Have you been wanting to renovate your home and have been considering a home equity loan? How about a loan to kick off a new business or expand your current one? Do you need some funds to tie you over while you sort out some problems? Where could you go to borrow a trillion? Yes, a trillion.
While most of us on the planet can not do this, there is a miniscule group that can access loans at this level. You must have the right contacts, which they do.
Let me show you something you may not have seen in the news. I did not even know the event took place until recently. However, with the historic levels of reckless we have seen these last few years, it did not surprise me.
I only need the trillion short term
If you need a short-term loan for one day, AND you are big bank or financial institution, you go to the repo loan market. This is where big money goes to big money and uses safe collateral, primarily US Treasuries for their short-term loan. (1)
On September 17, 2019 the overnight loan rate soared from around 2% to rates over 10%. This signaled that something was very wrong. Of course, at this stage, you needed a super money printing bank, which the Federal Reserve was ready to do. (2)
Since the Fed loves to use their powers to print money to help their “best customers”…short term of course…, the size of these repo loans continued to grow month by month until the Fed had restarted the collection of emergency loan programs they had created in 2008.
In the 4th quarter of 2019, the cumulative total of these loans came to a tidy sum. When Wall Street on Parade tallied up the “trade amount” column of the New York Fed’s repo loans for the fourth quarter of 2019, it came to $4.4 trillion. When they adjusted the loans based on the number of days of the loan, the total came to $19.27 trillion. (3)
[Source: Wall Street on Parade, Jan 17, 2022]
[Source: St. Louis Federal Reserve, FRED data, Secured Overnight Financing Rate, 7/7/22]
Of course, it probably helped that the three Wall Street banks listed in the chart above were also shareholders of the privately owned New York Fed. (4)
Fuel for the COVID stock bubble
By the time the world saw this headline, it had been 6 months since the historic repo meltdown day the previous September.
The Fed Goes All In With Unlimited Bond-Buying Plan, NY Times, 3/23/00
As Wall Street on Parade reveals, this allowed the Federal Reserve to roll the massive repos that started the previous fall into loan programs they restarted from 2008.
“Its repo loans lasted until July 2, 2020, by which time it had re-established the alphabet soup list of emergency loan programs from 2008.”
As the FRED chart on the Secured Overnight Financing Rate above illustrates, and the chart on the Federal Reserve’s Balance Sheet reveals, when the Fed returned to their zero interest rate policies of the post 2008 era and started purchasing $120 billion a month through its various emergency leading programs, we returned to yet another QE program where the Fed became the “buyer of last resort” and magician of asset inflation.
[Source: Tracker: The Federal Reserve’s Balance Sheet Assets, Thomas Wade, American Action Forum, June 27, 2022]
But just as the “magic” wears off for an addict and withdrawals bring pain, so also must the largest addiction of debt by the Feds and their support for Wall Street recklessness bring more pain. They really do need to change their mission statement.
2008, the Great Recession, 2022, ??
During the fall of 2019 when the Federal Reserve was supposed to be providing the United States with a “safe, flexible, and stable monetary and financial system”, they were loaning Nomura $3.7 trillion while it was approximately 90% exposed to risk from derivatives trading and they were loaning Deutsche Bank $1.39 trillion while they were on the brink of collapse. (5) Doesn’t this sound like we have been here before?
Congress Approves $700 Billion Bailout, NY Times, Oct 3, 2008
In 2008, Congress had to approve the bailout. In 2019, the Federal Reserve made trillions in loans to Wall Street and foreign banks without discussing anything with Congress.
The actions of the Federal Reserve in 2022 have made it clear, that even though they are way behind the actions of the bond markets, they are finally read to take the bull by the horns and slow down asset and debt inflation.
Fed will aggressively dial back its bond buying, sees three rate hikes next year. CNBC, Dec 21, 2021
“The Federal Open Market Committee’s moves, approved unanimously, represent a substantial adjustment to policy that has been the loosest in its 108-year history.”
The Federal Reserve Will Begin Reducing Its Holdings of Treasury Bonds and Notes, Peter J. Peterson Foundation, June 14, 2022
As of June 8, 2022, the Federal Reserve has a portfolio totaling $8.97 trillion in assets, an increase of $4.25 trillion since March 18, 2020 (around the time that many businesses shut down). Longer-term Treasury notes and bonds (excluding inflation-indexed securities) comprise two-thirds of that expansion, with holdings of those two types of securities more than doubling from $2.15 trillion on March 18, 2020 to $4.97 trillion on June 8, 2022.
Over that same period, the Federal Reserve expanded its total portfolio from $920 billion in December 2007 to $2.1 trillion in June 2009, a total increase of $1.2 trillion. [italics and underlining mine.]
When the 2000 stock bubble popped, the Federal Reserve dropped the Fed Funds rate (an intrabank lending rate) from 6% to 1%. This took 2 ½ years. The 1% was the lowest rate in American history at the time.
When the 2008 stock bubble popped, the Federal Reserve dropped the Fed Funds rate from 4.25% to 0.25% in 1 year. This historic rate was kept in place for 7 years. It took 1 ½ years to rise 1% to a rate of 1.25%.
In the spring of 2020, the rate was cut from 1.25% back to the 0.25% in under 2 months. In less than 5 months, in 2022 the rate has jumped from 0.25% to 1.75%. (6)
Where next?
History has taught everyone willing to learn from it, that ultra-low interest rates connecting to massive sums of “free money” are followed by painful periods.
Digital currency by the central banks along with the drive toward a cashless world will NOT lead toward a “safe, flexible, and stable monetary and financial system”. It is only leading us away from privacy and freedoms.
Cash has paid us nothing. Stocks have been levitated by the largest market intervention by central banks in history. US Treasuries have been signaling that at some point, bond bulls become bond bears. Cryptos have produced a wild ride up, but the last 6 months have shown that they too can have wild rides down. If there is anything we should have learned from 2008, it is that real estate prices are not vertical either.
I will leave you with three ideas. One, start learning about what was introduced to the world in 2012, bank bail-ins. We have not seen this in America, but it has happened outside America. Read and learn more, then act. This article is a good place to start. Changes are coming.
Why Bank Bail Ins Will Be The New Bank Bailouts, Investopedia, Aug 2021
Get a copy of The Great Reset by Klaus Schwab. The book came out within 4 months of the lockdowns in 2020. Not fun reading, but a wakeup call to everyone who believes in freedom, not more global bureaucrats.
Finally, I have just placed a piece on my personal blog, living2024.com. This is my first post since 2017. This is a short journey into where I find hope during these tumultuous and corrupt times.
I hope you have found this information interesting, possibly challenging, and beneficial.
Sources:
(1) Nomura, JP Morgan, and Goldman Sachs Received a Cumulative $8 Trillion from the Fed’s Emergency Repo Loans in Fourth Quarter of 2019, Wall Street on Parade, Pam Martens and Russ Martens, Jan 17, 2022
(2) Ibid
(3) Ibid
(4) Ibid
(5) The Fed's No-Limit Bank Bailout Repo Scheme - $20 Trillion and Counting, Occupy The Fed Movement, Feb. 23, 2022
(6) Fed Funds Rates History: Its Highs, Lows, and Charts, The Balance, June 15, 2022