Under guise of virus support, the Fed Will Buy Junk Bonds, Lend to States to the tune of an additional $2.3 trillion in additional aid.
Dear Jerome Powell, please tell the truth. This is not virus support, it’s stock market support.
“We will continue to use these powers forcefully, pro-actively, and aggressively until we are confident that we are solidly on the road to recovery,’ said powell in a speech 90 minutes after the details of the measures were announced.
The key missing word is “legally”.
Hussman Blasts the Fed
Pushing the Boundaries
Please consider Powell Pushed to Edge of Fed’s Boundaries in Fight for Economy
By pushing the Federal Reserve into corners of financial markets it has mostly shunned in its 106-year history, Chairman Jerome Powell is running into some thorny questions.
Like, for instance, how to maintain independence from the U.S. Treasury when the economic-support package Congress passed says they should work together? Or whether the same guidelines for companies receiving federal aid, which range from compensation limits to off-shoring restrictions, apply to the Fed if it gets more money from Treasury? And how about which companies — and perhaps eventually, municipalities and states — are invited to borrow and at what cost?
“This is going to lead to a complete re-examination of the role of central banking and the Fed’s independence,” warns Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington research firm. The Fed’s steps into credit allocation are tantamount to “a complete redesign of central banking on the fly.”
Pole Vaulting the Boundaries
When you take illegal actions and enter numerous uncharted territories on balance sheet expansion, junk bonds, and bond ETFs you are not “pushing” the boundaries, you are pole vaulting over them.
Temporary Measures
Powell says these are temporary facilities.
Yeah, right. Just like the Fed’s announcement that its previous balance sheet expansion was “temporary”.
The Fed had 10 years to unwind its balance sheet after the last crisis, but never did. Now we have new balance sheet records every week.
And today the Fed upped the ante by another $2.3 trillion.
There is no reason to expect it will stop there.
Gold Soars
In response to the announcement stocks and junk bonds rose.
Gold jumped as high as $1752. As of 12:50 Central it’s up $55 to $1739.
Gold vs Faith in Central Banks
Gold’s New Breakout is Very Bullish: Here’s Why
On April 6, I wrote Gold’s New Breakout is Very Bullish: Here’s Why
If you believe as I do that the price of gold is reflective of faith in central banks, there is every reason to be bullish rather than pay heed to alleged 5-year cycles.
COT action is icing on the bullish case.
Moral Fraud and Panic
In case you missed it, please note the Small Business Guarantees Are a Bucket of Moral Fraud
The Fed is in panic mode as Unemployment Claims Jump by 16.78 Million in Last 3 Weeks.
Today’s Fed actions compound the moral fraud.
Panic and fraud inevitably run on the same track.
Today’s Message from Gold
There are no temporary measures, just permanent lies.
No matter what the closing price of gold today, that’s the key message.
Mike “Mish” Shedlock
The Fed declared a situation of “exigent circumstances” back in the height of the GFC and apparently is still operating under than authority. I know I have watched them and do not recall them ever declaring that those circumstances were at an end. That may well give them legal cover to do this according to the Fed charter, but, any reasonable definition of exigent also includes a time limit of some sort.
The buck stops at the President’s desk. a great deal of this is happening because Trump sports a distinct view of the financial world that is rooted in his past. The President’s “damn tomorrow” attitude is reflected in deficit spending and his constant call for lower interest rates.
Trump’s idea the stock market can go straight up forever is not based on years of stock trading but rather seems rooted in his real estate background where inflation has served him well as prices rose ever higher. This does not work for everyone. More on this subject in the article below.
How is the Tea Party not going ballistic right now?
Hey why not have the Fed buy equities –It works for Japan NOT
Bianco’s comment: “meet the new Fed Chairman, Trump.”
Big question is if they start purchasing equities because Trump doesn’t think the market is high enough in an election year.
How does this not result in debt slave revolt?
Successful indoctrination of dumb and pliant drones.
???? A COUP, ACCOMPLISHED ????
The virus, and MSM, has been successfully used.
