buy silver now The Coming Financial Sentinel Event

[MyLadiesDaddy]

THIS IS MASSIVE BIG. 

 

 

 

 

Fed sees record $756 billion demand for reverse repo program and may hit $1 trillion

Last Updated: June 17, 2021 at 5:02 p.m. ET

First Published: June 17, 2021 at 4:33 p.m. ET

By 

Joy Wiltermuth

https://www.google.com/amp/s/www.marketwatch.com/amp/story/fed-sees-record-756-billion-demand-for-reverse-repo-program-expect-it-to-hit-1-trillion-say-rates-strategists-11623961989

Mix of pressures expected to push overnight demand to $1 trillion

 

Banks and money-market funds using the Federal Reserve’s overnight reverse repo program parked a record $755.80 billion in cash with the central bank on Thursday, a day after policy makers tweaked the facility’s payout.

High demand for the facility since April underscores how awash financial markets have become with cash during the pandemic, as trillions worth of fiscal and monetary stimulus slosh through the economy.

With interest rates low globally, banks and money-market investors have been eager to avoid negative yields and have been parking cash in the Fed facility, which as of Thursday pays 0.05% instead of 0%.

 

It “isn’t a lot, but it’s better than zero,” said Jim Vogel, interest rate strategist at FHN Financial, about the Fed’s bump up in its reverse repo rate.

“When the Fed opened up this new avenue, $250 billion of fresh demand came in overnight,” Vogel said. The Fed’s decision Wednesday to boost the rate it pays on excess reserves and on the overnight reverse repo facility comes as part of a broader strategy to keep a grip on short-term rates, while helping to stoke the U.S. economic recovery.

Fed Chair Jerome Powell on Wednesday also reiterated that it still was too early for the central bank to raise short-term rates above its current 0%-0.25% target range or trim its near $120 billion-a-month bond buying program.

But in a surprise for markets, Powell said the Fed now has penciled in two potential interest rate increases in 2023, while stressing that central bank officials were attuned to the risk of inflation rising faster than expected.

 

Recent guidance from the U.S. Treasury Department shows it intends to run cash balances down to $450 billion by July 31 from $776.7 billion as of late May, to “satisfy the requirements of the law that suspended the debt ceiling back in 2019,” they wrote. “So Treasury’s borrowing needs are going to be very light in the interim.”

“The question is not how high it goes,” Vogel said of reverse repo demand. “But where does it land after the debt ceiling agreement is reached.

 

[MyLadiesDaddy]

 

 

[rw.sutton]

7 hours ago, ladyGrace'sDaddy said:

 

 

Oh the History, this year has already brought, BuyDen, aka, Big Guy,  receiving close to 83 million votes, fell on the stairways 3 times, I was hoping for 4, One of his rallies had all empty Jeeps with window stickers still in them, 8 trillion in debt already! And Lee Greenwood, singing, Im proud to be an American! Damn I just cant hardly wait for Christmas!

[rw.sutton]

[MyLadiesDaddy]

3 hours ago, rw.sutton said:

I'm talking about it 

[MyLadiesDaddy]

 

 

[MyLadiesDaddy]

 

 

 

[MyLadiesDaddy]

 

BY TYLER DURDEN

SATURDAY, JUN 19, 2021 - 12:00 PM

Back in December 2015, just days before the Fed hiked rates for the first time since the global financial crisis, in its first tightening campaign since June 2004, we said that Yellen was about to engage in a great policy error, one which like the Ghost of 1937, would end in disaster...

 

 

... and sure enough it did, when after 9 rate hikes, Powell realized that a rate of 2.50% is unsustainable for the US economy which first cracked during the summer of 2019 repo crisis when the Fed cut rates three times, only to cut rates to zero from 1.75% in a matter of days after covid conveniently emerged on the global scene and led to an overnight shutdown of the US economy and

"forced" the Fed to nationalize the bond market as well as

inject trillions of liquidity into the market.

 

But what is it that prompted us to predict - correctly - that any rate hike campaign is doomed to fail

(similar to the Fed's ill-conceived plan to hike rates in 1937, which brought the already reeling country to its knees and only World War 2 saved the day, giving FDR a green light to unleash a fiscal stimulus tsunami the likes of which we hadn't seen until the covid response)?

Simple: as we explained back in Dec 2015, the equilibrium growth rate in the US, or r* (or r-star), was far far lower than where most economists thought it was. In fact, as the sensitivity table below which we first constructed in 2015 showed, the equilibrium US growth rate was right around 0%.

 

 

As we explained then making the case for a far lower r-star, "if nominal growth is 3 percent and the debt GDP ratio is 300 percent, the implied equilibrium nominal rates is around 1 percent. This is because at 1% rates, 100% of GDP growth is necessary to service interest costs."

