Get your Money Out of The Banks Now : Banks have No Liquidity -- 2008 all over again.

The Liquidity shortage is getting worse by the day . The banks were unwilling or unable to lend on a collateralized basis, even with the promise of large risk-free profits. This behavior reveals something very important about the banking system and points to the end of market stimulus that has been around for the past decade. Interbank borrowing is the engine that allows the financial system to run smoothly. Banks routinely borrow and lend to each other on an overnight basis to ensure that all banks have ample funds to meet daily cash flow needs and that banks with excess funds can earn interest on them. Literally, years go by with no problems in the interbank markets and not a mention in the media. Before the 16th of September , a premium of 25 to 50 basis points versus Fed Funds would have enticed a mob of financial institutions to lend money via the repo markets. On the 16th, many multiples of that premium were not enticing enough. Most likely, there was an unexpected cash crunch that left banks and/or financial institutions underfunded. The media has talked up the corporate tax date and a large Treasury bond settlement date as potential reasons. We are not convinced by either excuse as they were easily forecastable weeks in advance. Regardless of what caused the liquidity crunch, we do know, that in aggregate, banks did not have the capacity to lend money. Given the capacity, they would have done so in a New York minute and at much lower rates. To highlight the enormity of the aberration, consider the following: Since 2006, the average daily difference between the overnight GC repo rate and the Fed Funds effective rate was .025%. Three standard deviations or 99.5% of the observances should have a spread of .56% or less. 8% is a bewildering 42 standard deviations from the average, or simply impossible assuming a traditional bell curve. on September 16, 2019, when overnight repo traded at 7%-8%. If banks truly had excess reserves, they would have lent some of that excess into the repo market and rates would never have gotten close to 7-8%. It seems logical that banks would have been happy to lend on a collateralized basis at 3%, much less 7-8%, when their alternative, leaving excess reserves to the Fed, would have earned them 2.25%. Further confirmation that something was amiss occurred on September 17th, 2019, when the Fed Funds effective rate was above the upper end of the Fed’s target range of 2-2.25% at the time. This marked the first time the Fed Funds rate traded above its target since 2008. On September 17th, the Fed entered the repo markets with a $53 billion overnight repo operation, whereby banks could pledge Treasury collateral to the Fed and receive cash. The temporary liquidity injection worked and brought repo rates back to normal. The following day the Fed pumped $75 billion into the markets. These were the first repo transactions executed by the Fed since the Financial Crisis . On September 16, 2019, when overnight repo traded at 7%-8%. If banks truly had excess reserves, they would have lent some of that excess into the repo market and rates would never have gotten close to 7-8%. It seems logical that banks would have been happy to lend on a collateralized basis at 3%, much less 7-8%, when their alternative, leaving excess reserves to the Fed, would have earned them 2.25%. Further confirmation that something was amiss occurred on September 17th, 2019, when the Fed Funds effective rate was above the upper end of the Fed’s target range of 2-2.25% at the time. This marked the first time the Fed Funds rate traded above its target since 2008. On September 17th, the Fed entered the repo markets with a $53 billion overnight repo operation, whereby banks could pledge Treasury collateral to the Fed and receive cash. The temporary liquidity injection worked and brought repo rates back to normal. The following day the Fed pumped $75 billion into the markets. These were the first repo transactions executed by the Fed since the Financial Crisis . These liquidity operations will likely continue as long as there is demand from banks. The Fed will also conduct longer-term repo operations to reduce the amount of daily liquidity they provide. The bottom line is that the role excess reserves played in stimulating the markets over the last decade is gone. The "Federal" "Reserve" is doing what it has always done, help itself and the private banks it is comprised of .Welfare is cheap and all the money is in position on with the QE welfare for the big banks . I'm mostly at a loss to understand just what the hell they are doing. Is it going to take an 80 billion dollar a day 'cash injection' into the economy, just to keep the ponzi rolling . A heroin injection for a dying, convulsing junkie. They're trying to stop the bleeding. By doing QE 4 right away after Powell has been constantly yapping about how great our jobs market is, it would be an admission of defeat, and markets would collapse. By doing these injections in small increments, they hope to stabilize things. I think there are cases where the banks are not only fractional reserve / fiat lending, but with all the excess reserves they had, they begin to engage in fractional collateralization. Or - the same assets are pledged as collateral to more than one entity. They have learned this behaviour from watching the gold and silver markets - where the outstanding paper shorts are more than a years mine production and the gold leasing pledged amounts are multiple times the amount of gold available on the entire planet. It is easy to see that bankers abuse their IOER privileges and more QE will only be used for executive bonuses rather than inflation. Let the public in on this helicopter money. Allow everyone with a checking account write checks over their account balance for a 2 week period as the next QE4. I can imagine that it will be put to better use than banker bonuses and it would be just in time for Christmas shopping. If some individuals can't balance their account by January, the Fed can put it on their growing balance sheet. To sum all this up : Prior to '07 - '08 Banks and Markets were recreational drug users. QE 1 to QE3 created full blown chemically dependent addicts. After 8 years, drug tolerance has become so high that no amount of injections of even the highest grade of heroin can give the Banks and Markets the fix they need to get well; and, just like the real junkies on Skid Row when they reach this point, Banks and Markets are going for a Hot Shot injection. Of course, anyone who has done, or witnessed someone who did a Hot-Shot, knows that this is a guaranteed OD 100% of the time with a very high death rate. Globalist oligarchs aren't making money because the main street economy is in recession. The Fed prints the money and hands it to them to satisfy their greed. best banana republic economy ever . The usurers are doing what the usurers do best and that is to rob a country blind, bankrupt it, then find a scapegoat for the dunces to butcher when broke, while they find a new host to scalp. Studying economics, I was taught Money Printing was as bad as it gets and that there are repercussions for doing it. Well not in the USA. Such is the level of financial rigging, the nation of exceptionalists never suffer from any adverse market reaction for money printing. I simply cannot take this disconnect by the Mainstream media and the markets. It's a total sham. Gold and Silver for me, because surely, this show cannot go on for much longer . And audit the fucking Fed so we can find out what toxic assets they are buying from the big banks!



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