For years the general public has been inundated with the mantra that the fed was finally going to end this unprecedented inflationary cycle of money printing. The official story was that they were planning on slowly tapering — or “unwinding” — their balance sheet once and for all, finishing off what has been regarded as the largest state sponsored intervention into a nations capital markets in human history.
Remember, the federal reserves balance sheet had never once touched the $1 trillion mark before the financial crisis, and back before this ground shaking worldwide tectonic shift in banking policy, such an unimaginable credit infusion from a central bank would have caused an uproar.
So why is the media so eerily silent? As you can see in the table above, the difference between this repo program and the feds bailout during the financial crisis appears to be almost indiscernible. The PDCF loans were short term in duration, and Citi Group — and its vast swath of subsidiaries — along with various other household names in the financial services industry, received trillions in short term revolving loans, which is exactly what is happening today.
The only differences appear to be that the credit quality is much higher than it was during the 2008 financial crisis, and also that the names of the banks who are receiving these MASSIVE credit infusions are unknown to the general public. The only reason we know the names of the banks that received these government subsidized loans during the financial crisis is because Bloomberg LP won a years long and hard fought lawsuit that forced disclosure.
Just to put this into perspective, immediately following 911 and during the lead up to the most expensive military campaign in American history (maybe even world history), in a press release dated September.17, 2001, the fed described the emergency loans they were forced to issue to banks in response to the attacks as “unusually large“.
j”The Federal Open Market Committee decided today to lower its target for the federal funds rate by 50 basis points to 3 percent. In a related action, the Board of Governors approved a 50 basis point reduction in the discount rate to 2-1/2 percent. The Federal Reserve will continue to supply unusually large volumes of liquidity to the financial markets, as needed, until more normal market functioning is restored. As a consequence, the FOMC recognizes that the actual federal funds rate may be below its target on occasion in these unusual circumstances”.
During this same time period, the Chicago Fed also described a repo loan as a relatively insignificant market intervention that, in their words, “seldom top a few billion dollars each day”.
“The Desk will play a key role as it carries out open market operations— the buying and selling of securities— under the direction of the Federal Open Market Committee (FOMC).The Fed begins to flood the financial system with record levels of liquidity by executing repurchase agreements.These overnight loans collaterallized with government securities are used routinely in open market operations, but seldom top a few billion dollars each day”,
FRBC 2001 ANNUAL REPORT
Two years later in 2003, the fed’s balance sheet had ballooned by 18%, but that almost seems justified compared to what we seeing today with the feds repo program. At the time, America was involved in two large scale military campaigns in the Middle East — what they refer to as “The War on. Terror” — and as we know, war is not cheap.
“While our financial system recovered very quickly, the effect on the economy has been longer-lasting.The attack shook an already weak economy.The Federal Open Market Committee (FOMC) responded decisively, cutting the target for the federal funds rate by 1.75 percentage points during the final four months of 2001.These actions built on earlier policy moves during 2001 in which the target fed funds rate was reduced by 3 percentage points. Overall, the FOMC reduced the target fed funds rate during 2001 from 6.5 percent to 1.75 percent—the lowest level in more than 40 years”. Chicago Fed, 2001
“On Wednesday, the Fed injects $38 billion, more than double the previous record.Thursday, the Fed shatters that mark with $70 billion.The next day, the Fed injects even more—$81 billion”
FRBC 2001 ANNUAL REPORT
Today there doesn’t seem to be anything comparable taking place that would reasonably justify such a sharp and sudden increase to the fed’s balance sheet.
There has been no disclosure from the government that indicates they are participating in any large scale military campaigns overseas, so what could possibly be driving this decision to funnel trillions in revolving loans to unnamed mega-banks at the bargain rate of 1.5% per annum?
100’s of billions of dollars sure goes a long way, so maybe the government is working on some super secret mega project that is going to change the world? As of yet, we can only hope that this is the case, because if not, then what could possibly be of such colossal importance that it requires the federal reserve to suddenly increase the size of its already ballooning balance sheet by as much as 10% in a matter of only four short months?
If the answer to this question is what most of us probably suspect, and that all this money is going towards pumping up the stock market so highly corrupt kleptocrats on Wall Street can line their pockets at the expense of everyone else, then that would certainly be …..disheartening — for lack of a better word — when you consider the rapidly growing gap between the rich and the poor today; a problem that seems to just keep getting worse as time goes on.
To be fair, it wouldn’t be so bad if every company in America spontaneously decided to do a mass equity offering all at once, but that’s obviously not going to happen.
Let’s all cross our fingers and pray that all this money is being used for some super secret mega project. Hopefully it’s a spaceship; or a cure for cancer; or maybe even a super secret quantum computer — now that would be something! ..
Wait, are they are helping Elon Musk with his Tesla Hyperloop?..
No? Then what in the fuck is going on here!! Or better yet, why is nobody talking about it?!!