"How are you going to pay for it?" Asks absolutely no one ever when it comes to the big banks.



Thursday early afternoon, the Fed announced in a surprise shock-and-awe move that it will use the repo market in a big way to try to prop up and inflate whatever needs propping up and inflating. It will offer a series of $500-billion term repos at least through April 13, amounting to $4.0 trillion in new money over the four-week period.

...On Friday, the Fed will offer $1 trillion in repos: $500 billion in three-month repos and $500 billion in one-month repos. That’s a heck of a lot of bucks to print in just one day. But no problem for the new mega-money printer. If anyone wants this much, it can print it. Next week (the week of March 16), the Fed will offer another $1 trillion: next Monday, $500 billion in one-month repos; and next Friday, $500 billion in three-month repos.

...

These repos would come on top of the other repos and on top of the $60 billion a month in purchases of Treasury securities, that the Fed said it will broaden to include Treasury securities of all types and maturities, not just T-Bills.

That's a massive tidal wave of money printing that needs to be put into perspective.

The size of the entire U.S. economy was at $20.58 trillion in 2018.

Eliminating tuition at all public colleges and universities would cost $79 billion a year, according to the most recent Department of Education data.

The Fed has refused to provide the public with the dollar amounts going to any specific banks.

The taxpayer may support the dollar, but it seems we don't get to know what we are supporting.

Another thing that needs to be pointed out is this Fed bailout of Wall Street didn't just start with the coronavirus.



Since the Fed began its repo loan operations on September 17, the tally of the Fed’s cumulative loans to Wall Street’s trading firms comes to more than $9 trillion (using the Fed’s own Excel spreadsheet of the data; you have to manually remove the Reverse Repo dollar amounts.) According to the Fed audit conducted by the Government Accountability Office (GAO), from December 12, 2007 to July 21, 2010, a period spanning more than 31 months during the worst financial crisis since the Great Depression, the Fed’s cumulative loans to Wall Street tallied up to $16.1 trillion. (See chart below from the GAO audit.) And here we are today, when everyone from Fed Chairman Jerome Powell to bank analyst Mike Mayo is telling the public that the banks have plenty of capital and yet the Fed has pumped out 56 percent in six months of the amount it funneled to the Wall Street banks over 31 months during the 2008 financial crisis. At this rate, it is going to top the money it threw at the 2008 crisis in no time at all.

$9 Trllion. Half of which got sent to Wall Street before people began panicking over a pandemic.

Yet the markets crashed anyway!

Just how serious is this? Consider this headline.

Coronavirus-induced market mayhem has pushed so much liquidity out of U.S. Treasuries that the true value of more than $50 trillion in assets around the globe is in doubt.

...“Treasuries are the risk-free benchmark that anchors the over-$50 trillion in global dollar-denominated fixed-income securities,” said Joshua Younger, head of U.S. interest rate derivatives strategy at JPMorgan Chase & Co. “The level of volatility and lack of clarity in Treasuries makes it much harder to make sense of the value of all other assets,” added Younger, who has an astrophysics Ph.D. from Harvard University. “It can create a self-perpetuating flow of expectations that is not really reflective of financial markets and the true level of risk aversion.” One key gauge of Treasury liquidity -- market depth, or the ability to trade without substantially moving prices -- has plunged to levels last seen during the 2008 financial crisis, according to data compiled by JPMorgan. That liquidity shortfall, JPMorgan says, is most profound in long-term Treasuries.





“I have never seen moves like this in 35 years of trading. I’ve never seen anything like it.”

- Tom di Galoma, managing director of Treasurys trading at Seaport Global Securities.

Forget the stock market. This is HUGE!

Last week someone made a comment that I summed up as "None of these unprecedented moves in the credit markets mean much...unless they mean financial End Of Days."

Well, when Bloomberg News starts calling into question the value of Treasuries, Financial End Of Days is no longer a non-significant possibility.

This is what it looks like.



“You couldn’t trade off-the-run Treasurys even if you begged people,” said Gang Hu, managing director of WinShore Capital Management, a fixed-income hedge fund. Faranello concurred. On Monday, there were times when traders could not find anyone willing to sell off-the-run 30-year bonds, a rare occasion in the most liquid financial asset in the world, he said.

This illiquidity bleeds over into everything.



Ultra Long Term U.S. Treasury Bond Futures, which moved about 1.3 points per day on average in January, were down more than seven points on the day and off 36 points from Monday’s high. Italian sovereign debt had simply imploded. An index of costs to insure corporate debt with credit-default swaps surged the most since Lehman Brothers collapsed, and the CBOE Volatility Index measuring costs to hedge against losses in U.S. stocks was the highest since November 2008. In almost every single market, the difference between bid prices from buyers and ask prices from sellers was soaring. The spreads had become, Burdette said, “astonishingly wide.”

“There are so many flashing sirens on my monitors, I don’t know which is the worst,” said Burdette.

I expect the Fed to pump the market enough to unfreeze it, but only at the cost of Japanification of our economy, and making the markets even more illiquid in the future.