Fed ‘lathered the banks up’ with trillions of dollars in free money, credit guarantees, ‘toxic paper’ transfers onto the Fed’s balance sheet. And they are still at it, 13 years later…

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We Have The First Trillion Dollar Reverse Repo

ZeroHedge / Jul 30, 2021 – Excerpts:

It’s official: at exactly 1:15pm today, the NY Fed reported that for the first time ever, 86 counterparties parked over $1 trillion in reserves at the Fed’s Reverse Repo Facility for overnight ‘safekeeping’ and collecting a nice, fat yield of 0.05% – representing hundreds of millions in absolutely free money as these are reserves that the Fed has previously handed out to banks – for free – who then turned around and handed it right back to the Fed where it collected a small but nominal interest.

Of course, it is month-end (if not quarter-end) so we do get some window-dressing but even without it, it’s only  matter of time before we got consistent $1 trillion prints… which then become $2 trillion and so on.

In fact, the question of how big the Fed’s reverse repo facility – which as explained previously is just how the Fed recycles all its massive reserves which it keeps injecting into the financial system (if not economy) at a pace of $120 billion per month – is one we discussed yesterday, and highlighted a calculation by Curvature’s repo guru Scott Skyrm who made the following observations:

During the month of April, RRP volume increased by $49 billion. $296 billion during the month of May, $362 billion in June, and $124 billion in July. If RRP volume continues around the same pace, say $200 billion a month, RRP volume will reach $2 trillion by the end of the year.

Looking at the trendline, it puts RRP volume at $2.5 trillion by the end of the year. However, the RRP volume at the end of the year will be a far larger number due to year-end window dressing, meaning it will likely approach if not surpass $3 trillion on Dec 31, 2021.

A few rhetorical questions from Skyrm to conclude: what will be the impact of $2 trillion going into the RRP each day? How will this affect the markets? Will the Fed need to adjust the RRP rate again?

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The Leviticus 25 Plan, on the other hand, re-targets the Fed’s liquidity flows, so that these types of ‘bank funding infusions’ pass first through the hands of U.S. citizens, via a Citizens Credit Facility, on their way to the banks – in the form of debt elimination (mortgage debt, credit card and household debt, student loans, car loans).

And… then everybody wins – even the Fed, as the Leviticus 25 Plan pays for itself entirely over a period of 10-15 years.

The most powerful economic acceleration plan in the universe.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2022 (3807 downloads)

The Leviticus 25 Plan grants the same access to liquidity extensions that were provided to the likes of Morgan Stanley, Bank of America, Goldman Sachs, JP Morgan, Citigroup, UBS AG, Barclays, Deutsche Bank, Royal Bank of Scotland, BNP Paribas, Wells Fargo, along with brokerages and insurers like Merrill Lynch and AIG during the financial crisis, to bail them out of their subprime misadventures and restore them to ‘financial health.’

The Leviticus 25 Plan’s primary goal is to, in like manner, restore ‘financial health’ for American families, through a massive debt pay-down and a revitalization of economic liberty and free market dynamics.

The Plan will materially reduce the gross levels of U.S. citizens’ dependence on government subsistence programs, and thereby relieve citizens from the stifling, freedom-robbing effects of government influence and control over their daily affairs.

The Plan will re-energize vigorous, sustainable economic growth, and it will recapture massive amounts of tax refund and social welfare payouts, with a net result at the federal level of $383 billion budget surpluses over each of the first five years following launch.

The $383 billion federal budget surplus is based solely upon The Plan’s recapture benefits. It does not include the new tax revenues that would be generated from the substantial gains in economic growth.

The $383 billion estimate therefore understates the true growth in tax revenues that would accrue.

The power and agility of The Leviticus 25 Plan                                                  Imagine the dynamic growth benefits of an economic plan granting liquidity benefits sufficient to pay off 60% of the mortgage debt in the U.S..

The chart below from Y-Charts shows a current mortgage debt load in the U.S. of $10.167 trillion. A 60% pay-down in that debt would eliminate $6 trillion in mortgage debt.

That $6 trillion would, in effect, pay off 30 million mortgages, each with a balance of $200,000.  Assuming a 3.5% rate of interest and a period of 20 years to maturity, the “total cost of mortgage” on each of the mortgages would amount to $323,000. The net debt reduction benefit from the elimination of 6 million $200,000 mortgages over a 20 year period would be $9.69 trillion.

