Wednesday, September 25, 2019

It Has Begun

Between Tom Luongo and Pam and Russ Martins it's pretty obvious that the inevitable crisis of interbank confidence is well underway. As stated several times in this blog, the 29 Trillion in Fed dark money bailouts from the last such event barely kept the system hobbling along in maintenance mode for 11 years (although it cannot be said that the illusion of recovery wasn't artfully maintained).

Now with its daily repo on auto-pilot (publicly) the FED can only do what it's systematically programmed to do - keep bailing out defaulting derivative debt with more debt based derivative FIAT. As the weeks and months progress, you will be entertained with cries of "all is well" and "back to normal" but what is going on behind the curtain of happy smoke blowing up the skirts of the little people will be harder and harder to contain.

I suspect it's Deutsche Bank that can't cover its losses, and it's counterparties know it. It's Lehman / AIG in the form of Deutsche / Lincoln National for starters, but all the primary dealers are feeling their sphincters tighten as the great sucking sound coming from their assholes presages the collapsing super nova of liquidity anti-matter. In other words, multiple "dark holes" with "big JP" conspicuously involved, deep state cufflinks and all.

Maybe Mnuchin will go full Paulson on CNN. Williams as Geithner is unlikely, and Powell is no Bernanke. Somehow I can't see Trump in the role of Dubbya, looking like a deer in the headlights and talking about "Too Big To Fail". It's got to be spun another way. In the Luongo article above you are given a few clues.

We waded into uncharted waters in 2008 and we've been drifting further out without a life preserver ever since. Even the families are divided.

I know what I'd like to see, but no light is shed upon the flower of understanding. Only darkness. Someone will say "I told you so" but that won't matter. It will be interesting. Let the liquid invasion ensue.

11 comments:

  1. So please allow me to ask, what should one do in light of this situation? Thank you.

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    1. Every situation is different. But let's see how it plays out.

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  2. Do not be fooled by recent "news" that "the repos are over, liquidity is fine, the banks got what they needed and don't need any more" (etc.) What real news did leak out sent the stocks of the bailout Queens down considerably and that real news had to be adjusted to restore CONfidence. October may have a few surprises in store.

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  3. To wit....
    https://wallstreetonparade.com/2019/09/the-fed-is-offering-100-billion-a-day-in-emergency-loans-to-unnamed-banks-and-congress-is-not-curious-enough-to-hold-a-hearing/

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  4. I wonder what would happen if the Fed got stuck with all the collateral when the banks cannot buy them buy.
    I assume all the money the Fed create out of thin air cannot evaporate back into thin air the next day when the banks either don't want them back or don't have to liquidity to buy them back.
    Would that be the beginning or it has begun?

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    1. The Fed could have 25 trillion of dollar denominated assets on its balance sheet. The question is, does its dollar still function. Right now the dollar wants everyone to understand that while every other major currency has surpassed its highest price for physical gold the dollar has not. So all things are relative. But behind the curtain, systemic banks are preparing for a shock to the system based on the increasing move away from dollar settlement. If producer nation banks no longer need dollars for settlement, there's no liquidity problem, rather there's a derivatives problem. That problem, I believe, has begun.

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  5. Amazingly, Alasdair MacLeod echoes my very same thoughts two days after posting (though in his much more characteristically thorough fashion).

    https://www.zerohedge.com/political/us-repo-calypse-ghost-failed-banks-returns

    Friday was a wild day for me, it's no wonder I missed it. It was not brought to my attention until viewing the comments in Greg Hunter interview (today) with Rob Kirby, who points out another take on the "spectacular growth of America's money losing shale fracking debacle".
    https://usawatchdog.com/dollar-rejection-is-why-america-ramped-up-oil-and-gas-production-rob-kirby/

    We watch, as the rest of the story unfolds.

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  6. They seem to have fixed the plumbing problem with massive digital paper out of the thin air. Me think as long as the dollar is not rejected outright, they can do this again and again. Come to think of it, they have been doing this since !998.

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    1. Indeed sir they have, maybe longer. But ask yourself ... has the mood changed lately? Or is it just me? And then think about the fragility of confidence. My friend, this system is held together by thoughts blowing in the wind. And my fellow man seems to see a storm rising. It's THAT fragile now.

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  7. https://www.zerohedge.com/markets/fed-injects-1042bn-overnight-term-repos-one-day-after-start-not-qe

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  8. So where is the best place within 401-K options to weather this coming storm to preserve capital? Guaranteed investments? Money Markets for liquidity?

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