Posted on 04/01/2020 10:41:08 PM PDT by aquila48
How can the Fed launch an “unlimited” monetary stimulus with congress approving a $2 trillion package and the dollar index remain strong? The answer lies in the rising global dollar shortage, and should be a lesson for monetary alchemists around the world.
The $2 trillion stimulus package agreed by Congress is around 10% of GDP and, if we include the Fed borrowing facilities for working capital, it means $6 trillion in liquidity for consumers and firms over the next nine months.
The stimulus package approved by Congress is made up of the next key items: Permanent fiscal transfers to households and firms of almost $5 trillion. Individuals will receive a $1,200 cash payment ($300 billion in total). The loans for small businesses, which become grants if jobs are maintained ($367 billion). Increase in unemployment insurance payments which now cover 100% of lost wages for four months ($200 billion). $100 billion for the healthcare system, as well as $150bn for state and local governments. The remainder of the package comes from temporary liquidity support to households and firms, including tax delays and waivers. Finally, the use of the Treasury’s Exchange Stabilization Fund for $500bn of loans for non-financial firms.
To this, we must add the massive quantitative easing program announced by the Fed.
First, we must understand that the word “unlimited” is only a communication tool. It is not unlimited. It is limited by the confidence and demand of US dollars.
I have had the pleasure of working with several members of the Federal Reserve, and the truth is that they know it is not unlimited. But they know that communication matters.
The Federal Reserve has identified the Achilles heel of the world economy: the enormous global shortage of dollars. The global dollar shortage is estimated to be $13 trillion now...
(Excerpt) Read more at mises.org ...
I already don’t pick up pennies in the dirt.
Should I skip nickels now too?
As Nixon’s Treasury Secretary, John Connolly said: “The Dollar is our currency, but its your problem.”
Who is the sexy Cruella Deville next to Mnuchin?
How many debt obligations do you know that are denominated in Zimbabwean dollars?
I believe that is Mrs Mnuchin.
To circulate it as currency would be to create massive inflation.
All i know is that my bank account has a dollar shortage-
“Easy answer. The Fed is not circulating currency. It’s keeping most all of it on its balance sheet.
To circulate it as currency would be to create massive inflation.”
It is absolutely circulating currency. What do you think the $1200 they’re sending to most everybody is? And the increases in unemployment pay? And the billions being handed out to small businesses that have had to close? And on and on.
And it’s not going to cause inflation. Why? Think of all the trillions that have been lost in asset values as the result of this virus.
[[I already don’t pick up pennies in the dirt.]]
Why not? 100 of them = a million dollars (Brian Williams Math)
The global dollar short is why the Fed is extending swap arrangements to all these central banks.
China massive trade deficits played a role in this. If a China manufacturer sells to the US, those revenues are in dollars. So there is less currency risk to lend to them in dollars.
And with years of Fed ZIRP, dollar borrowing rates have been artificially low for years.
Also, commodities are priced in dollars, so the revenues of commodity producers are in dollars (even if they don’t sell to the US). So they could borrow in dollars as well.
The dollar revenues for all these borrowers are dropping drastically, and they are now a much worse credit risk.
A lot of that debt is coming due, as some is very short term and constantly rolled over.
The Fed does currency swaps only with a select few central banks; Bank of Japan, ECB, Bank of England.
These other central banks like China etc, - no currency swaps, they only get to access dollars from the Fed if they have US Treasuries to Repo.
That’s not going to be enough, and the Fed is going to have to decide in a few weeks, or maybe days, if they extend currency swaps to Bank of China et al. Or pull the plug and cause mass defaults and the collapse of the offshore dollar lending system in Asia.
I say pull the plug and let them go. There is a good chance that the economic collapse will take down the PRC regime in China. Good Riddance !
Watch who screams loudest for a China bailout. They are traitors to America and probably on the Chinese payroll.
“All i know is that my bank account has a dollar shortage-”
It will soon have at least $1200 more. Rejoice!
And why has the option of calling in loans become obsolete? No real collateral behind those loans?? And who decided extending liar loans ("malinvestment," in Austrian Economics parlance) was a smart idea? The folks who push reckless fractional reserve banking at the Fed and in the greedy, unethical financial community - that's who.
that won’t buy me the Ferrari i really really need j/k I do appreciate what is coming- just makin a funny-
bump
yep- she was an actress- Louise Lindon I believe
His wife.
Banks are holding $29 billion more in currency than the previous week. That's not going to cause huge inflation.
Show me where the Fed's balance sheet shows massive circulation?
“Easy answer. The Fed is not circulating currency. It’s keeping most all of it on its balance sheet.”
Pretty sure that the Fed never records dollars on its balance sheet. Because they can create dollars at will to purchase what they do hold, T Bills and other debt.
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