GOLD BULL: Rome Is Burning And The Fed Is Trapped

I've posted the Fed has been trapped for a while.  It's gradually becoming more apparent.

https://kingworldnews.com/gold-bull-rome-is-burning-and-the-fed-is-trapped/

Why Yield Curve Control by the Fed Will Be Bullish for Gold

https://www.voimagold.com/insight/why-yield-curve-control-by-the-fed-will-be-bullish-for-gold

Goldman Spots A Huge Problem For The Fed

https://www.zerohedge.com/markets/goldman-spots-huge-problem-fed

992 Billion Reasons Why The Fed Needs Another Market Crash In The Next Few Weeks

https://www.zerohedge.com/markets/992-billion-reasons-why-fed-needs-another-market-crash-next-month

Meet the Fed’s Global Plunge Protection Team

https://wallstreetonparade.com/2020/05/meet-the-feds-global-plunge-protection-team/

The Fed's Cure Risks Being Worse Than the Disease

https://www.bloomberg.com/opinion/articles/2020-03-27/federal-reserve-s-financial-cure-risks-being-worse-than-disease

The economic debate of the day centers on whether the cure of an economic shutdown is worse than the disease of the virus.  Similarly, we need to ask if the cure of the Federal Reserve getting so deeply into corporate bonds, asset-backed securities, commercial paper, and exchange-traded funds is worse than the disease seizing financial markets. It may be.
In just these past few weeks, the Fed has cut rates by 150 basis points to near zero and run through its entire 2008 crisis handbook. That wasn’t enough to calm markets, though — so the central bank also announced $1 trillion a day in repurchase agreements and unlimited quantitative easing, which includes a hard-to-understand $625 billion of bond buying a week going forward. At this rate, the Fed will own two-thirds of the Treasury market in a year.

But it’s the alphabet soup of new programs that deserve special consideration, as they could have profound long-term consequences for the functioning of the Fed and the allocation of capital in financial markets. Specifically, these are:

• CPFF (Commercial Paper Funding Facility) – buying commercial paper from the issuer.
• PMCCF (Primary Market Corporate Credit Facility) – buying corporate bonds from the issuer.
• TALF (Term Asset-Backed Securities Loan Facility) – funding backstop for asset-backed securities.
• SMCCF (Secondary Market Corporate Credit Facility) – buying corporate bonds and bond ETFs in the secondary market.
• MSBLP (Main Street Business Lending Program) – Details are to come, but it will lend to eligible small and medium-size businesses, complementing efforts by the Small Business Association.

To put it bluntly, the Fed isn’t allowed to do any of this. The central bank is only allowed to purchase or lend against securities that have government guarantee. This includes Treasury securities, agency mortgage-backed securities and the debt issued by Fannie Mae and Freddie Mac. An argument can be made that can also include municipal securities, but nothing in the laundry list above.
So how can they do this? The Fed will finance a special purpose vehicle (SPV) for each acronym to conduct these operations. The Treasury, using the Exchange Stabilization Fund, will make an equity investment in each SPV and be in a “first loss” position. What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is acting as banker and providing financing. The Fed hired BlackRock Inc. to purchase these securities and handle the administration of the SPVs on behalf of the owner, the Treasury.
In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades.
This scheme essentially merges the Fed and Treasury into one organization. So, meet your new Fed chairman, Donald J. Trump.

