Posted on 10/21/2022 1:11:34 PM PDT by RomanSoldier19
Treasury-market liquidity is drying up and it’s going to get worse. The problem is bigger than it seems.
Liquidity in the U.S. bond market, the world’s largest, has been deteriorating since the Federal Reserve began raising interest rates earlier this year. The end of massive monthly bond purchases followed by the start of quantitative tightening has worsened the problem as the Fed tries to extricate itself from Treasury and mortgage markets after buying a third of each. Treasury Secretary Janet Yellen recently said she was “worried about a loss of adequate liquidity in the market,” as Treasury supply booms to fund government spending but regulations limit big financial institutions’ willingness to serve as market makers. At the same time, traders see the potential for another 2% in rate hikes by March 2023.
(Excerpt) Read more at barrons.com ...
The bond market already failed in the UK and Japan. The BoE and BoJ cranked up the money printers and are soaking up the bonds to keep the illusion of civilization propped up a bit longer.
Now it’s coming for us and other countries in Europe and the west. This international bond crisis is seemingly correlated with having imposed sanctions on Russia.
That one is worth thinking about from a few angles.
Barron’s writer Lisa Beilfuss doesn’t tell us what Chicago Fed paper she is citing in her article, so I looked for a recent paper from them on inflation.
This is a speech that the Chicago Fed President gave in London UK on September 27, 2022 titled “On Taming Inflation”:
https://www.chicagofed.org/publications/speeches/2022/september-27-omfif
I couldn’t find anything in it blaming fiscal policy or even discussing it, so it’s a mystery to me what Beilfuss and Einhorn are referring to.
(Her quote: “He (David Einhorn) points to a recent paper from the Federal Reserve Bank of Chicago that says about half the recent increase in inflation has fiscal roots, with fiscal inflation particularly persistent and less sensitive to monetary policy.)
Fiscal policy is tax policy. Inflation stoking tax policy would be tax cuts, since that’s the only way that “extra” money finds its way into the economy via fiscal policy. I’m pretty sure that the Biden gang isn’t delivering tax cuts unless I missed something.
If you want to see what the Chcago Fed President & CEO is predicting skip to the end of his speech to “the outlook” and the “conclusion” paragraphs.
Why anyone would buy government debt at 4-5% below the official inflation rate (and even more below real-world inflation) is beyond me. Not surprised they would have trouble finding buyers.
So they are going to have to raise rates, meaning government debt will become much more expensive to make interest payments on. At the same time the Biden regime keeps spending like a drunken sailor on shore leave.
I came to the conclusion some time ago that the most responsible and moral thing an incoming POTUS can do is default on the debt to clean up the mess. Generations yet unborn are 100% innocent and should not be born into debt slavery. Anyone whose been buying treasuries the last few decades is like a bartender plying the town drunk with drinks before he drives home past the local grade school as it lets out. They deserve to take the hit for funding what has effectively been little more than a massive pillage and plunder campaign transferring trillions in wealth from actual productive people to parasites of all stripes. Time to shut that down.
whats fishy about this is the Dow futures were down 500 before opening...... thats a move of 1200 points on no news...
My guess is the Feds PPT is at work before the election...
one thing I know is ... nobody I know is putting any money into stocks when their accounts are down anywhere from 20% to 40% ... Its not us common folks that are doing it..
Like asserting that Mohammed Ali was propped up by holding the #1 spot in the world of boxing.
Whoever has a #1 spot - to him accrues additional fame, prestige, wealth, power.
The rich man is invited to dinner - the poor man isn't.
Regards,
“Weren’t they supposed to stabilize the value of our currency?”
The Fed has had a dual mandate for decades; maximum employment and price stability, which tend to be in conflict with each other.
When the Fed was formed the US was on the classical gold standard and that served to anchor the currency. FDR changed that in 1933.
agree that this is totally fishy. I think the bottom falls out after the republicans take a (huge) majority so they can be blamed by the masses.
You want to see a disaster?
If the Treasury stopped printing Ben Franklins every day,
In 90 days the world economy would go south...
I know, not going to happen.
5.56mm
that chart is showing the rate of change in commecial bank deposits not their quantity
That is the *change* in deposits. The deposits have been at a very high rate, it’s to be expected that it would come back at some point.
Meanwhile, overnight repos are higher than they have ever been in history:
https://fred.stlouisfed.org/series/RRPONTSYD
That’s over two TRILLION in cash on the sidelines.
Honestly, know what you are talking about before the knee-jerk gloom and doom postings.
Randy Quaid would be a better president.
The thing also is everyone is just as, if not more F!(@#@ up than the United States. So there’s no where better to go besides dollar.
So yeah the Dollar is the best, but as the great Dennis Miller says “that’s like being Valedictorian at Summer School”
Is unleash the private sector economy from regulation and burdensome taxation. Drill for oil and shackle the lawyers.
The Federal Reserve is chartered by the US Government to manage the US money supply by funding the purchase of Treasury bonds by the Fed member banks. The Fed votes on the bond interest rate that it will pay which sets the ask price from par and the member banks bid for the supply by offering their best price, hoping to sell them for more to the public bond market. If they don’t win the bid they have nothing to sell so they compete for their share pretty aggressively.
When the Fed stops buying and lets its holdings “roll off” (expire) the money is no longer circulating in the money supply. This is what is happening now. The loss of new supply (liquidity) means the banks have less and less to sell creating a supply chain problem and loss of revenue.
All this could be fixed with a keystroke by the Fed tomorrow. They are fixated by the supply chain/energy crisis induced inflation rate and are starving the banks of the product they must sell to make money. This is the entire crisis in a nutshell.
.Yes he was #1, and not propped up as you said. Then Ken Norton broke his jaw, Shavers cracked his skull. The dollar at one time was not propped up but earned #1.
I just don't think the dollar printing can keep going without creating an increasingly false value that will be untenable to holders of the dollar in reserve.
What you're seeing is movement of money from one pocket to another. There was an increase in savings balances, if you look at the St. Louis FRED site.
Net-net-net, M2 flattened, which is consistent with recessionary times.
But the economic Eeyores and doomsdayers would rather you wet your pants and pay them in that worthless fiat currency for their "we're all gonna die" newsletter.
I think it is pre election prop up to support Brandon. After the election, regardless who wins, I think it will crash. They will blame Republicans if they win.
Housing prices are typically absurdly high.
They have to be brought back to household income-based levels.
Just a pricing issue. Big enough discount and they’ll sell quickly.
Buy low and sell high. A lot smarter to buy now than at the peak. Stocks are bad, bonds are worse, and I wouldn't touch real estate with a 10 foot pole at the moment. Cash is losing at least 10% a year in value. Metal (if you have possession) is a hedge, made up computer coins are a fools game - you'd be better off in tulips.
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