The FED Sets Another New Record
 

Yesterday for the first time in history the FED Reverse Repo window went over 500B to 503B,,,

AND TODAY ANOTHER NEW RECORD WAS SET.. the drum roll please.....FIVE HUNDRED THIRTY FOUR BILLION NINE HUNDRED FORTY THREE MILLION

Just as I said it would keep ratcheting up.

Somebody is putting their unwanted USD's into circulation. You don't need cyber war to defeat the USA...we has dun it to ourselves.

The stage is being set for a USD panic...call it a crisis...

I agree...we are headed in a bad direction.

More importantly....HTH did you get 5 stars???:D

that's a lot of tiny, broken-up potato chips

What’s a reverse repo window?

Banks give FED cash, FED gives banks short term bonds paying zero % on a over night basis.

The rationale is that the banks have so much cash that if they bought bonds the interest rate would go negative..since that is a FED no no...they put the cash in overnight limbo with these short term securities..

The question is where is all this cash coming from? Of course the FED printed gobs and gobs of it...but where has it been hiding until now?

I suspect that there is a ground swell to divest USD's in the world. People in the world no longer TRUST the USA to be responsible stewards of the currency that is the foundation of the Global Economy of Scale.

I suspect this is the opening gambit of the end game for the USD...people are moving towards the door now and it will become a stampede at some point.

Self fking promotion.

Thank you. I think the dollars are coming from China.

If so, it appears we are at war.

The Chinese said they were going to divest themselves of 200B in US Treasuries..

Very possible...

As noted in 09 the Chinese set course to get away from the USA as quickly as they could..without hurting themselves..over the past 12 years they have done just that..now getting to the point where they no longer defer to the USA but now just do what they want..so far they have not exactly told the USA to go fk themsleves...

So far the USA has been able to adsorb any move against it...

It is not so much Chinese aggression or desiring dominance...it is about protecting themsleves against American delusional fiscal irresponsibility.

Hugh.

Incredible.

I know. Who knew an RV could hold so much moolah? Lotsa storage?

The smoke and mirror show since 1970 has really been astounding.
Much of it seems like it shouldn’t even be legal.

The Exchange rate for $USD shows it's absolutely plummeting.


Not really. I just wanted to make an interesting contribution :)

Another FED milestone has been.set today..8T on the balance sheet.

Lets have a rousing Hooray for the FED!

And this is getting darn right monotonous...

The FED sets another record by RATCHETING up the Reverse REPO to......FIVE HUNDRED FORTY SEVEN BILLION EIGHT HUNDRED AND EIGHT MILLION USD


This is getting to be some serious money here.

Just think in mid May the REPO window was operating at 200B to 240B a day...How fast things can change...

It is now becoming obvious that the FED in order to manage the US macro economy is sucking up excess cash that is being repatriated, by putting it into the daily limbo of the Reverse Repo window.

It seems that it is a slow accretion of cash that is being repatriated of 10B to 20B a day. So the question becomes from what mattress is this cash coming from? Is it foreign nationals, corporations or sovereign states?

deposits (cash) on a Banks balance is a liability. doing a rev repo with FRB is an asset. this an asset/liability management maneuver due to stricter banking regulations. but as you point out follow the money

Partly due to the debt limit coming up in July. This article touches on it.

https://news.yahoo.com/u-feds-reverse-repo-volume-175058552.html

That is why the banks have to do something with money and can not let it sit.

The Treasury had 1.5T parked at the FED in cash UNTIL....they passed the 1.9T Recovery Act..That $1400 felt real gud in my pocket..and I will bet it did in your pocket to.

The only question that I have is there such a dearth of short term Treasuries available from the Treasury due to the upcoming debt ceiling. that the banks have to use the RRepo window. That doesn't seem too likely a major causation. That in of itself is a sea change..

The tide has definitely turned against the USD as a safe haven. First the Chinese reducing their US Treasury portfolio by 200B and the net out flow of capital from the US when the CV hit in 2020 .. instead of the past historical inflow during times of stress.

My guess is that there is a slow reparation of USD from foreign nationals and or corporations lightening their loads. That this is the beginning of a trend. Imperceptible at first.. 10B to 20B a day..

The USD is trending downwards against other currency's. But other currency's have similar troubles as the USD so the fx equilibrium remains..

And the why for the FRB is it does not want negative short term rates (money markets) so they make reverses available to the banks. Banks do not have a capital reg alternative.

We have already been through outflow when you made the false claim "never have seen it before in the last 40 years".