In 2008 when something similar was done, it was on a smaller scale. Since few understood it, the Bush and Obama administrations ceded total control of those acronym programs to then-Fed Chairman Ben Bernanke. He unwound them at the first available opportunity. But now, 12 years later, we have a much better understanding of how they work. And we have a president who has made it very clear how displeased he is that central bankers haven’t used their considerable power to force the Dow Jones Industrial Average at least 10,000 points higher, something he has complained about many times before the pandemic hit.
When the Fed was rightly alarmed by the current dysfunction in the fixed-income markets, they felt they needed to act. This was the correct thought. But, to get the authority to stabilize these “private” markets, central bankers needed the Treasury to agree to nationalize (own) them so they could provide the funds to do it.
In effect, the Fed is giving the Treasury access to its printing press. This means that, in the extreme, the administration would be free to use its control, not the Fed’s control, of these SPVs to instruct the Fed to print more money so it could buy securities and hand out loans in an effort to ramp financial markets higher going into the election. Why stop there? Should Trump win re-election, he could try to use these SPVs to get those 10,000 Dow Jones points he feels the Fed has denied everyone.
If these acronym programs were abused as I describe, they might indeed force markets higher than valuation warrants. But it would come with a heavy price. Investors would be deprived of the necessary market signals that freely traded capital markets offer to aid in the efficient allocation of capital. Malinvestment would be rampant. It also could force private sector players to leave as the government’s heavy hand makes operating in “controlled” markets uneconomic. This has already occurred in the U.S. federal funds market and the government bond market in Japan.
Fed Chair Jerome Powell needs to tread carefully indeed to ensure his cure isn’t worse than the disease.

TICK TOCK

https://www.theburningplatform.com/2018/12/02/tick-tock-4/

President's top candidate to lead Fed knows all about gold market rigging

If Trump appoints Kevin Warsh as the next Fed Chairman, expect gold bugs to be all over him about his previous comments on market manipulation.
http://www.gata.org/node/17681

Fed Trying to Cripple Trump Economy-Danielle DiMartino Booth

Danielle DiMartino Booth sounds like a lunatic fringe blogger. The only problem with that labeling is she is a former Fed insider.

http://usawatchdog.com/fed-trying-to-cripple-trump-economy-danielle-dimartino-booth/

Gold Is ‘Managed’ by Wall Street and The Fed - Frank Giustra

I agree with Frank Giustra that gold is being "managed by central banks," but I fail to see the difference between the term "managed" and "manipulated".

http://www.kitco.com/news/video/show/Kitco-News/1624/2017-06-20/Gold-Is-Managed-by-Wall-Street-and-The-Fed---Frank-Giustra

Gold, The Fed, Exter’s Pyramid – When John Exter Met Paul Volcker

http://www.goldcore.com/us/gold-blog/gold-bullion-the-fed-exters-pyramid-when-john-exter-met-paul-volcker/

OECD Warns Fed, BOJ, ECB of Asset Bubbles, “Risks to Financial Stability,” Pinpoints US Stocks & Real Estate

http://wolfstreet.com/2016/09/21/oecd-warns-fed-boj-ecb-of-asset-bubbles-risks-to-financial-stability-pinpoints-us-stocks-real-estate/

Financial instability risks are rising, including from exceptionally low interest rates and their effects on financial assets and real estate prices.”

Low interest rates underpin widespread and substantial increases in asset prices, both internationally and across asset classes, which increases the likelihood and vulnerability of a sharp correction in asset prices.

A reassessment in financial markets of interest rates could result in substantial re-pricing of assets and heighten financial volatility even if interest rates were to remain below long-term averages.

This is as close to code speak by financial authorities that markets are about to crash.

The Fed’s Monetary Politburo Is Finally Catching Some Flack

End the Fed.  They pose as high priests of finance, when they are merely sophisticated scoundrels, liars, cheats, and thieves.

http://davidstockmanscontracorner.com/the-feds-monetary-politburo-is-finally-catching-some-flack/

"There's A Real Problem Here" - Did Fed's Plosser Just Admit Trump Is Right About Yellen?

http://www.zerohedge.com/news/2016-09-28/theres-real-problem-here-did-feds-plosser-just-admit-trump-right-about-yellen

Why the Fed Destroyed the Market Economy

http://www.acting-man.com/?p=46614

Click to Image to Enlarge

Yellen: Fed Should Explore Purchasing ‘Broader Range of Assets’

Lost amidst the normal gobbledigook double speak by Fed Chair Janet Yellen at the Jackson Hole Summit last week, was a short passage which largely went unnoticed by the financial pundits more interested in short-term interest rate fluctuations (to hike or not to hike).  Here is the passage (boldface emphasis is mine):

