a matter of time before Congress has to pass yet another fiscal package which will be at least another trillion dollars, and up to $3 trillion if the Democrats get their wish, one can say that Guggenheim’s projection of over $5 trillion in debt issuance this calendar year will be wildly conservative.

 

Infinite money printing: Fed now buying ETFs, by Simon Black

The Fed will have to get more printing presses and run them 24/7 to have any chance of bailing out the billions in corporate debt that will otherwise default. From Simon Black at sovereignman.com;

Just when you thought they couldn’t come up with any more crazy ideas, the Federal Reserve announced last night that they will start buying Exchange Traded Funds, effective immediately.

Just to be clear, this means that the Fed is going to conjure money out of thin air, and then use that new money to buy ETFs.

But not just any ETF. The Fed is specifically targeting ETFs that own corporate bonds.

The key idea here is that the Fed is trying to bail out bankrupt companies across the Land of the Free.

Under normal circumstances, most medium and large businesses regularly issue corporate bonds (which is a type of debt) to help fund their companies.

This is pretty normal; even very strong and healthy businesses regularly go into debt by issuing bonds.

For example, Apple has been wildly profitable for years. But the company has about $90 billion in debt according to its most recent financial statements, plus they just issued another $8 billion in bonds last week.

Companies all over the world do this, and the total size of the global corporate bond market is absolutely enormous– tens of trillions of dollars.

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America Is a Technocracy, Not a Democracy, by Ryan McMaken

American is run by federal government bureaucracies, not elected officials. From Ryan McMaken at ronpaulinstitute.org:

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Perhaps never before in American history have the unelected technocrats played such an enormous role in shaping public policy in America.

In recent weeks, members of Congress have been missing in action. Late last month, the House of Representatives passed the biggest spending bill in history while most members were absent. Member votes were not recorded and the legislation was passed with a voice vote, which required only a tiny handful of members.

Weeks later, the Senate refuses to even meet, and may finally get around to debating some legislative matters in May. As with the House, a handful of members assembled earlier to approve another enormous stimulus bill. Many Senators stayed home. This is “representative government” in modern America.

But if you thought this lack of congressional action means not much is happening in Washington in terms of policymaking, you would be very wrong. It’s just that the democratically elected institutions have now become a largely irrelevant sideshow. The real policymaking takes place among unelected experts, who decide for themselves—with minimal oversight or control from actual elected officials—what will happen in terms of public policy. The people who really run the country are these experts and bureaucrats at the central banks, at public health agencies, spy agencies, and an expanding network of boards and commissions.

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“Sweep the Leg”, by Simon Black

Unlimited debt and debt monetization will have economic and financial consequences. From Simon Black at sovereignman.com:

It was barely a week ago that the federal government estimated it would borrow $3.7 trillion this fiscal year due to all the Covid bailouts.

Then, only a few days later, the Treasury Department updated the estimate and announced they would in fact be borrowing $4.5 trillion this fiscal year.

That’s an increase of $800 billion in less than a week!

Not to be outdone, the Federal Reserve has printed more than $2.5 trillion in less than 50 days, expanding its own balance sheet by 62% since the start of the pandemic.

I’ve been really hammering this theme lately, but it’s critical to understand: there is no limit to the amount of money they’ll print, or to the amount of debt they’ll take on.

And this has serious implications for the dollar.

It would be foolish to expect that you can create trillions of dollars in a matter of weeks, and take on trillions of dollars in debt, without any consequences whatsoever.

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The Federal Reserve: More Lethal than Coronavirus, by Ron Paul

The economy was in no great shape before the coronavirus outbreak, but the Fed’s actions since the outbreak will do far more damage to the economy and overall American health than the virus. From Ron Paul at ronpaulinstitute.org:

Last week the Federal Reserve announced it will keep interest rates at or near zero until the economy recovers from the government-imposed shutdown. Following this announcement, Federal Reserve Chairman Jerome Powell urged Congress and the Trump administration to put aside any concerns about the deficit and spend whatever it takes to stimulate the economy and combat coronavirus.

The Federal Reserve previously announced it would make unlimited purchases of Treasury securities, thus encouraging Congress and the president to increase spending and debt. With some members of Congress talking about another multi-trillion-dollar stimulus bill, and with President Trump proposing a two trillion dollars infrastructure plan as a way to get Americans back to work, it is obvious, and not surprising, that Congress and President Trump gleefully agree with Powell’s advice.

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David Stockman on the Destruction of the Financial Markets and What it Means for You

The economic consequences of lockdown lunacy are going to be far more severe than most people reckon. From David Stockman at internationalman.com:

International Man: Decades of money printing have created enormous distortions in the market. It seems that the coronavirus popped the Everything Bubble. Where do you see the stock market going?

David Stockman: I’d say it’s going in a new direction, and it’s not up year after year, month after month, day after day.

It’s not going to be a world where buying the dip is a no-brainer thing to do.

I think the stock market was insanely valued when the S&P 500 peaked at 3,380 on February 19th.

It has got a long way yet to correct.

Who knows what earnings are going to be?

No one knows how long these lockdowns will last.

You look at the news flow every day, and it’s like a massive political arm-wrestling match between the White House and the Democratic governors and mayors.

I’m sure in their minds, these local and state politicians, think they’re serving the public good and protecting the safety and lives of their citizens. But, the fact is, back in the unstated regions of their brains, they’re focused on taking down the US economy, which was Trump’s only claim to reelection.

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Broken System, by Sven Henrich

The Federal Reserve and its partners-in-crime central banks have damaged the world’s financial and economic system beyond repair. From Sven Henrich at northmantrader.com:

The Fed poisons everything, and I mean everything. From markets, the economy, and I will even go as far as politics. Sounds far fetched? Let me make my case below. But as much as the Fed poisons everything this crisis here again reveals a larger issue: The system is completely broken, it can’t sustain itself without the Fed’s ever more monumental interventions. These interventions are absolutely necessary or the system collapses under its own broken facade. And this conflict, a Fed poisoning the economy’s growth prospects on the one hand, and its needed presence and actions to keep the broken system afloat on the other, has the economy and society on a mission to circle a perpetual drain.

So how does the Fed poison everything?

Let’s start with the Fed actual process of working towards its stated mission: Full employment and price stability.

How does it do that? Well, for the last 20 years mainly by extremely low interest rates and balance sheet expansion sprinkled with an enormous amount of jawboning. The principle effect: Asset price inflation.

It’s not a side effect, it’s the true mission. The Fed has been managing the economy via asset prices even though Jay Powell again insisted on saying the Fed is not targeting asset prices.

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