In this case, real growth would slow in response to rate hikes because productivity would stay weak at full employment and companies would be profit/price constrained around paying higher wages. Moreover, nominal growth would then slow even more than real growth does because inflation would fall to 1 percent or below.

As we concluded then, "this is the important policy error scenario because even a very shallow path of rate hikes might drive the real Funds rate well above the short-term equilibrium real rate, further depressing demand. It is then plausible that the economy would be driven into recession, and the Fed would quickly be forced to abort the hiking cycle. As an aside, such a policy error could reinforce itself by causing structural damage that puts additional downward pressure on the equilibrium real rate. In this case the yield curve would flatten meaningfully, at least until the Fed actually reversed course by cutting rates."

As the chart at the top shows, this is precisely what happened, only instead of World War II - which is what short-circuited the Ghost of 1937 rate hike policy error,

it was the covid crisis that gave the Fed and the US government a green light to unleash an unlimited monetary and fiscal stimulus, delaying the inevitable recession and kicking the can a few years.

* * *

Why is all of this relevant? Because according to some of the smartest people on Wall Street, the market's reaction to last week's unexpected Fed announcement suggests that r* now is even lower - which makes intuitive sense in light of the surge in debt and decline in growth excluding government stimulus - and that the next tightening cycle, which may start as soon as next year according to Bullard - will be the shallowest one yet as the US economy can hardly afford tighter financial conditions.

In a note written late last week, and certainly after the market's remarkable reversal following the hawkish Fed, DB's chief FX strategist George Saravelos wrote that the day after the Fed meeting "was extraordinary by any measure: the biggest daily rally in the dollar index since the March global shutdown, a big drop in long-end US yields to the lowest since February, the biggest drop in some commodity prices since March of last year but a new record high in the NASDAQ all happening at the same time."

How to square it all up?

According to Saravelos, the Fed made a big policy error as evidenced by the flattening in the yield curve...

 

 

... which according to the DB FX strategist 

"boils down to a very pessimistic market view on r*" or in other words, the same argument we made 6 years ago when we predicted that the Fed's hiking cycle would end in disaster.

First, the easy part. The big dollar rally is entirely with the conventional wisdom that what matters for the greenback is front-end real rates. Fed tightening expectations have repriced sharply higher over 2023 and support more near-term dollar strength (chart 1). There should be no surprise that the dollar has rallied strongly even if 10-year yields have not made new highs.

 

Second, the commodity part. As the DB strategist notes,

the role the Fed has played in inflating commodity prices should not be underestimated and is perhaps seen best in the very high correlation between the dollar and base metal prices at the moment:

Our fixed income colleagues have shown there is an extremely powerful link between the Fed balance sheet, commodity prices and inflation expectations: the taper of 2013 marked the peak in inflation expectations back then too.

 

On a similar note, economists have shown that even survey-based measures of inflation expectations such as Michigan exhibit a high correlation to commodity prices.

All of this reinforces the point that the Fed can be far more powerful in influencing inflation expectations via
the dollar and commodities than is commonly assumed.

Finally, and most importantly, we get to the bond and r* part.

As the chart below shows, the market has undergone a remarkable twist flattening over the last 48 hours which according to Saravelos is extremely unusual given that the Fed has not even started hiking rates yet. And in a repeat of the aborted hiking cycle of 2015-2019, while market pricing for hikes in 2023 and 2024 has gone up, yields beyond that have gone down as the market is saying that the best the Fed can do is less than 2-years of rate hikes.

 

 

This has also coincided with a notable drop in inflation expectations - indeed Fed has shown a hawkish pivot even before market breakevens have reached their pre-2014 normal range.

 

 

What all of the above is telling us, according to Saravelos, is that unlike 2015 when we were the only ones warning about how low real r* is, the market now is taking an extremely pessimistic view on real neutral rates, or r*.

Said otherwise, if the Fed decides to go early - as first Powell hinted and then Bullard doubled down on Friday sending stocks plunging - the market is saying that  it won’t be able to go very far before inflation and growth hit a speed limit, pushing yield expectations after the initial hike lower.

This very pessimistic view on r*, first laid out here in 2015, is also in line with market behavior beyond the bond market. First, as DB's Saravelos notes, it is aligned with the very high dollar responsiveness we have seen to even small shifts in Fed stance: huge pent-up demand for yield from investors across the planet forces a stronger dollar and a bigger disinflationary impact quicker than assumed.

In other words, a low global r* (remember the rest of the world still has massive current account surpluses, or excess savings) pushes US r* even lower.

Second, a low r* is consistent with continued equity resilience, especially in growth stocks heavily reliant on a low medium-term discount rate. That the equity moves in the past two days were led by huge relative rotation from the Russell to the NASDAQ should not be a surprise. This, as Deutsche Bank ominously warns, is 2010-19 secular stagnation pricing, version 2.

