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Money manager and economist Michael Pento predicts, “We are going to have an election in this country that is the most contested vote this country has ever seen. Whichever party that loses is not going to accept the results. That’s mad chaos for the stock market, and that is one of the things I am thinking about when I am managing money.”

Another thing Pento is thinking about is massive Fed money printing in response to CV19. They have printed a massive amount in a very short amount of time. Pento explains, “They borrowed $3.3 trillion in fiscal 2020. All of it was monetized by the Federal Reserve. We switched to an inflationary hedge, and that worked out wonderfully for us. Then a funny thing happened at the end of July, the PPP loans, the paycheck protection loans, they were exhausted. The money that was spent and sent by helicopter, $1,000 per adult, $500 per child and $600 in enhanced unemployment, that was all spent too. So, you have this massive fiscal cliff I warned about is here and here now. Last week, I got much more defensive. . . . We borrowed $3.3 trillion, and that was monetized by the Fed, and that is all going away. The amount of new borrowing is done.”

Pento points out one huge lingering problem, and that is unemployment and people still collecting a check. Pento says, “There are many programs that people have access to get unemployment insurance. One of the major ones is called Pandemic Unemployment Assistance (PUA). That number is 29.6 million people when you include continuing claims and pandemic claims for unemployment. The PUA portion was up one million people last week. The number of claims might be going down under the traditional channels, but they are all filing claims under the PUA.

…click on the above link to read the rest of the article…

US Facing Mounting Debt Amid Global Pandemic – ABC

July 25, 2020

US Facing Mounting Debt Amid Global Pandemic – ABC

Good interview with Professor Barry Eichengreen of UC Berkeley, a good friend of GMM, and odds on favorite to be a Nobel laureate one day. We agree with him that now is not the time to worry about the public debt as we are already down this rabbit hole and the economy is on the verge of complete implosion, risking plunging our society into anarchy without another rescue package.

We also hate what we see: large well-capitalized corporations and entities getting PPP loans, which will be forgiven, some dead beats using their PPP loans to buy Teslas, trade stocks, and gamble in Las Vegas, not to mention the lack of planning and total incompetence of the policymakers. He quotes Voltaire’s famous exhortation, used many times here at the Global Macro Monitor, “do not let the perfect be the enemy of the good.”

No MMT Discussion?

Did you also notice not one peep about the Fed buying up all the Treasury debt and effectively monetizing the deficit…err MMT…and supporting other debt markets?

We heard some bozo on CNBC today saying the Treasury is having no problem floating its debt to the market. Are. You. Fricking. Kidding. Me? What market?

Nobody really knows for certain, but our priors are if the U.S. Treasury was completely dependent on the markets to finance itself – that is no central bank (Fed and foreign) buying of its marketable debt — the 10-year yield would be well north of 6 percent, and that is very generous, in our opinion.

Do Your Homework

Folks, do your homework. Granted, it’s impossible to completely grasp all the intricacies of the global economy and markets with their infinite feedback loops, and futile to even try, but at least try and grasp the basics.

…click on the above link to read the rest of the article…

US National Debt Spiked by $1.5 trillion in 6 Weeks, to $25 trillion. Fed Monetized 90%

May 7, 2020

US National Debt Spiked by $1.5 trillion in 6 Weeks, to $25 trillion. Fed Monetized 90%

I’d never imagined I’d ever see this sort of spike, though in recent years I added an upward arrow with “Debt out the wazoo” to my charts, not realizing just how factually accurate this technical term would become.

The US gross national debt – the total of all Treasury securities outstanding – jumped by $1.05 trillion with a T in the four weeks since April 7 and by $1.54 trillion in the six weeks since March 23, to $25.06 trillion, the Treasury department reported today.

Those trillions are whizzing by so fast it’s hard to even seen them. WOOSH… What was that? Oh, just another trillion. The flat spots in the chart are the periods when the debt bounced into the debt ceiling. Yeah, those were the days!

I’ve been lamenting and lambasting the stupendous growth of the US national debt since 2011, the beginning of my illustrious career as a gnat in the big world of financial media. And through all these years, I’d never imagined that I’d ever see this sort of spike in the US debt, though in recent years I’ve been adding an upward arrow and the green label “Debt out the wazoo” to these charts, not realizing just how factually accurate this technical term would become.

The US debt was even surging at an accelerating rate during the “Best Economy Ever,” when there should have been a surplus and a reduction in the debt, so that the government can go into debt during bad times.

