By Wayne Jett © October 15, 2019
For weeks, financial observers have been agitated by astonishingly high sums of Federal Reserve Notes (“hundreds of billions of dollars”) moving from the Federal Reserve to borrowers under lending instruments known as repurchase agreements, or “repos.” On September 17, e.g., the Fed created and loaned $53 billion to unnamed parties and, on September 18, an additional $75 billion. Those two days are the mere tip of the iceberg. Who are the borrowers and why is the Fed providing them so much money?
To put in perspective these increases in monetary base, recall the angst in 2008, when the Fed’s increases in monetary base during 2002 to 2006 were (wrongly) blamed for expansion of home mortgage lending during that decade and for the ensuing 2008 financial terrorism. The largest increase in monetary base during an entire year between 2002 and 2006 was $45 billion.
Now the Fed is eclipsing that amount in a single night! Who is getting the money, what are its uses, is it likely to be repaid, and what are the implications of these giant loans?
The Fed’s Public Statement
On Friday, October 11, the Fed issued a statement describing its intentions and actions in part as follows:
• In light of recent and expected increases in the Federal Reserve’s non-reserve liabilities, the Federal Reserve will purchase Treasury bills at least into the second quarter of next year in order to maintain over time ample reserve balances at or above the level that prevailed in early September 2019.
• In addition, the Federal Reserve will conduct term and overnight repurchase agreement operations at least through January of next year to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation.
The first item tells us the Fed expects higher operating expenses, so has issued additional Fed notes to buy Treasury bills (short term loans) which pay interest. So the additional interest income will pay the Fed’s higher expenses.
The second item of the Fed’s statement tells us the Fed is using “term” repos (loans with a term longer than overnight, which the borrower promises to buy back, with interest) as well as overnight repos to add new currency, but gives no hint how long the terms of individual repos may be.
Further on the second item, the Fed presently intends to continue what it is doing now “at least through” January 31, 2020. But the terms of repo agreements may extend beyond that date, so far as we are told. Perhaps, according to the Fed, this may help to assure that activities in “money markets” have sufficient liquidity so their interest rates do not “adversely affect” the Fed’s efforts to hit its targeted interest rate for overnight funds.
This is all the Fed is telling the general public about its re-po activities and intentions at present. So Fed insiders and their friends almost surely maintain a significant edge in available information. Do not assume this is all the Fed is presently doing or all the Fed plans to do. The statement may be merely what the Fed wishes public observers to believe presently. Or, more likely, it is part or all of what the Trump administration asked or demanded from the FOMC at this time.
Nonetheless, the FOMC statement gives no assurance that it describes all of the consequential actions being taken or even the entirety of the repo transactions. No doubt the big banks which are the Fed’s primary dealers in Treasury securities are getting profitable business in carrying out this Fed “policy.”
That is as much attention as we ought to expend tracking the Fed’s official description of its current activities.
The Fed: Global Cabal’s Instrument and Weapon
Better to proceed further by putting the Fed into perspective as a powerful instrument of the global cabal’s wealth acquisition apparatus. Concurrently, the Fed is a destructive weapon to be used against the global cabal’s enemies.
This global cabal which controls the Fed is the same “vast and dominant pecuniary interest” which undertakes to write the laws and mold thoughts in every nation, as first described by Henry George in 1880 in his great book Progress and Poverty. By much historical and contemporary evidence, the global cabal incites wars, funds terrorism, traffics drugs and humans, spreads de-population diseases and vaccines, engages in satanic rituals including human sacrifice, and is presently seeking to over-throw constitutional government in the U. S. by means of a coup d’état.
Contemporary aspects of this criminal cabal’s conduct is, by some accounts, under investigation presently by the U. S. government both domestically and internationally. Evidence has mounted that the cabal’s operatives wield power and influence in many aspects of American society. How else could those operatives challenge and attempt to overthrow, by subversion and perhaps by violence, even the elected and inaugurated president of the federal government?
The Bottom Line(s)
Here is what can be said of the Fed’s recent actions to fund mammoth purchases of Treasury bills by creating new currency. Most likely it is being done at the behest of President Trump and the U. S. Treasury in an effort to keep the market for Treasury bills relatively stable, even strong, for a continuing period, perhaps long enough to accomplish balancing the current account deficit through revised trade deals and re-setting the U. S. monetary system to a gold-backed dollar.
Nonetheless, monetizing federal debt with such large injections of new Federal Reserve Notes will sharply decrease the dollar’s purchasing power over time. The fact that other trading nations are devaluing their currencies even faster than the Fed notes – thus making the dollar appear “strong” in comparison – will not shield Americans entirely from the pain of inflation-caused increases in cost of living.
But this should be no surprise. People subjected to fiat currencies have never fared well in the end. Had the Fed continued with its earlier pattern of increasing interest rate targets, economic decline and monetary failure likely may have been underway by now. Perhaps the president has gained a little more time to accomplish his plan.
If President Trump pulls off this monetary reform – getting Americans and the world back to sound money – this will be the monetary win of the millennium.