OPEN LETTER TO CONGRESS
Dear Congress Critter,
Is Congress going to give exploitative rapists trillions of dollars under the pretext of saving the US economy which they have wrecked??
It is the perpetrators of the pernicious chaos that are being offered the reins of government control, and they have the audacity to ask for immunity from exposure ?
Your constituent,
John Q. Public
If the rumor that the US Treasury (i.e., Mnuchin of Goldman Sachs) has been authorized as of March 27 to purchase bad debt from the Fed and drop the bad debt that was purchased from Too Big To Fail banks [TBTF] onto the US taxpayers [to save Wall Street from bankruptcy] is true — [[[[and it appears to be confirmed]]]—, we must conclude Wall Street, as hidden owners of the Federal Reserve Board of Governors, Inc., [BOG] has formulated a coup and Wall Street, who is the creators of the crisis, is now wanting to control the economic reins of the Nation to save their *$$.
And the Fed wants to be exempt from FOIA requests ??? I can see why. Wall Street wants to hide all the trashy MBS’s, derivatives, and such they created and now want to dump them on the taxpayers and citizens of this nation. In addition, they want to hide their embezzlement of $23 trillion over the past 100 years.
Pundits have claimed bad debts of the TBTF banks exceed $1,500 trillion. And the bankers will eventually want the citizens of this nation to buy this debt from them ?? Of course, they will start with a paltry $200 billion for a few small businesses they have loaned money.
The – [Ft. Detrick] – virus is the distraction from the economic collapse which was already pending from the Federal Reserve//Wall Street high-risk fool-hardy agenda.
A New York doctor who has treated >500 cases with 100% cure rate. Relief can be in 4-6 hours and cure in 6 days: https://newsthud.com/ny-doctor-successfully-treats-patients-with-drug-cocktail-zero-deaths-zero-hospitalizations-zero-intubations/ The open letter was sent to White House 10 days ago. Also, https://forward.com/news/national/442285/coronavirus-hydroxychloroquine-trump-doctor/ with 500 patients; and https://techstartups.com/2020/03/28/dr-vladimir-zelenko-now-treated-699-coronavirus-patients-100-success-using-hydroxychloroquine-sulfate-zinc-z-pak-update/; https://therightscoop.com/watch-ny-doctor-says-his-hospital-already-using-chloroquine-for-coronavirus-patients-and-have-had-zero-deaths/; and 4 other sites.
The virus was discussed years before the spread from Ft. Detrick; the cure was known. https://vinsuprynowicz.com/?p=8359 . The origin of the virus is identified as Ft. Detrick. Ref. https://www.altermidya.net/opinion-origin-of-covid-19-ecological-historical-and-geopolitical-perspective/
The virus is going to be blamed as the cause of the economic collapse. The TBTF banks have led the nation to insolvency and will use the Fed to cover the bankruptcy of its owners. Then they will use the Fed to foreclose on the US national debt.
The select Primary Dealers/TBTF banks own shares of the BOG, Inc. The BOG is [alleged to be] a closely held corp that does not have to file SEC reports. They have skimmed $22 trillion [illegal] profit over 100 years. They are using the Fed to protect their [bankrupt] banks and their ownership of six mega-corporations. Ref. https://www.spartareport.com/2019/11/the-federal-reserve-a-different-view/.
The ultimate end is the Fed will be used to foreclose on the $23 trillion national debt of the US. https://ppjg.me/2019/11/18/scenario-of-national-bankruptcy/.
The scheme can be exposed by FOIA. Ref. https://thedailycoin.org/2020/02/19/federal-reserve-transparency/.
Repo crisis was the Lehman moment (part 2)banks (and govt)has collapsed to the point now where they can’t hide it,so they make up this bs covid nonsense to shut everything down to buy time while they figure out what to do next!Chinese and US banks are insolvent to the point where you can’t pretend anymore,instead you deflect and hope the ATM’s (that’s the tell)don’t shut down!