 

 

Bottom line: while a day’s price action (or even two) does not a trend make, the market is sending some peculiar signals that need to be monitored. Meanwhile, Saravelis has been emphasizing in recent weeks that the transition away from the v-shaped part of the recovery to the new post-COVID steady state will start raising all sorts of uncomfortable questions, including the structural damage COVID has left on private-sector saving rates as well as the new level of equilibrium real rates. One can only imagine the sorry state of the economy when the fiscal stimulus is gone and turns from a tailwind to a headwind. Historical evidence has shown a huge negative impact of pandemics on r* for example. For a big dollar up cycle, the Fed needs to be able to get very far. The market is not so sure, although for now the paradoxical divergence between the surging dollar and tumbling yields has yet to be addressed by the market.

 

A bigger question is will the US even be able to sustain positive GDP growth absent trillions in new stimulus each and every year? And even more ominous: what happens to inflation if the Fed is forced to cut rates well before the inflationary burst is extinguished?

 

  These are among uncomfortable questions markets will have to answer in the coming months.

Perhaps the biggest question facing the Fed now is whether it is about to do another huge "ghost of 1937" error{ Which Santa believes they will}.

As a reminder, the Fed believed the US economy had turned the corner in 1937 and started to raise rates – and was wrong, bringing the economy to its knees again.

Only the massive fiscal reflation sparked via World War 2 saved the day.

The problem is that this time we already had the covid "war" which pushed both the US debt and deficit to wartime levels,

 so what else left absent all out war with China?

 How else can the US government justify tens of trillions more in stimulus at a time when the market is already discounting the US economy hitting a brick wall in 2024 when the next rate hike cycle comes to an end. And how will Powell's replacement (the Fed chair will certainly take the first opportunity to get the hell out of Dodge) combat inflation when some time in 2024 the economy enters recession even as prices continue to rise?

Because while Saravelos is right that the market freaked out as a result of a "very pessimistic" take on r*, a far more appropriate question is whether we are on the precipice of non-transitory runaway inflation as the Fed's hands will soon be tied and its attempt to stem soaring prices will push the US into economic depression?

 

[MyLadiesDaddy]

The 10 year is also down to 1.399.

Not good for the Fed.

 

 

 

[MyLadiesDaddy]

I'm afraid it's beginning 

 

 

 

[MyLadiesDaddy]

 

 

[md11fr8dawg]

3 hours ago, ladyGrace'sDaddy said:

I'm afraid it's beginning 

 

 

 

 

Forgive my ignorance, but what is 2700 $es?

[MyLadiesDaddy]

1 hour ago, md11fr8dawg said:

 

Forgive my ignorance, but what is 2700 $es?

A stock index based on the S & P 500. The indicators are not good. Speculation is the S & P will be 2700 by Labor day. That's  nearly a 50 percent drop. 

All markets worldwide have taken a downturn in the last week. Speculation is that isn't going to stop anytime soon. 

[MyLadiesDaddy]

 

 

[MyLadiesDaddy]

 

 

[MyLadiesDaddy]

 

[Pitcher]

https://www.moneymetals.com/news/2021/06/28/why-banks-are-resisting-new-basel-iii-gold-rules-002319
 

Why Banks Are Resisting Today’s New Basel III Gold Rules

Gold bugs are speculating about the impact of Basel III regulations set to take effect next month. European banks, minus those in the all-important London markets will soon be subject to Net Stable Funding requirements.

The effect may be to reduce bank activities in the paper metals markets.

Marketwatch actually put together a fair summary of the regulation and its potential impacts. The new rules seem to recognize the risk associated with holding derivatives versus holding the real thing. They will be required to hold extra reserves to offset any paper metal they have on the books.

Tangible bullion, however, is being classed as a “zero risk” asset, so long as it’s hedged and in an allocated form.

But unallocated gold holders –holders of gold derivatives, gold leases, and other more risky instruments without direct backing -- will be required to hold an 85% reserve as an offset.

Bullion investors are cautiously optimistic because it appears regulators are acknowledging the risks inherent in the leveraged paper metal markets. Rules which penalise participation in these derivatives markets and incentivize the banks to hold allocated physical metal would be a step toward more honest price discovery.

However, there are very few communities more skeptical of regulators than physical bullion investors. They have been continually let down by captured agencies such as the CFTC. Most will wait to see metals prices more properly reflecting the fundamentals before they credit the Bank of International Settlements with solving any problems.

That said, there is some reason to hope. It comes from another organization with few fans. The London Bullion Market Association -- LBMA -- has come out with dire warnings against the new rules. If that group of crooked bankers is opposed, it is a good sign.

The LBMA is complaining the updated Net Stable Funding Requirements will:

“Undermine Clearing and Settlement -- The required stable funding for short-term assets would significantly increase costs for LPMCL clearing banks to the point that some would be forced to exit the clearing and settlement system, which may even be at risk of collapsing completely.”

