“The concept of transitory is really this: it is that, uh, the increases will happen. We’re not saying they will reverse. That’s not what transitory means. It means that the increases in prices will happen, so there will be inflation, but that the process of inflation, uh, will stop so that, so that there won’t be furth- uhn fur-..” – Jay Powell, verbatim, on inflation at the last post-FOMC meeting press conference
Wall Street on Parade read through the Fed’s Annual Report for 2020 and discovered a direct correlation between the Fed’s deployment of large repo operations precedes the onset of a financial crisis. This occurred at the end of 1999, 2008 and late 2019 (I predicted in October 2019 that the Fed’s repo operations were nothing more than QE dressed in drag and that a financial crisis was brewing – LINK). Wall St On Parade does the grunt work and it’s worth reading their findings (Repo loans/crisis) because the Reverse Repo operations certainly signal that something ominous is occurring behind the Fed’s “curtain.”
In the context of the high correlation between repo loan spikes and financial system accidents, it makes the Fed’s establishment of a $500 billion “standing” repo facility that is open to both domestic and foreign banks even more intriguing:
“The Federal Open Market Committee on Wednesday announced the establishment of two standing repurchase agreement (repo) facilities—a domestic standing repo facility (SRF) and a repo facility for foreign and international monetary authorities (FIMA repo facility)Under the SRF, the Federal Reserve will conduct daily overnight repo operations against Treasury securities, agency debt securities, and agency mortgage-backed securities, with a maximum operation size of $500 billion.” (FOMC standing repo facility)
With price inflation anything but “transitory,” notwithstanding Powell’s incoherent attempt to explain why he believes price inflation will prove ephemeral, and with economic activity once again deteriorating more quickly than most realize and the stock market at 2-3-sigma over-valuation measurements, the establishment of the $500 billion “standing” repo facility ($500 billion for starters, I predict) is quite possibly a signal that the Fed is bracing for another financial crisis.
“From year-end 2009 through year-end 2018 the Fed reported zero amounts of Repurchase Agreements (Repo Loans) because there was no cataclysmic stock market crash. But beginning on September 17, 2019, the Fed went into panic mode again and began shoveling out Repo Loans to its primary dealers (the trading houses owned by the mega banks on Wall Street) by hundreds of billions of dollars.” (Wall St on Parade)
Note: There’s also a high correlation between periods of extreme official intervention in the precious metals markets using Comex paper derivatives and LBMA unallocated fictitious gold bars. I would suggest that the recent massive interventionary efforts that may have culminated this past Friday and Sunday night are further evidence that a crisis is lurking.
As Ronan Manly queried: “Or do the central banks know that further market turmoil is imminent and need to take down the gold price so that when the gold price then rises, it will be from a lower level?”
About the author