On a monthly basis, a $200,000 mortgage with a 3.5% rate of interest and 20 years to maturity would require principle and interest payment of approximately $898 in monthly debt service.

Eliminating that $898 monthly debt service payment for 30 million families would result in ~$900 of newfound discretionary liquidity for each family each and every month for the next 20 years. And that would amount to $27 billion in new money for main street America each month for the next 20 years.

This $27 billion in new liquidity flows for main street America would strengthen small business, increase growth in quality jobs, increase tax revenue and payroll tax growth.

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The Leviticus 25 Plan is a powerful economic growth engine like no other plan in existence.  It is a powerful defender of individual freedom and liberty like no other.

The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens.  It is a comprehensive plan with long-term economic and social benefits for citizens and government.

The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2022 (3803 downloads)

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“He who will not apply new remedies must expect new evils.” – Sir Francis Bacon

Basel III & CBDCs: The Seismic Changes Facing The Global Financial System

Authored by Alasdair Macleod via GoldMoney.com, / https://www.goldmoney.com/research/goldmoney-insights/banking-faces-seismic-changes

Excerpts:

The role of commercial banks in the global economy is changing, with lending to governments and their agencies now more important than lending to goods and services industries. It is a trend which is due to continue.

The new Basel 3 regulations seem set to encourage this trend, despite retail depositors being accorded a stable funding status. Central bank digital currencies are anticipated to augment and perhaps replace non-financial business credit over the next five to ten years.

But the increasing financialisation of commercial banking brings the risk of tying its future firmly to a financial bubble. And with price inflation on the increase, it is only a matter of very little time before that bubble bursts.

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But there is a bigger picture…

Behind the convenience of a CBDC solution important monetary and economic considerations are being assumed or ignored. While central and commercial bank credit is expected to be continually expanded to finance government spending and asset inflation, the increasingly obvious consequences for prices are certain to lead to higher interest rates —and soon.

Central banks will find they have to escalate their attempts to support asset prices in financial markets, by yet further monetary expansion, or risk seeing the asset bubble implode. By embarking on a policy of engendering economic confidence by a perpetual bull market, central banks have tied the fate of their currencies to stock and bond markets.

The strategy of large commercial banks being increasingly committed to purely financial activities and turning their backs on non-financial credit expansion has led to them swapping one risk for another. Furthermore, in financial activities banks are increasingly bound to each other’s fate, exchanging counterparty risk from industrial debtors for those with other banks. And nowhere does this matter more than in cross-border banking relationships, where undercapitalised banks in, say, the EU, pose a global systemic risk which is not addressed by Basel 3’s NSFR.

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We are facing global systemic financial system risk – brought on by the massive debt loads that are burying governments, businesses and citizens.

For the U.S., there is one powerful solution to this looming catastrophe – a solution that will eliminate massive amounts of ‘ground level’ debt, dramatically reduce government deficits, reduce dependence on government entitlement programs, restore a ‘citizen centered’ health care system, and recharge America’s long-term economic growth engine.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2022 (3796 downloads)

Justice David Brewer on Free, Self-Governing Americans

David J. Brewer (1837-1910) served as an associate justice on the United States Supreme Court for 20 years, from 1889 to 1910. He strongly advocated equal rights and respect for women, worked for equal opportunities for black Americans, and supported freedom of association among workers. In a series of lectures delivered at Yale University on American Citizenship (1902), Justice Brewer explained what it meant to be an American in terms of defining beliefs and ideas:

“This is a government of and by and for the people. It rests upon the thought that to each individual belong the inalienable rights to life, liberty and the pursuit of happiness. It affirms that the nation exists not for the benefit of one man, or set of men, but to secure to each and all the fullest opportunity for personal development. It stands against the governments of the Old World in that there the thought is that the individual lives for the nation; here the nation exists for the individual…

“Far be it for me to affirm that we have lived up to our ideals. I am making no Fourth of July speech. On the contrary, our history has disclosed many shortcomings. We have not been free from the weaknesses of human nature. But, notwithstanding all our failures, nowhere has there been a closer living to the ideals of popular government, and nowhere are the possibilities of future success greater.