I wrote back then, for example on February 19, when the debt had spiked by $1.3 trillion over the past 12 months to $23.3 trillion: “But these are the good times. And we don’t even want to know what this will look like during the next economic downturn.”

…click on the above link to read the rest of the article…

Helicopter Money Is Here: How The Fed Monetized Billions In Debt Sold Just Days Earlier

January 2, 2020

Helicopter Money Is Here: How The Fed Monetized Billions In Debt Sold Just Days Earlier

The Fed’s charter prohibits its from directly purchasing bonds or bills issued by the US Treasury: that process is also known as monetization and various Fed chairs have repeatedly testified under oath to Congress that the Fed does not do it. Of course, the alternative is what is known as “Helicopter Money”, when the central bank directly purchases bonds issued by the Treasury and forms the backbone of the MMT monetary cult.

But what if there is at a several day interval between Treasury issuance and subsequent purchase? Well, that’s perfectly legal, and it’s something the Fed has done not only during QE1, QE2 and QE3, but is continuing to do now as part of its “QE4/NOT QE.”

Here’s how.

On December 16, the US Treasury sold $36 billion in T-Bills with a 182-day term, maturing on June 18, 2020, with CUSIP SV2. And, as shown in the Treasury Direct snapshot below, of the total $34.3 billion in competitive purchases, Dealers acquired $23.7 billion.

What happened next?

For the answer we go to the Fed’s POMO page, which shows which specific T-Bill CUSIPs were purchased by its markets desk on any given POMO day when Dealers sell up to $7.5 billion in Bills to the Fed.

Exhibit 1: on December 19, just three days after the above T-Bill was issued and on the very day the issue settled (Dec 19), Dealers flipped the same Bills they bought from the Treasury back to the Fed for an unknown markup. Specifically, of the $7.5BN in total POMO, the SV2 CUSIP which had been issued earlier that week, represented the biggest bond “put” to the Fed, amounting to $3.9 billion, more than half of the total POMO on that day, and by far the most of any CUSIP sold to the NY Fed’s markets desk on that day.

…click on the above link to read the rest of the article…

The Next Wave of Debt Monetization Will Also Be A Disaster

November 20, 2019

The Next Wave of Debt Monetization Will Also Be A Disaster

According to the IMF (International Monetary Fund) and the IIF (Institute of International finance) global debt has soared to a new record high. The level of government debt around the world has ballooned since the financial crisis, reaching levels never seen before during peacetime. This has happened in the middle of an unprecedented monetary experiment that injected more than $20 trillion in the economy and lowered interest rates to the lowest levels seen in decades. The balance sheet of the major central banks rose to levels never seen before, with the Bank Of Japan at 100% of the country’s GDP, the ECB at 40% and the Federal Reserve at 20%.

If this monetary experiment has proven anything it is that lower rates and higher liquidity are not tools to help deleverage, but to incentivize debt. Furthermore, this dangerous experiment has proven that a policy that was designed as a temporary measure due to exceptional circumstances has become the new norm. The so-called normalization process lasted only a few months in 2018, only to resume asset purchases and rate cuts.

Despite the largest fiscal and monetary stimulus in decades, global economic growth is weakening and leading economies’ productivity growth is close to zero. Money velocity, a measure of economic activity relative to money supply, worsens.

We have explained many times why this happens. Low rates and high liquidity are perverse incentives to maintain the crowding out of government from the private sector, they also perpetuate overcapacity due to endless refinancing of non-productive and obsolete sectors t lower rates, and the number of zombie companies -those that cannot pay their interest expenses with operating profits- rises. We are witnessing in real-time the process of zombification of the economy and the largest transfer of wealth from savers and productive sectors to the indebted and unproductive.

…click on the above link to read the rest of the article…

Peter Schiff: Trump and the Fed Are Reading Off the Same Script

October 15, 2019

Peter Schiff: Trump and the Fed Are Reading Off the Same Script

Stocks took off on Friday on several big news items – most significantly President Trump’s announcement that the US and China have worked out phase one of a trade deal. In his podcast, Peter broke down the news. He also made an interesting observation: Trump and the Federal Reserve seem to be reading off the same script.

The consumer sentiment number for September came out Friday higher than expected. As Peter noted, this index is regarded as very important.

It measures whether or not the consumer is confident enough to go deeper into debt and keep buying stuff that he can’t afford. And assuming the consumer is so confident then everything is great because the spending continues and the GDP continues. But of course, if you look back historically, the consumer is never smart enough to be pessimistic when he should. He’s always very optimistic just before a major economic decline.”

