Friday, August 5, 2022

The American Economy enters in Panic Mode

The American Economy enters in Panic Mode

with QE4ever The FED enters in Panic Mode as the Repo Madness Continues -- Economic Collapse Debt service is about $500 Billion in 2019; the deficit is right about $1 Trillion. The US government is borrowing money to pay the interest on the Debt. A standard definition of Bankruptcy. And, it's during what is called an Economic Expansion. The only source of funds that could pay off part of the Debt, maybe a 1/3 of the $22 Trillion, is, to tell the truth about the Mortgage-Backed Security mess. Cleaning up that mess may have cost a few $Trillion - but many more $Trillions were made "on the way up" - via fraud. The US gov. has a legit reason to claw back some of those Credit Derivative profits, but it would involve seizing the wealth of a demographic that is obviously given preference in US society - Jewish Bankers. Since the US gov. doesn't have the stomach for that, they have no options but to print digitally. Welcome to The Atlantis Report. It's no longer just me using terms like "Armageddon, crisis, devastating, chaos, Great Depression;" it's leaders of the world's most noble and conservative central banks! The big banking squeeze that began in September never went away. In fact, repo auctions last week looked worse than ever, in spite of the Fed's launching of QE4ever. With a new $60 billion a month in permanent re-inflation of money supply pouring back into the economy now, the Fed still has found itself back to where it began in September with its repo operations becoming hugely oversubscribed, meaning it has more takers than what it is offering to give. Dealers submitted $52 billion in securities for two-week "loans" of new temporary money this past week against the Fed's offer to do $35B worth. The question here is who has access to Repo, and where does the money go?? The repeating issue of a dollar shortage in overseas demand comes to the front. And it may be nothing more than Turkey dollar debt and the invasion of Syria. On a larger scale it goes to China, thats' Doug Nolands read, the Fed is not simply liquifying US markets he is pumping global markets. Why? The usual signs of credit tightness are not there, LIBOR has been steady lower. So no cracks in the system they are frantically patching? May just be the dollar markets reacting. It's a one-day creation of new money in the system until they roll it over and over again, as they are doing. So, the one day, added only $75 billion ever since that repo began. "Only." Sheesh. That was not enough, however, so they upped it to $120 billion that they now keep rolling over indefinitely. Because those one-day repos do not aggregate (just as you say they do not), the Fed added a repo operation with a fourteen-day term, and they have up to three of those running at the same time because they do one or two fo those operations a week. They set that at $30 billion per operation; so, at any given time, the term repos were adding another $90 billion in aggregate into the monetary system. That was not enough, so they upped it to $60 billion per term repo, which means at any given time the term repos are adding $180 billion into the monetary system in addition to the $120 billion added by the constantly rolling-over overnight repos for a total of $300 billion in new money in the system at any given time since all these operations began. That was not enough, so they started $60 billion per month in permanent QE which they claim is not QE simply because they are doing it at the short end of the interest curve to uninvert the curve, which, of course, is utter nonsense because it is still new money created out of nothing that goes into the monetary system. Since this would be QE4, if they were calling it QE, I'm going with the term QE4ever because we have already seen they have NO capacity ever to remove this from their balance sheet. Therefore, it does monetize the US debt as permanent new money created out of nothing to buy government bonds. It is technically QE since it expands the FED's balance sheet. Would it unwind the repo's then it would be QT since it decreases the balance sheet? In the end, it is just a twist by the FED, because they have too. Bernanke lied under oath that it was not monetizing the Debt since they would unwind it once the economy was stable again. Well, they proved that to be impossible. Returning to QE would instantly prove to the market that it would be QE4ever and send the long end rates spiking and the Dollar crashing. So they come up with this, but of course, it is just REPO in perpetuity. In the meantime: the three month - 10-year yield spread up from 15 bp this morning to 20 bp now. So it looks like markets already start to move, specifically the long end. The FED can't undo the tightening by starting QE again. The FED was able to pull off the increase of its balance sheet because it promised it was only a temporary fix, which would be unwound when the economy was stable again. Investors believed that, and therefore the Dollar didn't crash. Now they are beginning that the FED can never go back without deflating the financial markets and the economy. This, by definition, means that inflation expectations will be revised, and the long end of the bond market will shoot up. This will blow op the junk part of the bond market (and very likely the triple B part), and it is game over. Also, the increase in the 30 years will blow up the housing market. As of this morning, the 10-year yield is up another four bp to 1.84% and the 30 years to, to 2,33%. Spread three month-10 years up to 15bp. The FED is stuck; they can try to prevent the wheels from falling off. But they have no idea how long they will succeed in that. That is why it is now an unrecoverable disaster. We have to keep compounding the Debt by half a trillion each year just to maintain interests payments, AND that half a trillion in interest has to increase each year by the interest on the additional Debt we take out each year to make the interest payments! And that is where we are with nearly record-low rates. So, the whole government would blow up if rates rise, which is why the Fed is forced to keep them low and to go back and stay with QE in order to keep monetizing the government debt (while claiming, of course, that it is not doing that as monetizing the Debt is illegal in the US). What a charade! And nearly everyone goes along with it and doesn't even question it because they don't want to deal with the question.

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