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It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal
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This is full of holes. Actually thought I might get some insight into what the liquidity problem is. Instead, at the end all he says is the repo market will blow up. Great explanation, why? how? The only way there is a problem with what is outlined is if the collateral goes bad. Where are the examples of the collateral going bad?
Also his example of the house price rise creating $ 1 mil is about 900K off the mark. The money supply only goes up by the amount in the banking system, which usually is the down payment in his example 100K. Yes it’s going up but he’s off by a factor of 10X.
First Hank, did you sleep through the 2008 Crash. You ask: “where are the examples of the collateral going bad”. Well, the collateral is loaded with mortgage-backed securities (MBS) which, if you look up the word shit in the dictionary, you will see MBS listed as definition #2. In fact, MBSs take primary responsibly for inflating the housing bubble prior to the 2008 Crash. MBSs peddled by Wall Street at the time were loaded with mortgages to people who lacked the means to pay them.
Second, you need to upgrade you economics education a bit. A 900K montage loan from the bank does not add $100k to the money supply. That $100k down payment was already in the buyer’s pocket and thus already part of the money supply. However, the bank created $900K out of thin air to allow the buyer to get the house. That $900K from thin air is an increase in the money supply.
But Hank, don’t believe what I say. Just continue believing everything is okay and the government has our backs. And hey, the Super Bowl is Sunday so life is good, right?
We are not talking 2008 , we are talking present. The FED has recently embarked on more QE to supply money to the Repo Market supposedly for liquidity. Why? Who is in default today?
Second – Definition of Money Multiplier. The money multiplier is the amount of money that banks generate with each dollar of reserves. Reserves is the amount of deposits that the Federal Reserve requires banks to hold and not lend. This is what expands the money supply. The 900K loan does not!
You are correct the original 100K was probably already in the bank, it’s a fine point but in the transaction it probably was deposited in a new bank, which then only requires 10% reserve resulting in 90K of new money. The deposit in the old bank goes away, reducing their reserve requirement, and if they are not flush may result in a reduction of the money supply. Which was my point, a million dollar loan does not create a new $1 million increase in money.
https://www.zerohedge.com/markets/944-trillion-reasons-why-fed-quietly-bailing-out-hedge-funds
This is one of the most informative articles I have come across regarding currency devaluation via inflation/printing. It’s a 5-10 minute read. Things would have collapsed in Sept/Oct if not for massive monetary injection (devaluation). Mechanics of all the leveraged betting (due to previous injections), and by whom (hedgefunds) and showing who holds the bag (Clearing Houses) are explained in detail.
Near the end of the video he says the Fed adding to their balance sheet causes rates to go up, which is exactly the opposite of what happens. The Fed adds to their balance sheet (buying securities) which causes the price of those securities to go up and the corresponding yields to go down. I think what he meant to say is that the Fed has to keep buying, keep expanding their balance sheet at this point or else all that shitty financial paper will crash back to earth and rates will blow sky high.
i was just reading an article on another site–the fed’s repo lending/holdings are rapidly declining & are back down to 10/19 levels–