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)

Government-driven solutions for America’s economic maladies are doing nothing to provide long-term solutions. In fact, they appear to be driving America deeper and deeper into the hole….

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CBS: With moratorium ending, more than 8 million households face foreclosure or eviction

By Khristopher J. Brooks

June 19, 2021 / MoneyWatch /  https://www.cbsnews.com/news/eviction-foreclosure-moratorium-ending-8-million-households/

Excerpts: 

Even as the nation rebounds from the coronavirus pandemic, more than 2 million homeowners are behind on their mortgages and risk being forced out of their homes in a matter of weeks, a new Harvard University housing report warns.

Most of the homeowners at risk of foreclosure are either low-income or families of color, said researchers who published the 2021 State of the Nation’s Housing report. Congress has dedicated $10 billion to help homeowners get caught up on payments, but it’s unclear if that funding will make it to families before mortgage companies begin sending out foreclosure notices, researchers say.

Separately, millions more renters are “on the brink of eviction,” the Harvard researchers found. Census data show that 6 million households are still behind on rent and could face eviction at the end of June, when federal eviction protections expire. 

The Center for Disease Control order halting some evictions, and federal limitations on foreclosures for federally-backed housing, both expire on June 30. Housing advocates have pushed for the Biden administration to extend both, but there is no indication an extension will happen.

“With so many renters in financial distress, there are concerns about an impending wave of evictions,” the Harvard report said.

More than 7 million homeowners took advantage of the foreclosure moratorium passed as part of the Coronavirus Aid, Relief and Economic Security Act last spring. The provision was later extended by the Biden White House. As of March 2021, most of those homeowners have started repaying lenders and some are even up to date with their lenders. But that leaves about 2.1 million still behind on their mortgages, researchers said. Of that number, about 325,000 homeowners have a Federal Housing Administration loan and are behind at least 60 days. They are most likely people of color, the U.S. Department of Housing and Urban Development said Wednesday. 

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Solution: A Federal Reserve Citizen’s Credit Facility – to power American families up out of poverty and eliminate dependence upon government social welfare programs.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2022 (3782 downloads)

America needs a powerful, new, ‘outside-the-box’ economic acceleration plan – or we are ‘doomed.’

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Government Accountability Office (GAO) Report, Mar 23, 2021: https://www.gao.gov/products/gao-21-275sp

Absent Changes, Continued Spending and Revenue at Unsustainable Levels Will Pose Serious Challenges in the Future

The unsustainable fiscal path strains the federal budget and contributes to growing debt. According to CBO, high and rising federal debt increases the likelihood of a fiscal crisis and could lead to a large drop in the value of the dollar or to a loss of confidence in the government’s ability or commitment to repay its debt in full.

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There is precisely one economic acceleration plan with the raw power to eliminate America’s massive debt overhang, restore economic liberty, reignite a powerful, free market economic growth cycle, reestablish a citizen-centered health care system, and lift millions of U.S citizens up out of poverty.

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 (3777 downloads)

Five short years ago, U.S. citizens got ‘hooked’ by the IMF for a $3 billion transfer to help make Valdimir Putin ‘financially healthy.’

U.S. citizens received… ‘zilch’ for their financial needs.

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Ukraine owes Vladimir Putin $3 billion, and Putin is demanding payment.

Bank of America Merrill Lynch maintains that the IMF will be stepping in to provide Ukraine with the requisite funds to make Vladimir Putin ‘whole,’ and to de-stress the situation:

The $3bn Russian bond is included in debt restructuring, but Russia will not participate in debt restructuring and will either be paid $3bn from reserves in December or there will be a political decision to agree on an extension, likely without haircuts. We believe the $3bn bond is likely to be classified as sovereign debt and the IMF would likely be forced to pay it (as a holdout) in order to continue the program in December.   Source:  ZeroHedge 8-28-15  Putin To Get $3 Billion From US Taxpayers After Ukraine Bond Debacle

And so, here we have the U.S. government, funneling U.S. taxpayer dollars through the IMF fire-hose to Russia’s Vladimir Putin … to help make Putin ‘financially healthy.’

It is now time to grant U.S. citizens the same access (to their own money) that was so graciously provided to Vladimir Putin – to allow U.S. citizens to also become ‘financially healthy.’

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2022 (3776 downloads)

The Federal Reserve and U.S. Treasury Department ‘flushed’ billions of dollars (courtesy of tax-paying U.S. citizens) out through their big-bank-connected umbilical cord credit extension system during the height of the Great Financial Crisis.