Also on Friday, the Federal Reserve Bank of New York came out with its non-quantitative easing quantitative easing plan. The bank said it would buy $60 billion in short-term Treasuries each month.

Of course, don’t confuse this with quantitative easing when the Fed was buying $85 billion a month of Treasuries, because this is no way quantitative easing except, of course, that’s exactly what it is.”

The Fed also reiterated that it plans to use all of the interest it earns off its portfolio to buy more Treasuries. And as the bonds mature, it will take that money and buy more Treasuries, thus pumping up the balance sheet. Peter says this proves that Ben Bernanke was either lying or incompetent when he told Congress back in 2009 that the central bank was not monetizing the debt.

…click on the above link to read the rest of the article…

“We’re Never Going To Go Away From Zero:” Presenting Kyle Bass’ Latest Trade

July 17, 2019

“We’re Never Going To Go Away From Zero:” Presenting Kyle Bass’ Latest Trade

Here at Zero Hedge, we’ve dedicated plenty of attention to signs of “Japanification” in European bond markets…

… with the issue taking on even more urgency now that we have influential bond strategists earnestly advocating the purchase of equities by the ECB, and the Fed in the middle of a policy U-turn that has prompted the market to price in at least three interest rate cuts by the end of the year…

…previously “conspiratorial” ideas like the Fed buying equities to turbocharge its stimulus program are beginning to look eminently plausible.

For readers who are unfamiliar with the term, “Japanification”, also known as Albert Edwards “Ice Age” concept, it involves the dawn of a new economic paradigm characterized by stagnant growth and pervasive deflation, where central bank debt monetization is needed to finance public spending to keep economies from sliding into contraction.

Already, there’s reason to believe that both the US and Europe are heading for the same monetary policy trap as Japan. Case in point: the neutral rate – or r*, as the economists at the Fed like to call it – has failed to revert back to its pre-crisis level.

And with the Fed likely to cut rates later this month and global bond yields tumbling to levels not seen in years, if ever, hedge fund manager Kyle Bass has revealed his latest trade in an interview with the FT: Bass is betting that the Fed will slash interest rates to just above zero next year as the US economy slides into a recession, forcing the Fed to restart QE, and possibly even consider more radical alternatives like buying equities.

…click on the above link to read the rest of the article…

Stock & Bond Bubbles Much Worse Than 1929-David Stockman

September 17, 2016

Stock & Bond Bubbles Much Worse Than 1929-David Stockman

Economic expert and best-selling author David Stockman offers a dire view of the deep financial trouble America faces in his new book titled “Trumped!” Stockman warns, “I think we are on the very edge, but what is different this time and makes it scarier . . . is I believe the central banks that ruled the roost have gone from one extreme to the next and done unfathomable things like negative interest rates on $13 trillion of bonds around the world, monetization of the debt, and bond purchases that are staggering such as $90 billion a month in Europe. . . . So, this time, as the phrase goes, they went all in. They have violated every principle of sound money and sustainable finance that mankind has ever learned about over many centuries. They have taken us to the edge, but they are out of dry powder. I think it’s pretty obvious that they can’t go any deeper with subzero interest rates, or negative interest rates. . . . If they tried this in the United States, I think there would be a huge political uprising. . . . They are out of dry powder and out of tools, and therefore, the financial markets of the world are more vulnerable, maybe even more so than in 1929. You are talking about a bond bubble like never before imagined or conceived, and the stock market is the same way as well as derivatives.”

All this financial malfeasance and engineering was fantastic for the one percent, but everybody else got the shaft. For example, Stockman points out in “Trumped!” the last 30 years “The top 1%’s wealth has grown by 300%, and the top “Forbes 400” wealthiest people in the world had their wealth grow by a staggering 1,000%.” Meanwhile, the “bottom 90% of Americans have seen their wealth steadily deteriorate.”

…click on the above link to read the rest of the article…

The Next Level of John Law Type Central Planning Madness

November 7, 2015

The Next Level of John Law Type Central Planning Madness

Cries for Going Totally Crazy are Intensifying

What are the basic requirements for becoming the chief economist of the IMF? Judging from what we have seen so far, the person concerned has to be a died-in-the-wool statist and fully agree with the (neo-) Keynesian faith, i.e., he or she has to support more of the same hoary inflationism that has never worked in recorded history anywhere. In other words, to qualify for that fat 100% tax-free salary (ironically paid for by assorted tax serfs), one has to be in favor of central economic planning and support policies fully in line with today’s economically illiterate orthodoxy. Meet Maurice Obstfeld, who has just taken the mantle.