By late spring early summer ,all ATM’s will shut down,they’ll make up some bs story that a “virus” has shut down the system and all ATM’s will go dark,then they’ll move on partial cash ban,or what the Fed call “cash rationing”!
The key missing word is “legally”.
Maybe congress will back date some legislation to make it all legal, like with Citi and the Travelers umbrella that became part of its logo. Maybe they will throw in a provision for the FED to directly buy stock ETF’s, while they are at it. Don’t let a crisis go to waste.
It is legal in that the Fed charter does allow them to do such things during EXIGENT CIRCUMSTANCES. They declared such conditions during the GFC and never revoked that declaration as far as I can tell so may be able to claim they are still operating under that declaration, but it would not matter since Covid surely qualifies as exigent circumstances. As opposed to saving some crooked banker’s asses as they did in the GFC. If called on it they simply declare such circumstances dated to mid February.
I’ve been reading MISH since 2007 and have found him to be quite the opposite and I’ve learned a tremendous amount from him. A special thanks to you though for providing a textbook example of an ad hominen attack…..
Mish is an idiot. PERIOD.
A blanket comment like that has no credibility.
Neighbor Dave…and you are? an asshole? go away!
Collateral Consequences according to the US Department of “Justice”:https://www.youtube.com/watch?v=1dE-CdqJel4
Hyperinflation calls are idiocy
So all this new money is going to disappear into the maw of defaulting debt?
Yep, and it started a long time ago.
Hi Mish,
Although I am on the fence about hyperinflation in the immediate future, I don’t think it is entirely out of the question. I still envision it to be analogous to a giant tsunami wave…..tide recedes rapidly (deflation) followed by the giant wave inundating the shore (hyperinlfation).
Will it happen? I dunno, and if it does, I certainly don’t have a timeline.
Interesting recent article regarding deflation preceding hyperinflation. Food for thought and debate.
Actually I agree with that article. We will see deflation first, but the end game is hyperinflation.
Of course I have no proof of this, it’s all based on pure speculation. The US Dollar will lose quite a bit of value not just because of economic reasons. Geo political reasons might actually turn out to be the main driver. The US is very beatable now even if there’s a war. Heck if you can’t beat people wearing sandals, you probably can’t beat anyone.
Per any monetary aggregate, we have had hyperinflation for anywhere from 1 to 5 decades already.
If one insist on being a well indoctrinated idiot, and fall for the childish drivel that inflation has anything to do with prices, it certainly is idiocy to expect hyperinflation in the goods primarily bought by those who are designated victims of the theft.
But if you look at the prices of the goods the theft beneficiaries are the primary buyers of, like stocks, bonds and houses, we have, again, had hyperinflation for decades already.
Interesting perspective.
Inflation in fixed assets. Things that can’t be grown or manufactured. Deflation in everything else.
” Things that can’t be grown or manufactured.”
“Can’t be” being restricted to limit-case idiotopias.
Anywhere else: manufacturing more houses, and printing more stocks and bonds, are hardly considered particularly complicated.
“Hyperinflation calls are idiocy.”
You’re an Austrian adherent. So are you saying they will not want to do what it takes to prevent a debt collapse or that Mises is wrong?
Rule of law is over, and none of the bailout is for you. Adjust your behavior accordingly.
“You can’t do anything about which way the wind blows, but you can adjust your sails accordingly”.
Great movie, Zardoz, but as someone invested in assets like equities and RE, I must disagree. Actions taken by the Fed that supports the prices of assets benefits me as well as anyone with a 401k or pension.
Not true. Some people might have a bearish stance and hold short ETFs.
And that’s a valid position, I mean markets can get overvalued.
Powell Put: the ultimate derivative.
Japan comes to mind… except Japan is not the reserve currency.
Reader who read “The Rise and Fall of the Dutch Republic” will find an interesting parallel, namely the Dutch East India company went broke, but the government maintained the dividends (I oversimplify). Approximately speaking this change marked the start of the slow fall into ruin of the Dutch Republic.