The ‘biggest of the big’ made out well – and their insiders did even better.

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“Secrets and Lies of the Bailout” –  RollingStone, Jan 4, 2013 

Goldman Sachs, which had made such a big show of being reluctant about accepting $10 billion in TARP money, was quick to cash in on the secret loans being offered by the Fed. By the end of 2008, Goldman had snarfed up $34 billion in federal loans – and it was paying an interest rate of as low as just 0.01 percent for the huge cash infusion. Yet that funding was never disclosed to shareholders or taxpayers, a fact Goldman confirms. “We did not disclose the amount of our participation in the two programs you identify,” says Goldman spokesman Michael Duvally.

Goldman CEO Blankfein later dismissed the importance of the loans, telling the Financial Crisis Inquiry Commission that the bank wasn’t “relying on those mechanisms.” But in his book, Bailout, Barofsky says that Paulson told him that he believed Morgan Stanley was “just days” from collapse before government intervention, while Bernanke later admitted that Goldman would have been the next to fall.

Meanwhile, at the same moment that leading banks were taking trillions in secret loans from the Fed, top officials at those firms were buying up stock in their companies, privy to insider info that was not available to the public at large. Stephen Friedman, a Goldman director who was also chairman of the New York Fed, bought more than $4 million of Goldman stock over a five-week period in December 2008 and January 2009 – years before the extent of the firm’s lifeline from the Fed was made public. Citigroup CEO Vikram Pandit bought nearly $7 million in Citi stock in November 2008, just as his firm was secretly taking out $99.5 billion in Fed loans. Jamie Dimon bought more than $11 million in Chase stock in early 2009, at a time when his firm was receiving as much as $60 billion in secret Fed loans. When asked by Rolling Stone, Chase could not point to any disclosure of the bank’s borrowing from the Fed until more than a year later, when Dimon wrote about it in a letter to shareholders in March 2010.

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It is now time to ‘level the playing field’ – and grant U.S. citizens the same direct liquidity access that was provided to major banks and insurers during 2007 – 2010.

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 (3771 downloads)

Answer:  $23.7 trillion

Neil Barofsky, the Special Inspector General of the Troubled Asset Relief Program filed an official SIG TARP report in July 2009 projecting the government’s “Total Potential Support Related to Crisis” at an astounding $23.7 trillion.

Barofsky’s report was immediately criticized as being misleading in its characterizations, prompting him to respond on May 12, 2014 to one of the chief critics, Tim Geithner, who was Secretary of the Treasury during the crisis years.

The SIG TARP report did not say that the government might “lose” $23.7 trillion, as critics claimed.

Barofsky: “What the report actually ascribes to that number (at page 138) is the “Total Potential Support Related To Crisis” (and not potential losses) of the myriad pledges of support to the financial system from an alphabet soup of agencies and programs. The numbers underlying that estimate, of course, were provided to us by Treasury and other governmental agencies, the report was vetted with Treasury before it was issued, and the report makes clear in a series of caveats that it was not an estimate of actual potential losses.

Again, the U.S. government’s “Total Potential Support Related to the Crisis” weighed in at $23.7 trillion.

The effects of that “support” for main street America have been marginal, with the best of it short-lived.
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The Leviticus 25 Plan provides for a Citizens Credit Facility to serve as the conduit for direct liquidity access by U.S. citizens – the same direct of access that was granted to Wall Street financial heavyweights during the crisis.

The Leviticus 25 Plan will provide for massive ‘ground level’ debt elimination and restore financial health for millions of American families. Money would still flow into the banking system – after first passing through the hands of U.S. citizens and the millions of small businesses in main street America.

The Leviticus 25 Plan would re-ignite powerful, long-term economic growth and put America on track for substantial budget surpluses. It would drastically scale back government control over the daily affairs of citizens. It would restore basic social freedoms and economic liberty for all.

Question:  What would be the U.S. government’s “Total Potential Support Related to The Leviticus 25 Plan?”

Answer: $21.6 trillion – all of which would get ‘repaid’ to the government over a 10-15 year period.

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 (3764 downloads)

It is time for an economic recovery plan that grants access to liquidity for all Americans, not just Wall Street and the wealthy ‘elite.’