At that time I showed you that we have had inflows for the 1st 3 months of 2021. I also said we should probably wait for the next data release of April numbers (15th of June) to see if we stay positive or go negative.

We have had a net positive inflow from China from Oct-March (damn near neutral over the last 15 months of data).
Positive from Europe. Negative from Canada and a big negative number from the Caribbean. (Caribbean?)

I will say it one more time...we should probably wait for April data to see if the inflo continues or we go negative.

https://www.federalreserve.gov/data/secholdtrans/treasurybondsnotes20210531.htm

Fed doing repos to keep money markets from breaking the buck par value. If they didn’t, short term rates would be negative.

I cited the source...Druckenmiller of Duesquene basically said that in his 40 years of managing money that he had never seen a capital outflow of money from Treasuries (this was the larger infrence and a harbringer of things to come)...he is a successful manager of large sums of money and being that is his profession he has credibility. I have noted that since 2000 in times of duress foreign money has flowed into the USD and US Treasuries as a SAFE HAVEN which drove bond prices up and yields down. the reverse happened in 2020 I commented about that specifically in 2013 (and earlier) as an On The Beach strategy

The point of the argument was that in 2020 instead of foreign money coming in to the USD and Treasuries as a SAFE HAVEN it was leaving (per Druckenmiller). This denotes a sea change in the global perception about the USD's solidity. It is the ADVERSE SHIFT I mentioned in 2013.

Now you can quibble about my semantics and minutia all you like..but it doesn't change reality, as much as you would like it to. Shoot the messenger so you can ignore the message.

As far as pop growth and econ growth..Jeremy Grantham who is the strategist for a 120B + fund also stated the same thoughts in late 2012 and again on CR in 2013. He also has lots of street cred.

The main conclusion that I made in 2012 was that the US econ was going to grow between 1.5 to 2.5 percent as a benchmark going forward. It has largely been between those parameters with statistical variances. I would say that what I said was close enough for govt work. Also I said that growth did not meet the 3% growth parameter that the govt set out as a benchmark for sustainability of US fiscal policy, but everybody understood that as a given. that is why everybody has said growth has been anemic..

I also concluded that the only reason we have gotten the stellar growth that we have gotten is FED and Treasury juicing..it has kept the system bouyant at these levels and the corollary that they couldn't take the foot off the gas or else. One might say with diminishing returns as debt levels increases the drag on the econ. So the juicing has to become ever bigger...this has been born out by events. You can look at the veracity of that by what happened in late 2018 after the FED went from Acomadative to Neutral policy in an attempt to NORMALIZE the Balance Sheet and Interest rates. The FED did a quick about face, where Equities then did an about face rising to ever higher levels. .

In Sept 2012 wt QE3..wt the SP500 at 1450 I said that the SP500 would go to 2250 as the FED was guaranteeing the over and the under with the caveat that the amount of time it took to reach that number might skew it higher. . It took until Trump's election to breach that level. The point to be taken is that operationally Equities were a NO LOSE prop as long as the FED maintained it's street cred. That remains as true today as it did in 2012.

As far as current over Equity valuation..maybe not..the intrinsic value of the USD is not what it once was..so valuations of even abstract assets like Equities would run higher..

There is NO VALUE left in the USA...not with it's debt and accts payable obligations. The USD has been run out to support the continuation of these obligations. Americans have borrowed their way into oblivion to support their hedonistic life style. Everybody went along for the ride..

With those levels you are dead men walking..and for the most part don't even know it. The USD is the Bedrock of the Global economy, there isn't an alternative as nothing else has scale ability or credibility. Everything else that you see are the distortions caused by the stress of a system that is unraveling. People have become delusional in trying to bitterly hang on to their perceptions of being a rich nation in the face of a BK reality. They have gone Alice in Wonderland.

the fact that the leadership touts MMT shows you the lunacy of it all. They think that they can defy gravity. Nobody says no to it, no body stands in the way. Maybe they have come to realize that their is no other alternative except collapse..so they keep on keeping on? Kick the can on down the road..until they can't.

I do believe as I smell a whiff of it in the wind and I am running with it that the worm has turned and that a global adverse shift has occurred with the USD.. It is in the nascent stage..of something bigger to come. It is like hearing the very faint rumbling of thunder in the distance and being able to discern what it is.

