Posted on 03/31/2020 7:39:48 AM PDT by jdsteel
The Fed announced Tuesday morning that it would be establishing a repurchase agreement facility for foreign and international monetary authorities (FIMA) that have accounts at the central bank’s New York branch. Through the FIMA repo facility, other central banks and monetary authorities unable to make smooth trades in the open market will be able to temporarily liquidate their positions in Treasuries.
(Excerpt) Read more at finance.yahoo.com ...
The US has a ton of outstanding debt at much than current higher interest rates. There is no mechanism to refinance this debt to take advantage of today’s super low rates. Until now.
Nations that are desperate for US dollars (for liquidity) will be given dollars for the US Treasuries they sell to the Fed. New debt will be created by the Fed at the current low interest rates to swap out the monetized debt.
A version of “never let a crisis go to waste” that actually benefits us.
Maybe they will start issuing fifty year bonds as well and see if anybody bites. Might be a good strategy prior to inflation hitting.
Nice! Anyone know where to go to pick up some of that ‘liquidity’.
The foreign sector is not selling these Tsys though, they’re repoing them out to the Fed so that there are dollar reserves in their economy.
Whoa. It was sealed? They’ve opened the seventh seal?
“Repo” = “sell back”....at face amount to boot.
Temporary refers to the 6 month period that this deal is available.
Now someone is getting it. Trump is totally in charge of the Fed at this point. He is in the middle of merging the Fed with the US Treasury Dept. Once that happens those 160 or so central banks that currently come begging to the Fed for credit swaps will be coming to the US Treasury Dept for those credit swaps.
New currency is being issued at zero percent and going into circulation as equity instead of debt. The $2 trillion stimulus package is going into circulation as equity dollars and will be paying off old debt dollars which will be removed from circulation.
IMO Trump plans to retire our national debt before he leaves office, shut down the IRS and institute a consumption tax of 15-17%.
“Nations that are desperate for US dollars (for liquidity) will be given dollars for the US Treasuries they sell to the Fed.”
I wonder how the price for those treasuries is set. Does the Fed play hard ball, or is it a pushover?
“New debt will be created by the Fed at the current low interest rates to swap out the monetized debt.”
The Fed doesn’t issue new debt, the Treasury does.
As much as I hope you are correct, all I can say is “dream on” at this point.
I do hope it happens though.
BTW, the last president who tried to get rid of the Fed ended up dead in Dallas Texas.
He signed an EO to print money backed by Gold again. A few weeks later, JFK was assassinated. Two weeks after that, LBJ reversed that EO.
And nobody batted an eye over it.
Excuse me..that EO was to issue SILVER certificates and not gold.
Wasn’t a liquidity facility part of the Soylent Green process?
“ The Fed doesn’t issue new debt, the Treasury does.”
You are correct. However, in this instance it’s pretty much a moot point.
And I believe the repo is at face value, MUCH less than market value right now.
“ IMO Trump plans to retire our national debt before he leaves office...”
Be still my beating heart.
“ Wasn’t a liquidity facility part of the Soylent Green process?”
Only for Soylent Green soup.
There never seems to be a shortage of green ink.
“And I believe the repo is at face value, MUCH less than market value right now.”
I don’t understand, then, why they would need to go to the Fed to sell them. I would think a lot of people would be jumping all over them at those prices.
“I don’t understand, then, why they would need to go to the Fed to sell them. I would think a lot of people would be jumping all over them at those prices.”
I’m going to simplify this a lot, so consider this for illustration purposes only.
Say some entity purchased a $100,000 10 year US Treasury bond brand spanking new on November 8th 2018. It cost them 100 thousand US dollars. They were promised 3.24% interest per year and to get their money back in full 10 years later.
The MARKET VALUE of that bond goes up if interest rates go down. Right now the 10 year is yielding 0.7% interest, so the market value is CONSIDERABLY HIGHER if they sold it on the open market.
The problem is there is a shortage of people willing to pay out US dollars right now. It’s a liquidity crunch AND the value of US dollars is high compared to foreign currencies. The Fed is saying they will give you your initial $100K back RIGHT NOW if you want it.
It will take a motivated seller....but they are out there to be sure.
JFK tried to get rid of the Fed. Trump is getting rid of the Fed. He took control of Powell and drove the Fed to zero interest rates. At that point they became irrelevant.
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