Another ‘means-tested’ welfare program using U.S. Treasury debt, purchased by the Federal Reserve using ‘imaginary electronic money’ created at the Fed’s discretion – which will inevitably debase the U.S. Dollar and create ever increasing poverty…

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“39 Million Households Including Most U.S. Children To Get Up To $3,600 Stimulus In Monthly Payments“

ZeroHedge  /  May 17, 2021 – Excerpts:

In the latest evolution of creeping Universal Basic Income, Biden administration officials said on Monday that a poverty-fighting measure included in the COVID-19 relief bill passed this year will deliver monthly payments to households including 88% of children in the United States, starting in July. The Democratic-backed American Rescue Plan, signed into law by President Joe Biden in March as a response to the coronavirus pandemic, expanded a tax credit available to most parents.

Treasury and the IRS also announced the increased CTC payments, will be made on the 15th of each month allowing families who receive the credit by direct deposit to plan their budgets around receipt of the benefit. Eligible families will receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and above.

Eligible recipients will get [annually] up to $3,000 per child between 6 and 17, or $3,600 for each child under the age of 6, in 2021, subject to income restrictions. The benefit will reach 39 million households, many automatically and by direct deposit every month, starting on July 15. It is one of several measures the administration says could lift more than 5 million children out of poverty, half of the total number of U.S. youngsters in that situation, according to Reuters.

Officials are trying to help the economy recover from the pandemic. Yet recent signs of higher inflation have raised concern that those costs could eat away at incomes and exacerbate inequality… which was underscored by Stanley Druckenmiller in a recent discussion in which he said that “There’s Been No Greater Engine Of Inequality Than The Fed“

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The American Rescue Plan will pile hundreds of billions of dollars of additional debt onto the U.S. Treasury balance sheet each month, while doing nothing to lift American families up out of poverty… nothing to improve productivity… nothing to rejuvenate America’s failing health care system… nothing to solve the rapidly depleting Social Security and Medicare trust funds… and nothing to shore up the long-term stability of the U.S. Dollar.

America needs a new plan.

The Leviticus 25 Plan is an equal opportunity plan – available to every U.S. citizen who wishes to participate.

This Plan will eliminate massive amounts of ‘ground level’ debt across America – lifting millions of families up out of poverty and providing a pathway toward financial health and prosperity for all who are willing to embrace the opportunities it provides.

This Plan will generate $383 billion surpluses annually for each of the first five years of activation, and will pay for itself entirely over the course of the following 10-15 years.

It will restore a citizen-centered health care system in the U.S. and rejuvenate the SS and Medicare trust funds.

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 (3764 downloads)

The U.S. government is now piling on trillions of dollars in additional debt annually – jeopardizing the long-term financial health of America, distorting free markets and compounding financial stress within the economy, all the while providing little, if any, long term debt relief and financial security for American families.

U.S. citizens must be provided with direct liquidity access through a Citizens Credit Facility, in order to reduce/eliminate debt at the family level and off-set the potentially devastating consequences of future major debasement of the U.S. Dollar.

The Leviticus 25 Plan’s one-time credit extension of approximately $21.6 trillion to U.S. citizens’ Family Accounts and Medical Savings Accounts would set America on a powerful new course providing immediate and substantial liquidity benefits to American families, strengthening small businesses, and reigniting true economic growth in the U.S. economy.

The Plan would also stabilize the U.S. Dollar and strengthen the nation’s banking system.

There is a Biblical precedent for The Leviticus 25 Plan.

The Leviticus 25 Plan is justified upon the basis of its profound historical correlations with the Biblical year of the “Jubile” (The Book of Leviticus, Chapter 25). This Year was established by God to free Israelites from economic indebtedness and oppression. It provided individuals and families a fresh start, with economic liberties and a societal rebalancing to counter permanent and restrictive class structures.

Justification:
1. SIGTARP, the oversight agency of the Troubled Asset Relief Program (TARP), in its July 2009 report, vetted by Treasury, noted that the U.S. Government’s “Total Potential Support Related to Crisis” (page 138) amounted to $23.7 trillion. While this figure represents a backstop commitment, not a measure of total potential loss, it is nonetheless an astounding degree of support, in the form of liquidity infusions, credit extensions and guarantees, various other forms of assistance for financial institutions and other business entities affected by the financial crisis.

One example of the mechanics of these backstop commitments involved two of the major investment-banks which were at the forefront of the U.S. financial crisis, Goldman Sachs and JP Morgan who, through their high-risk exposure to subprime debt and derivatives, received enormous financial assistance at the expense of U.S. taxpayers.