“If, therefore, the chief object of national existence is to secure to each individual the fullest protection in all inalienable rights and the fullest opportunity for personal advancement, and if this nation has come nearer than any other to the realization of this ideal, and if by virtue of its situation, its population, and its development, it has the greatest promise of full realization of this ideal in the future, surely it must be that the obligations of its citizens to it are nowhere surpassed.” (pp. 14, 17-18)

How Central Banks Murdered the Markets – Michael Pento, Pento Portfolio Strategies

June 28^th 2021

The Japanese Government Bond market is nearly $10 trillion in size. It is the 2nd biggest bond market in the world. However, it comes as a shock that this humongous market barely trades any longer.

The government of Japan has systematically supplanted and killed the entire private market for its bonds. Meaning, there are almost no private investors who will touch it any more. The Bank of Japan has bought so much debt that it forced interest rates below zero percent back in 2016; and the result is the free market has subsequently died.

Investors are now refusing to buy JGBs, which are guaranteed to lose principal in nominal terms—and deeply negative results after adjusting for inflation. But at the same time, are not in any hurry to sell their existing holdings because they understand the government will be propping up bond prices.

In this same vein, the 5-year greek yield recently turned negative. This is prima facie evidence that centrals banks have committed murder-one when it comes to markets. Back in February of 2012, at the height of the European debt crisis, the Greek 5-year Bond Yield skyrocketed to 63%. The free-market deemed the nation to be insolvent and that it could never pay back its debt without returning to the Drachma; and then turning it into confetti. Hence, bond yields surged—makes perfect sense, correct? Also in 2012, the Greek National debt to GDP ratio was 160%. Today, that ratio has soared to an all-time record high of 210%; and yet, these bonds display a negative cash flow going out 5 years in duration. Only one thing has changed: central banks deemed it mandatory to step in and replace the entire demand for government debt in order to force interest rates towards zero percent. It is the only way these countries would have any semblance of solvency.

Sadly, the U.S. is headed in this exact same direction as Greece and Japan. And, that is why we can be certain central banks’ monetary tightening cycles can’t last for very long and will end in disaster–as per usual. In fact, Mr. Powell will probably torpedo markets before he is able to end his current historic and massive QE program.

If you want to know how fragile markets really are, just look at the 2.5% selloff during the week surrounding Powell’s June FOMC press conference. The fed hasn’t started to end QE yet. In fact, it hasn’t even set a date to start the taper. All the fed’s money printers have done is admit that they have begun to discuss when to think about a time for the start of tapering $120b per month in asset purchases.

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The simple truth is, asset values and debt levels have grown to become such enormous monstrosities that they prohibit the tightening of monetary policy much at all before the entire fragile and artificial edifice collapses.

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Wall Street’s favorite mantra post the Financial Crisis was: either the economy improves enough to boost earnings and the market, or the Fed will keep printing money in order to support stocks and engender a perpetual bull market. Now, as a result of the Fed’s “success” with creating runaway inflation, the exact opposite calculation is now true: either the economy soon slows down significantly enough on its own, which will depress EPS & inflation, or the Fed will tighten monetary policy until inflation is tamed, which will cause asset bubbles to collapse.

Central banks have destroyed price discovery across the board. As these maniac money printers begin to exit their market manipulations, the free market will demand much lower asset prices. The challenge for investors is to actively manage your portfolio in order to maintain—or perhaps even increase–your standard of living, in spite of the carnage that is set to occur on Wall Street and Main Street.

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The key for this financial dilemma for the U.S. is to engage a massive debt elimination plan, which will effectively ‘pay off’ trillions of dollars of ‘ground level’ debt (mortgage, household, consumer, student loans, back rent, credit cards, auto loans), while at the same time reducing government costs (federal, state, local) through income tax refunding, reduced social welfare outlays, reduced Medicare, Medicaid, VA, TRICARE, FEHB claims payments, reduced SSDI, SSI, and reduced interest costs on government debt.

And THEN, the Fed can begin to initiate a gradual ‘price discovery’ process into the credit markets.

It all starts here – with the most powerful, citizen-centered economic acceleration plan in the world:

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2022 (3787 downloads)