For all we know the man is merely misguided and otherwise a nice person (in fact, he’s laughing a lot in photographs and seems a personable enough fellow). But his proposals could eventually affect the lives of countless people in the whole world, so he is fair game for robust criticism. We personally believe that he and other members of our “enlightened” technocratic ruling class should resign without delay and start looking for productive work instead of parasitizing and hampering the ever shrinking class of genuine wealth producers, but it seems unlikely that they will be interested in our opinion.

There once was a time when monetary cranks of the sort in charge nearly everywhere today were laughed out of the room. Today they are perfectly free to drive what is left of the market economy over the cliff. Mr. Obstfeld turns out to be yet another in a long list of luminaries belly-aching about (non-existing) “deflation” – this is to say, the alleged danger that the purchasing power of consumer incomes and savings might increase at some point. Allegedly, this remote eventuality has to be guarded against at all costs.

…click on the above link to read the rest of the article…

A Stunning Admission From A BOE Central Banker: This Is What The Coming “Helicopter Money” Will Look Like

November 7, 2015

A Stunning Admission From A BOE Central Banker: This Is What The Coming “Helicopter Money” Will Look Like

Back in early 2009, just around the time the Fed announced it would unleash QE1, we warned that any attempt to reflate the debt (a pathway which ultimately leads to hyperinflation as monetary paradrops are the only logical outcome as a result of the deflationary failure of the intermediate steps) would fail, and instead would saddle the world with even more debt, making monetary financing, i.e., paradropping money, the inevitable outcome.

We said that instead, the right move would be to liquidate the excess debt, and start anew – a step which, however, would wipe out trillions in (underwater) equity, something which the status quo would never agree to, as that is where the bulk of its wealth is contained.

7 years later, debt is well over $200 trillion, having risen by more than $60 trillion in the interim, and we are rapidly approaching the peak of the world’s debt capacity as we noted a month ago in “The World Hits Its Credit Limit, And The Debt Market Is Starting To Realize That.”

Today, we find that none other than Adair Turner, a member of the Bank of England’s Financial Policy Committee and a Chairman of the Financial Services Authority, wrote a long essay in Bloomberg which admits everything we have warned about.

To wit:

Advanced economies’ public debt on average increased by 34 percent of GDP between 2007 and 2014. More important, national incomes and living standards in many countries are 10 percent or more below where they could have been, and are likely to remain there in perpetuity.

The fundamental problem is that modern financial systems inevitably create debt in excessive quantities. The debt they create doesn’t finance new capital investment but the purchase of existing assets, and above all real estate. Debt drives booms and financial busts. And it is a debt overhang from the last boom that explains why recovery from the 2007–2008 crisis has been so anemic.

…click on the above link to access the rest of the article…

The Moment When The San Francisco Fed Finally Figures Out What “Debt” Is

March 23, 2015

The Moment When The San Francisco Fed Finally Figures Out What “Debt” Is

The San Fran Fed, in addition to being the lair that hatched the current Fed chairmanwoman, is best know for spending millions in taxpayer funds to “contemplate” such profound topics as:

And let’s not forget “San Fran Fed Spends More Money To Justify Colossal Failure At Anticipating Consequences Of Its Actions.”

So today, in the latest example of misappropriation of millions in taxpayer “R&D” funds by a Federal Reserve bank, has released a note titled, mysteriously enough, “Mortgaging the Future?” unleashes the following shocker: “Leverage is risky.”

* * *

This coming from the institution that monetized $3 trillion in US debt, and whose balance sheet will never be unwound without a global market crash so profound it would likely lead to a global war?

Why yes. That’s right.

* * *

So for all those curious to learn just how stupid the Fed is, and desperate for laughter in these centrally-planned times, here are several excerpts of deep intellectual work from what according to many is the most important regional Fed in the US (now that everyone is aware Goldman Sachs is in charge of the NY Fed and is scrambling to limit the vampire squid’s domination over the world’s most levered hedge fund in the world):

…click on the above link to read the rest of the article…

Japan Approaches Limit To Bond Buying Former BOJ Official Okina Warns

March 2, 2015

Japan Approaches Limit To Bond Buying Former BOJ Official Okina Warns

A day after we highlighted the veritable collapse in U.S. shadow banking liquidity (down by nearly half since 2008) occasioned by a potent one-two punch from Fed bond purchases and regulatory measures designed to stem prop trading (but which have apparently impaired market making), we get rumblings out of Japan that the BOJ might have hit the limit on how many JGBs it can purchase without breaking the market. Specifically, Yuri Okina, vice chairman at Japan Research Institute, is concerned about the exact same issue raised by the Center for Financial Stability in their report on the “steep slide” in market finance: namely, that the absence of liquidity created by QE will create distortions and volatility.