Pretty clear we are in it by my definition
IMF predicts coronavirus pandemic will trigger worst global recession since the Great Depression in the 1930s – Reuters
I wouldn’t be surprised if they didn’t plan this with one of their favorite NGOs.
On a more positive note, it seems ISIS is picking up some of the slack; resulting from the Taliban feigning politeness towards their version of the idiots, and focusing on Corona containment; back in the free world.
They are now de facto “nationalizing” what used to be our capital markets. This will end up in a Soviet Union type disaster.
Its already a disaster, because all collateral is now impaired. The illusion of solvency is rapidly evaporating with every person that loses their job and cannot pay their bills. If they do not intervene the whole economy will melt into a depression.
Federal Reserve needs to wrap its head around the idea that periodic recessions are MUCH NEEDED to clear out mal investment and excess.
Trying to repeatedly avoid recessions has led to weak economic growth (fueled by ever greater amount of debt) the past decade.
Is it possible that someone would go to court to stop the Fed from buying junk bonds?
I am still amazed that no Libertarian lawyer has gone to court to stop any local from imposing the business lock downs and shelter-in-place orders. Doesn’t anyone have any cojones left?
It’s pure fiction. Fictional reserve banking , so what. The show must go on. Now go eat a cookie make yourself feel better, have two
So a quick look at the Fed’s mandate: maximizing employment, stabilizing prices, and moderating long-term interest rates.
Those things are so vague, they could mean anything.
Looks like they are legally covered.
Demolish the Fed.
Article 14 of Federal Reserve Act spells out what Federal Reserve can purchase.
A change (buying equity) would require Congressional / POTUS approval.
And you see a problem with that?
The POTUS is the biggest stock market promoter. “Greatest market ever”
Congress? Are you kidding?
“The Fed announced today that it will buy junk bonds. This exceeds its legal authority.”
…
No, they are skirting the law, not breaking it. Surprised at Hussman not noticing. Bonds being bought OUTSIDE of Federal Reserve’s balance sheet via a Special Purpose Vehicle (SPV) joint venture with Treasury. Treasury put up the equity (first loss position) of $75 billion, while Federal Reserve financing at 7x or 10x capital depending on what purchased.
Since Treasury on the hook for loss, should bring scrutiny from White House / Congress … and not buried and forgotten on FR’s balance sheet.
Mish, who’s going to arrest these people? The answer is zero.
I already said it before. Moral frauds are impossible in an economic system based on zero morals. Anything goes.
Hyperinflation is guaranteed. Bankruptcies, etc take time, so it’s just “better” for everything to be paid for.
Look for food inflation a couple months down the line. Won’t show up in official statistics though.
Food is only necessary for survival, not for providing useful economic metrics, like how much more people spend on essentials than they did last year. Rolling my eyes with you.
“Hyperinflation is guaranteed.”
…
Deflation coming next.
After that??
Hyperinflation wipes out the value of financial assets. A lot of the status quo will oppose that so it’s not guaranteed, but one possible outcome. The Fed will try and thread the needle to avoid that outcome while maintaining asset values. I have no idea if the Fed will succeed. I think food inflation is very likely, probably taking the form of reduced package sizes in many cases.
Got Gold?
Countries are now hoarding food, which is understandable. There’s no guarantees our farmers will be healthy, etc. One good thing is that they all live in rural areas, so social distancing is probably a given, but still in the end, someone’s gonna pick up all these produces and that someone might be infected, etc.
I have news for you, but during the 2009 crisis the FED bought a lot of putrid stuff. Mostly MBS. Maybe they technically can’t buy junk, but what determines which securities are junk? All they have to do is do their own analysis and declare it not junk. And if they buy an ETF, technically they aren’t buying junk bonds.
MBS was at the asset end of over night bank lending. Could it be that the Fed had to step in starting last September and become the surrogate wet nurse when banks lost trust in each other? Can’t wait to see what happens to mortgages taken out in the last 10 years. Force people to stay home and the mortgages don’t get paid. But rest assured, the Fed has our backs. Reach behind back by your shoulders, and you will find proof… a knife sticking out.