LBMA Most gold bugs will shout “Hallelujah!” if price-rigging banks are forced out of the paper markets.

“Drain liquidity -- The required stable funding would dramatically increase costs for remaining LPMCL members taking gold on deposit to be held as unallocated metal relative to the cost of providing custody of allocated metal.”

There will be few tears shed if liquidity in the derivatives market diminishes, and some migrates to the markets for physical, allocated metal. The paper markets are almost completely disconnected from fundamentals like physical supply and demand.

“Dramatically increase financing cost -- The required stable funding would penalise LBMA members who hold unallocated balances of precious metals. This would increase the cost of short-term precious metals financing transactions as stable funding costs are passed through to non-bank market participants.

“Such cost increases would impact miners, restrict refining, and raise the costs of an inelastic key input to industrial and consumer goods. This includes some essential medical equipment and technologies required to reduce pollutants (such as catalytic converters).”

The last sentence implies the LBMA member banks help medical equipment manufactures and the environment, but they won’t be able to do that without the unfettered ability to trade paper metal. That’s rich. Bullion investors have seen chat logs which demonstrate just how charitable and caring these bankers are!

“Curtail central bank operations -- Fewer LPMCL clearing banks may curtail central bank deposits, lending and swaps in precious metals. These operations are essential to offset costs of storing gold reserves and generating income. In addition, this provides important liquidity to the market.”

This criticism hints at what might be the best reason of all to support the new rules.

Anything which reduces the ability of Central banks to interfere in the metals markets would be a good thing. All of the lending and swapping has but one purpose; to artificially increase the supply of metal and cap prices.

It is important to note the new rules do not take effect in the London markets until the end of the year. There is still time for the LBMA and its member banks to seek further delay of the rules and to promote changes.

Gold bugs know better than to count on regulators doing the right thing, but fingers are crossed.

[Pitcher]

Bought more silver today LGD!!  

[MyLadiesDaddy]

8 minutes ago, Pitcher said:

Bought more silver today LGD!!  

Yeppers, my next order will be the 15th.

for me this is a nonstop purchase until Silver can no longer be purchased. 

[MyLadiesDaddy]

I've been saying this for a long time, the entire financial world is balanced on top of the tiny Silver market. And the MORONS running the show have built up a multi TRILLION DOLLAR Derivative scam around Silver. 

 

If APES truly wanna destroy the evil Democratic and RHINO autocracy remove ALL SILVER from the retail market ASAP. 

 

 

 

[MyLadiesDaddy]

[MyLadiesDaddy]

 

[MyLadiesDaddy]

Just got this email from 

 

ROGUE ECONOMICS 

 

Dear Reader,

As a former vice president of a major investment bank, I feel it's my duty to warn you about what's coming on July 28.

With this new banking rule...

Banks across the country are already preparing.

I suggest you do the same...

Because things are moving quickly.

Stephen Roach, former chief economist at Morgan Stanley, warns:

"Already stressed by the impact of the Covid-19 pandemic, U.S. living standards are about to be squeezed as never before. A crash in the dollar could well be in the offing. It's going to fall very, very sharply."

Yeah, I know...

For decades we've heard rumors of a dollar crash...

But what's happening behind the scenes now is stunning.

This new banking rule will change everything.

I've never seen anything like it.

If you have money in the bank...

Click here to see what's happening to our banking system and how to prepare.

Sincerely,

Teeka Tiwari
Chief Analyst, Palm Beach Research Group

[MyLadiesDaddy]

Dear Reader,  If you print money in your basement... it's called counterfeiting. And you go to jail.  When political elites do it, they pretend it benefits us all. But...  Look where all that new money ends up:  Printing trillions of dollars hasn't done a thing to enrich the working class over the last 40 years. In fact, regular Americans earn the same amount today that they did in the 1970's if you adjust for inflation. But Washington and Wall Street elites haven't done too badly — especially in the last ten years.  And that's not even the worst part...  Because a new plan is now being discussed to alter the very bedrock of our monetary system. It's a terrifying proposal for a new kind of currency. One that lets elites rig the game even more in their favor.  And it could spell disaster for anyone with money saved for retirement. In fact, this new plan is the biggest threat to your wealth since the 16th amendment created the personal income tax. And the battle to implement this new kind of currency is heating up.  It's what's really behind a lot of the bitter political polarization you see today... It's what's really driving the so-called "social justice" movement... And as the wealth gap widens... You're going to hear more and more voices calling for a change to our current monetary system. Go here to find out how you can protect yourself. Regards,  Dan Denning  Coauthor, The Bonner-Denning Letter

[md11fr8dawg]

So Santa, do you subscribe to Teeka and Dan's newsletters?