Back in 09 or 10 I said that we were in the EYE or quiet of a hurricane and that we were going to revisit the other half of the storm down the road. We have solved nothing, the leadership has not even been able to identify and or clarify the causation. Thinking that peripheral fixes would return the world to prosperity which was in fact debt based.. Of which the causation is the US consumer was tapped out by 08, lessor paying job, no job, no savings and credit to the eyeballs (you need a broad based MC to support a Global Econ of Scale and with out it..) Which was the cause of anemic Demand. The Global Econ of Scale is voracious requiring ever greater demand to be sustainable and without it contracts into what amounts to a death spiral..Where debt and currency are the knife and gun of demise. We the people have pulled the trigger with our chase of secular materialism and perception of being prosperous and wealthy. In reality we are not only bk materially but intellectually and spiritually as well.

Caribbean 2019, -88,625 2020, -266,542 3/2021, -66,664 -3,650 -36,637 -6,426 -21,416 -48,024 -60,386 41,746

https://www.federalreserve.gov/data/secholdtrans/treasurybondsnotes20210531.htm

The Caribbean the home of off shore banking...Luxembourg, Ireland, Belgium, Switzerland

The UK is a large purchaser...maybe as a proxy for the FED?

As stated there is no official alternative to the USD in scale ability and or credibility so they have to stick to the USD. In the shadow world of off shore..those havens are showing a negative flow out of..

Then we have to look at the guyz who stuff their mattresses with USD eg don't use banking to hold USD's. And that btw is a large amount of USD's. What are they doing?

I suspect that sentiment is being reflected by the Reverse Repo Window as those USD's are being repatriated (coming out of the mattresses)...as in a ground swell of divestiture.

As long as people want to and do hold USD's the FED could print all they wanted as they would be sucked up ..change that sentiment and suddenly you start to see an excess of USD's showing up on banking doorsteps... So what does the FED do with them but store them into the daily limbo of Reverse Repo. The more that come out the bigger the Reverse Repo operation. WOW from apx 240B a day in early May to 547 in mid June...that is an increase of 300B in excess cash in one month...or 10B a day...

So can we surmise the mattresses (including foreign banking etc ops) are hemorrhaging 10B a day Globally? That is a groundswell change in sentiment towards the USD. by dribbles and drabs..

So the trajectory indicates that this is the beginning and that the USD divestiture is going to get much bigger down the road. At this point the official policy of sovereign nations and corps is that they must stick with the USD..no other alternative. And they are trying to find one.

That is largely my point here. Do I make myself crystal?

I give you Boyz credit, that you are capable of filling in the blanks in my initial offerings...but I find myself being mistaken in that remedial help is needed as there is a lack of capability here. You need it spelled out..

We may go back to outflows when the report hits this week. March, 2021 was the highest inflo in history. We shall see what happens.

At this time the latest data in 2021 shows a slight net inflo

Yes we shall see..remember not necessarily a straight line but ebbs and flows..
A lot of stuff is not reflected in the data?

Where did that 300B in excess cash that suddenly showed up on the banks doorsteps come from? It was lurking somewhere and now it is in the open.

The FED printed it, and it was being held somewhere..where it wasn't being utilized.

The USA has relied on USD's being held in reserve Globally where they would not be utilized..in essence dead money..by holding them, there is a defacto imposed tax in that with inflation those USD's would decline in real value. That is the why of 2% needed inflation.. it makes US debt cheaper.

Without that 2% the US is paying sticker price for that debt.

Can you imagine the fear and trepidation at the FED and Treasury that they would pump out roughly 5T in a month? They threw caution to the wind and were throwing money willy nilly into the fire to keep the boiler of the economy lit... they had NO LIMITS..it was all in to stave off nothingness.

To do that they had to realize that it was do or die..their feet were dangling over the abyss. They did not care about consequences or ramification of their actions..cause there would be no consequences if they didn't act as they did. Luckily it stopped at 5T cause they would have gone all the way....at some point they would have realized that no matter what they did it couldn't be stopped.

That is what their actions tells you about the circumstances of 2020.

Net inflows in April. A net inflow since at least Sept, 2020. They haven't updated their page with the April data by country.


https://www.reuters.com/article/usa-treasury-securities/update-1-foreign-holdings-of-us-treasuries-rise-in-april-as-rates-stabilize-data-idUSL2N2NX2KV
NEW YORK, June 15 (Reuters) - Foreign holdings of Treasuries rose in April, data from the Treasury Department showed on Tuesday, as investors bought back U.S. government debt after yields started to decline from their highs.

Major foreign holders of Treasuries held $7.070 trillion in Treasuries in April, up from $7.028 trillion in March.