Goldman Sachs and J.P. Morgan received these direct liquidity infusions during the financial crisis via Fed disbursements through the Primary Dealer Credit Facility and numerous other credit facilities. The two (according to ZeroHedge 4-1-11) “had the temerity to pledge bonds that had defaulted (i.e. had a rating of D)… as in bankrupt, and pretty much worthless. . . that have no value whatsoever. . .” Goldman Sachs received $24.7 million and JP Morgan $1.4 million on the worthless collateral (September 15, 2008). Goldman Sachs pledged D-rated securities again September 29, 2008 and received $82.7 million (Citigroup received $102.8 million; Merrill Lynch – $217.8 million; Morgan Stanley – $261.0 million; UBS – $202.2 million).

U.S. citizens deserve nothing less than the same access to credit extensions for resolving liquidity issues of their own at the family level, that have been extended to major domestic and foreign financial institutions dating all the way back to 2007, and the beginning of the Great Financial Crisis.

Furthermore, the same two investment banking giants, Goldman Sachs and JP Morgan, earned free interest (again at taxpayer expense) through their access to credit extensions at the Federal Reserve discount window. Within two years, Goldman Sachs was paying out $111.3 million in “delayed bonuses” for the years 2007 and 2009 (NY Times 12-15-10).

The initial credit extension outlay with The Leviticus 25 Plan ($21.6 trillion – assuming an 80% participation rate by U.S. citizens) would hardly be prohibitive, in light of the trillions of dollars in Federal Reserve and Treasury outlays during 2007-2010 to major U.S. banking and financial institutions (Morgan Stanley, Citigroup, Bank of America, State Street Corp, Goldman Sachs, Merrill Lynch, JPMorgan Chase, Wachovia, Lehman Brothers, Wells Fargo, AIG, Bear Stearns) and major foreign financial institutions (Royal Bank of Scotland, UGS AG, Deutsche Bank AG, Barclays, Credit Suisse. Dexia, BNP Paribas).

The Federal Reserve’s various credit facilities, Discount Window transactions, emergency loans, Foreign Exchange swap lines, Interest on Excess Reserves (IOER) for foreign banks, and Treasury’s TARP and stimulus programs have done little to improve the financial status for the majority of American families. These government programs have also done nothing to change the dominance and risk profile of “too big to fail banks,” and they have done little to lessen the counterparty default risk in the global derivatives markets.

U.S. taxpayer dollars have been used to support the IMF bail-out of Greece. The U.S. funded at least $780 million (17.09%) of the July $4.6 billion IMF transfer to Greece (purportedly funding interest payments to hedge funds which had speculated in purchasing the high-risk Greek debt).

U.S. taxpayers also funded approximately $2.9 trillion of a massive 2014 IMF loan to Ukraine to help Kiev pay off creditors including Western banks, Gazprom (the big Russian oil company), and previous IMF loan payment obligations).

The U.S. Treasury Department followed that up by guaranteeing a $1 billion Ukrainian bond issuance, and has added an additional $3.7 billion in Foreign Assistance to Ukraine since 2014.

If U.S. taxpayer funds are being used to bail major Wall Street Financial institutions and foreign banks, and to bail out the citizens of bankrupt foreign nations, then U.S. citizens deserve direct access to liquidity extensions to restore ‘financial health’ at the family level in America.

The Leviticus 25 Plan – An Economic Acceleration Plan for America

$90,000 per U.S. citizen – Leviticus 25 Plan 2022 (3753 downloads)

America needs a new, outside-the-box plan to deal with this ticking time bomb..

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One Bank Spoils The Party, Reminds Traders We Are This Close To The “Breaking Point”

ZeroHedge, Apr 5, 2021 – Excerpt:

“… the only question is how much longer with this yield stability persist. Because if Deutsche Bank rates strategist Steven Zeng is correct, the next move higher in yields is on its way.

In a note that could sober up some of the stock market Kool-aid drinkers, Zeng reminds us that the amount of outstanding Treasury coupon debt is increasing at a record pace, and “every quarter, the Treasury is adding more than $650bn of new debt to replace the T-bills issued last year and to support new stimulus spending.”

The math is, to put it mildly, startling: even with the Fed buying substantial amounts, the amount of coupon supply left to private investors is staggering, and it will only go up more once the Fed begins to taper its purchases.

“All of that begs the question: who will buy all these Treasuries”, Zeng asks rhetorically (especially since the Fed’s next move is not more QE but an eventual tapering of QE)…..

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America’s powerful ‘outside-the-box plan”:

The Leviticus 25 Plan will massively reduce the ‘cost of government’ by trillions of dollars each year. It will reduce the U.S. Treasury Department’s income tax refunds amounts by $261 billion per year during each of its first five years of activation.

It will generate $383 billion budget surpluses during each of those first five years, also, and it will completely pay for itself over a 10-15 year period.

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 (3751 downloads)