The big topic of last week in economics was not the Fed’s decision to reduce rates, nor Europe-Germany’s continuing industrial recession nor the US-China trade war nor anything else. It was the near collapse of what’s called the Repo Market for bank lending based on US Treasuries. Since the eruption, the Fed has injected hundreds of billions of dollars into the market and plans to continue to provide hundreds of billions more between now and mid-October. It will likely continue to do so permanently from this point. What does the Repo instability represent? Is it the ‘black swan’ (or at least gray) signaling the next financial crash? Listen to my take and analysis on the importance of this event from my Alternative Visions radio show of Sept. 20, and the event as harbinger of what is likely more global financial instability ahead.
To Listen GO TO:
http://alternativevisions.podbean.com
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SHOW ANNOUNCEMENT
Dr. Rasmus dissects this past week’s spike in Repo (Repurchase Agreement) bank to bank lending market and what it means for growing financial instability in the US and globally. Candidate for financial market instability in US and worldwide are reviewed (junk bonds, BBB, leveraged loans, CDOs, etc., as well as India-Europe banks, China markets, Argentina, etc.). further slowdown of world real economy and trade underlying and interacting with growing financial market instability. Competitive devaluations via central bank interest rate and currency wars. Trump’s narrow view of tariffs and Fed rate cuts. Why the Fed was divided on last rate cut this week. In the midst of all this, the US Repo market rates spike to 10%. Official short term explanations not acceptable. Longer term more fundamental causes: Fed pulling money out of bank reserves via bond operations and balance sheet sell off in order to finance US $1 trillion plus budget deficits. Banks now addicted to more excess reserves after QE, financial structure changes since 2008, etc. Fed will now restart ‘QE Lite’ via Repo market injections (4 times this week). More Negative Rates worldwide and balance sheet ballooning again inevitable now. Fed and central banks policies no longer as economic stabilization tools but as main conduit of capital market incomes subsidization tools. Fed and central banks now secretely planning even more radical innovations next year.
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