Read the Beforeitsnews.com story here. Advertise at Before It's News here.

By CoyotePrime (Reporter)
Contributor profile | More stories

Story Views
Now:
Last hour:
Last 24 hours:
Total:

The Fed’s Gifts to Wall Street

Friday, December 20, 2019 20:25

% of readers think this story is Fact. Add your two cents.

“The Fed’s Gifts to Wall Street”

by David Stockman

“A people that values its privileges above its principles soon loses both.”

– President Dwight D. Eisenhower,

“First Inaugural Address” (January 20, 1953)

“This is probably the last real trading day before Christmas; things are going to be very slow next week. But, as of midday, it looks like all the major equity indices are going to close well in the green today, at or near all-time highs too. It’s the most wonderful time of the year, indeed.

This rally – to put a bow on a 25%-plus year for “the stock market” – makes it easy to forget… well, last Christmas Eve, when the S&P 500 Index shed 2.7%. That’s the only time the S&P 500 has ever lost more than 1% on the last trading day before Christmas. We were also talking about the worst December for stocks since 1931. Shortly thereafter, on January 4, 2019, Federal Reserve Chair Jerome Powell signaled his intention to throw in the towel on “normalization” and once more make like Goldfinger’s caddy for everybody on Wall Street. It’s a gift that keeps on giving.

What we’re witnessing right now is proof of our monetary central planners’ obeisance to power. They’ve determined that – at month No. 126 of the current business expansion – a money-market rate of exactly 1.55% day-in and day-out is just the ticket to insure the American economy brims with maximum goodness.

Oh, but the real, live multi-trillion-dollar money markets – including the giant collateralized funding system known as “repo” – don’t wish to cooperate. Here’s why… Since June 30, 2019, the U.S. Treasury, under the watch of the King of Debt, has issued $892 billion of new borrowings. That’s $5.3 billion per day including weekends, holidays, and snow days.

This tsunami has caused the balance sheets of the 23 official government bond dealers to balloon big time. They’ve responded by going to the repo market for funding. Of course, hedge funds and other speculators never miss a beat. They see the Fed’s panicked rollout of “Not QE.” And they’ve gone into overdrive front-running the renewed spree of balance-sheet expansion. They’ve been putting on structured trades in Treasuries and futures markets. Their expectation is their positions will be lifted by the Fed’s new burst of securities absorption – and they’ve also financed those positions on 90% margin in the repo market.

Back in the day, of course, no one would’ve been surprised about the consequence of this massive jam-up in the repo market. The pricing mechanism would’ve been called upon to do its job. Yields would’ve risen sharply, at once discouraging demand and inducing new supply into the market.

Alas, the Fedheads continue to rig money and debt markets. They’re now signaling that they’re willing to offer cash against literally any and all U.S. Treasury collateral that moves or stands still. They’re basically forcing traders to toe the mark exactly at its target policy rate. It actually announced that, through year’s end, it would be injecting upwards of $500 billion of new credit into the markets through multiple fire hoses, including:

• $150 billion of overnight repos;

• $330 billion under nine new term facilities; and

• $60 billion or more of T-bill “permanent open-market operations” purchases.

When this liquidity is fully injected in early January, the Fed’s balance sheet will be back to where it was before that quixotic tilt at “quantitative tightening.” It appears what was an “extraordinary” response to a 100-year event is the new normal. The longest economic expansion history, the lowest headline unemployment rate in 50 years, and a stock market at all-time highs would presumably signify footings regained. By January 14, 2020, the Fed’s balance sheet will be pushing $4.6 trillion – surpassing its previous all-time high of $4.5 trillion.

It’s time to ask, “For whom?” and “For what?”

This isn’t “central banking.” It’s out-of-this-world financial price control. It’s predicated on a false theory – that the Main Street economy can be fine-tuned to inflation, employment, and other macroeconomic targets based on tweaks to money-market rates 25, 50, or even 100 basis points at a time. And even that misses the main point: that monetary central planning simply doesn’t work.

The current occupants of the Eccles Building have tumbled down a deep, dark rabbit hole in feckless pursuit of Keynesian macroeconomic management. Under current conditions of massive demand for funding, their current 1.55% policy target is absurd. It’s of no use to auto-loan borrowers, credit-card users, small-business borrowers, or even corporations seeking term loans for productive investment. The Fed’s money-market peg is of value only to Wall Street carry-trade speculators and stock-market gamblers operating on margin and options. They’re making their powerful friends wealthier. But they’re destroying money. And they’re killing Main Street.”

- http://deepstatedeclassified.com/

And what are they giving you this year, Good Citizen that you were?

Source: http://coyoteprime-runningcauseicantfly.blogspot.com/2019/12/the-feds-gifts-to-wall-street.html

Before It’s News® is a community of individuals who report on what’s going on around them, from all around the world.

Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.

"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.

Please Help Support BeforeitsNews by trying our Natural Health Products below!

Order by Phone at 888-809-8385 or online at https://mitocopper.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomic.com M - F 9am to 5pm EST

Order by Phone at 866-388-7003 or online at https://www.herbanomics.com M - F 9am to 5pm EST

Humic & Fulvic Trace Minerals Complex - Nature's most important supplement! Vivid Dreams again!

HNEX HydroNano EXtracellular Water - Improve immune system health and reduce inflammation.

Ultimate Clinical Potency Curcumin - Natural pain relief, reduce inflammation and so much more.

MitoCopper - Bioavailable Copper destroys pathogens and gives you more energy. (See Blood Video)

Oxy Powder - Natural Colon Cleanser! Cleans out toxic buildup with oxygen!

Nascent Iodine - Promotes detoxification, mental focus and thyroid health.

Smart Meter Cover - Reduces Smart Meter radiation by 96%! (See Video).

Comments

Online:
Visits:	1,602,997,062
Stories:	8,148,610