On the monetary policy side, future policymakers might choose to consider some additional tools that have been employed by other central banks, though adding them to our toolkit would require a very careful weighing of costs and benefits and, in some cases, could require legislation. For example, future policymakers may wish to explore the possibility of purchasing a broader range of assets. Beyond that, some observers have suggested raising the FOMC’s 2 percent inflation objective or implementing policy through alternative monetary policy frameworks, such as price-level or nominal GDP targeting. I should stress, however, that the FOMC is not actively considering these additional tools and policy frameworks, although they are important subjects for research.

This key message was obscurely packed into a bunch of esoteric back filling, but more importantly hints that helicopter money is coming.  It is the last resort for desperate central banks trying to re-inflate the economy in a deflationary environment which every Keynesian economist fears.  "Broader range of assets" indicates buying not just US Treasury bonds (quantitative easing), but also equities, corporate bonds, real estate, and eventually leads to giving away free tax deductions to the masses.  Money and credit figuratively rain down at every level:  household, corporate, government.  Hence, the term "helicopter money" is coined due to the massive liquidity injected into the economy.

The problem, of course, is liquidity is not wealth.  Stimulus of this sort is nothing more than legalized counterfeiting, and no wealth is created...but that's for another discussion.

Helicopter money also ensures hyperinflation. The ol' "be careful what you wish for (targeted inflation rate)--you may get it (unintended hyperinflation)" rings true.

http://blogs.barrons.com/incomeinvesting/2016/08/26/yellen-fed-should-explore-purchasing-broader-range-of-assets/

How The Fed's Facebook PR Campaign Went Terribly Wrong

http://www.zerohedge.com/news/2016-08-23/how-feds-facebook-pr-campaign-went-terribly-wrong

The Fed Launches A Facebook Page... And The Result Is Not What It Had Expected

The comments to the Fed's new Facebook page would be hilarious if they weren't also tragic.

http://www.zerohedge.com/news/2016-08-21/fed-launches-facebook-page-and-result-not-what-it-had-expected

Fed Cornered: Core CPI Jumps Near 4 Year Highs As Rent Rises At Fastest Rate In 9 Years

As predicted, the Fed is cornered.  In a "Be careful what you wish for" scenario--the Fed has been desperately clamoring for higher inflation, as disinflation is mistakenly articulated as deflation, a softer term for depression, which is an existential threat to the financial authorities.  According to pundits, inflation equals GDP growth, which means the bureaucrats get to keep their jobs.

However, to the average consumer, higher prices equates to lower purchasing power.  Perhaps the computer industry best illustrates how lower prices--not higher prices, catalyze booming economies.  On the other hand, higher costs lead to lower profits, layoffs, and store closures.  See the big box retailers as counterexamples of booming economies.

Now that inflation is on the rise, the Fed now has to scramble because fighting inflation requires raising interest rates.  But due to exploding debt (at the government, consumer, and corporate levels), raising interest rates would bankrupt not just America, but globally, thereby crashing financial markets and destroying wealth.  This is the financial cul-de-sac which sound money advocates have been warning against.  Reckless creation of fiat currency and credit markets does result in tears.

Expect more financial crises and social unrest, as billions struggle to make ends meet.

http://www.zerohedge.com/news/2016-07-15/fed-cornered-core-cpi-jumps-near-4-year-highs-rent-rises-fastest-rate-9-years

The Fed Sends a Frightening Letter to JPMorgan and Corporate Media Yawns

http://wallstreetonparade.com/2016/04/the-fed-sends-a-frightening-letter-to-jpmorgan-and-corporate-media-yawns/

At the top of page 11, the Federal regulators reveal that they have “identified a deficiency” in JPMorgan’s wind-down plan which if not properly addressed could “pose serious adverse effects to the financial stability of the United States.” Why didn’t JPMorgan’s Board of Directors or its legions of lawyers catch this?

It’s important to parse the phrasing of that sentence. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”