From Bloomberg:

“If additional easing is done using government bonds, it may have the considerable side-effect of impairing the functioning of the market,” Okina, an economist and a former BOJ official, said on Feb. 26 in an interview in Tokyo.

The BOJ’s purchases have had a “huge” impact on the market’s liquidity, Okina said. Buying bonds at a faster pace would make it more difficult for the BOJ to exit from its easing policy when the time comes to reduce stimulus, she said.

Clearly there’s something self-evident (even tautological) about this discussion. That is, the BOJ is set to monetize all JGB gross issuance in 2015 (and may own 50% of the entire market within three short years), so yes, there are likely to be rather serious issues with market liquidity going forward.

…click on the above link to read the rest of the article…

Debtors’ Prison: Global Debt Has Grown $57 TRILLION Since 2007 With 100 Percent Of Sovereign Debt Monetized

February 22, 2015

Debtors’ Prison: Global Debt Has Grown $57 TRILLION Since 2007 With 100 Percent Of Sovereign Debt Monetized

Now that the Greece default crisis is on temporary hold (they will be back again), it is time to turn our focus to the GLOBAL debt market.

Since the subprime mortgage crisis and Lehman failure, global debt has grown by $57 trillion since 2007.,raising the ratio of debt to GDP by 17 percentage points.

Here is a nice chart from McKinsey & Company that shows the relative rise of PUBLIC SECTOR debt relative to HOUSEHOLD debt. That is, governments borrowing money on YOUR BEHALF that you are now liable.

Couple this chart with the fact that Central Banks are monetizing 100 percent of sovereign debt.

…click on the above link to read the rest of the article…

The ECB Will Fail Given The “History Lessons Of US And Japan”, Warns Deutsche Bank

January 18, 2015

The ECB Will Fail Given The “History Lessons Of US And Japan”, Warns Deutsche Bank

Recall that the stated purpose behind the reason why Mario Draghi’s ECB is about to launch a European government debt monetization program ranging between EUR500 and 1000 billion is to halt deflation, spark credit creation and rekindle inflation. Alas, if that is indeed the case, then as Deutsche Bank said has already determined apriori, it will be a failure. Here’s why from the biggest German bank.

First, a broad strokes preview of what the world’s most confused Central bank will do this week:

[The ECB] is trapped down a dark alley and they will bite. For all the pros and cons of public QE as well as the hows and whens, at the end of the day the market has pushed the ECB into that corner. Within the context of the practical limitations of QE, we have no doubt that Draghi once again will leave a warm fuzzy feeling that they are prepared to do all that it takes. Of course, like OMT, it probably doesn’t mean they are buying BTPs come February 1st, but that doesn’t matter for BTPs. It also doesn’t matter for the Euro zone outlook given the dubitancy of QE efficacy.

And here is why the ECB too will follow its peers, the Fed and BOJ, in failing to boost inflation expectations which at last check were below the Lehman collapse levels and sliding fast (see “The Chart That Terrifies The Fed“)

…click on the above link to read the rest of the article…

Bank Of Japan Warns Abe Over “Fiscal Responsibility” While Monetizing All Its Debt | Zero Hedge

November 19, 2014

Bank Of Japan Warns Abe Over “Fiscal Responsibility” While Monetizing All Its Debt | Zero Hedge.

If one were to look up the definition of hypocrisy, the image of BoJ head Kuroda should be front-and-center. Having tripled-down on his money-printing and ETF-buying largesse just last week, he came out swinging last night at the government’s fiscal irresponsibility blasting Abe’s policies by saying Japan’s fiscal health “is the responsibility of parliament and the government, not an issue for the central bank to be held responsible for.” Aside from the fact that he is directly monetizing all JGB issuance – thus enabling Abe’s arrogant fiscal stimulus plan (by issuing 30Y and 40Y debt),Bloomberg notes that “Kuroda is making it crystal clear the government has to tackle the debt problem and if fiscal trust is lost that’s not going to be on the BOJ.” The world has truly gone mad.

Seemingly paying the same lip-service as Bernanke and Yellen in the US and Draghi in Europe, BoJ’s Haruhiko Kuroda is carefully positioning the blame for lack of growth and economic chaos on the government’s lack of growth-oriented policies… and not the central bank’s enabling experiments…(via Bloomberg)

…click on the above link to read the rest of the article…

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