On a transaction basis, foreigners purchased $49.57 billion in Treasuries in April, after record inflows of $118.87 billion the previous month.

Japan, the largest foreign holder of U.S. sovereign paper, led the way, increasing its holdings to $1.276 trillion in April, from $1.24 trillion the previous month. Japanese investors sold Treasuries in February and March as their holdings declined.

China’s holdings, meanwhile, slid to $1.096 trillion from $1.1 trillion in March. Its stock of Treasuries has declined for two straight months.

https://lawliberty.org/skewering-the-pretense-of-knowledge-in-the-financial-realm/

Like 08, immediate collapse is avoided (the can is kicked) but as you say, nothing is fixed, and in fact the “fix” just sets the conditions for the next, bigger crisis.

08 was a drop in the bucket - child’s play - compared to what the govt did the last year (and has continued and continues to do even with an effective vaccine in place) in response to a virus with a 99.x% survival rate.

It is hard to disagree with what one has already postulated since 09. .

I disagree with the culpability of the FED...they act in response to.....to maintain an equilibrium. In other words to mkt conditions..and policies. The ultimate responsibility for Americas current fortune is the American people themselves which includes the policy makers etc as a subset.

The FED did not create the inflation of the 70's...the LBJ inspired policy of "GUNS AND BUTTER" sic fighting a war in Vietnam and the GREAT SOCIETY..all at the same time...created an environment of OVER SPENDING....Americans gradually after WW2 thought they could have it all with out consequences because they were so rich. It just took a few years to reap what we had sown.

We are now reaping the consequences of living beyond our means for the last 53 years (1968). The American people have been living on BORROWED MONEY since the 1980's. Nothing is going to fix this problem. The resolution is to eat the shyte sandwich, and I hate to say it there is no short term recovery as the scale of the debacle is globally inclusive..It is a global plunge into chaos.

I have lived in a state of chaos for a good portion of my life..so I know it when I see it. There is little to no continuity now...we are in a state of chaos now. With the overlaying fiction which fewer and fewer people are believing that thing are continuing on as before... Anybody want to contradict that statement I have a long list of chronological events that would indicate otherwise.

So the facade of stability remains somewhat, but behind the scenes holy shyte it is desperation born of complete wreckage of a system.

The bottom line on Inflation is that the BROAD BASED American MC that is needed to sustain the Global Economy of Scale NO LONGER EXISTS..As such DEMAND becomes ANEMIC and has to be propped up with FED monetary policy and Treasury Spending. Thus a LONG TERM UNDERLYING DEFLATIONARY ENVIRONMENT. This has not changed and is only growing worse, where consumers are being priced out of markets.

So what skews that scenario.

1. Disruption of fragile Supply Chains which can create shortages which drives inflation. Especially after the CV shutdowns and growing geo political concerns makes supply chains uncertain and or unstable.

2. Reduced demand will cause a decrease in production which will drive unit costs higher which will be reflected by inflation.

3. Debasement of fiat currency by printing strips out the intrinsic value of said currency. Prices remaining constant in that situation is a form of hidden inflation.

Now here is the bad news...The FED and Treasury went all in to backstop the CV economic shutdown. Stretching the limits of an already stretched system. Long term FED and Treasury policies and the aftermath of CV has made the system unstable. In response to continuity being lost as the system unravels, the animal spirits have become desperately maniac in seeking to find some sort of safe haven for themselves. Rationality has been lost, this is resulting in a maniac blowoff stage in a last frantic attempt to hold onto what no longer exists. After the animal spirits exhaust themselves reality will set in and the slide will begin..Nothing will stop it..as with water the system will seek it's own level.

The question is will the slide be short and quick or slow and prolonged? Will a semblance of the system's structure remain or will it be Darwinian?

Many people are seeking to get out of large metro areas because of their increased vulnerability to disease, fragility of infrastructure and civil unrest inclusive of lawlessness. In essence they are seeking to leave killing zones.

Monday R REPO set another record at 584B, Tues 509B W 520B...

Good luck with the FED backing off the accelerator.

Fed just raised RRP rates from zero to 0.05%.

They said they were going to do that..and that is not taking your foot off the gas.

120b a month is the pedal as well as interest rates.

Raise rates and watch debt service explode. And who is going tobuy all those Treasuries every month if it isnt the FED as last resort. Interest rates would jump if the FED stopped. The FED has to be accomodative to keep interest rates low..They have no choice.

Add it up.