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The Federal Reserve Is Directly Monetizing US Debt
The Federal Reserve Is Directly Monetizing US Debt
In a very real way, MMT is already here
Sure, it’s not admitting to this. And it’s using several technical jinks and jives to offer a pretense that things are otherwise.
But it’s not terribly difficult to predict what’s going to happen next: the Federal Reserve will drop the secrecy and start buying US debt openly.
At a time, mind you, when US fiscal deficits are exploding and foreign buyers are heading for the exits.
How It’s Supposed to Work
Here’s how it’s supposed to work when the US government issues new debt:
- If the US Treasury needs to raise new funds, it announces an upcoming auction of US Treasury bills/notes/bonds.
- A date for the auction is set.
- Various participants bid for those bills/notes/bonds (including ‘regular folks’ like you and me if we’re using the government’s Treasury Direct program).
- At a later date, the Fed can buy those US Treasury bills/notes/bonds. The various holders of that debt submit offers to sell, and the Fed (presumably) selects the best offers on the best terms.
The Federal Reserve, under no conditions, buys Treasury paper directly. The Federal Reserve’s own website still maintains that this is the case:
There are two important claims plus one assertion I’ve highlighted in there, each in a different color:
- Yellow: Treasury securities may “only be bought and sold in the open market.”
- Blue: doing otherwise might compromise the independence of the Fed.
- Purple: the Fed mostly buys “old” securities.
So according to the Fed: it’s independent, it follows the rules set forth in the Federal Reserve Act of 1913, and it mostly buys “old” Treasury paper that the market has already properly priced in a free and fair system.
But that’s not really what’s going on…
…click on the above link to read the rest of the article…
The Importance Of A Resilient Life
The Importance Of A Resilient Life
In the end, it will mean all the difference
My business partner Adam and I recently met with a successful business owner whose career began on Wall Street. The kind of guy who should be rooting for the system, because it has treated him well.
Instead, he was quite nervous about the sustainability of the status quo. “Starting in August,” he said, “Maybe it was the Amazon catching fire, maybe it was the negative interest rates – I don’t know for certain what the trigger was – but something has snapped.”
I agree. Because I feel it, too.
As do so many others. And not just those who regularly read PeakProsperity.com. Increasingly, even ‘mainstream’ voices are stating to report a profound sense that something really isn’t right. That — from the economy to geopolitics to the natural world — things are swiftly worsening.
Public perception is beginning to shift from complacency to fear. Countries are fast rejecting globalization in favor of nationalization. The holes in our ecosystem — vanishing birds, insects, amphibians and fish stocks — are becoming frighteningly obvious. The threats to life as we’re accustomed to it are becoming more visible while accelerating in both magnitude and frequency.
I expounded on the danger of this in my recent report It’s the Pace of Change That Kills You. Negative developments can spark their own vicious cycle. The more components of a system that fail, the more at risk the remaining components become.
That report was published just two weeks ago. Since then the world’s largest oil refinery was attacked by hostile forces and knocked out of commission, throwing the future integrity of the global oil market into question. Scientists just announced that North America has lost 29% of its total bird population (a drop of -3 billion) in the past half century.
…click on the above link to read the rest of the article…
2019: The Beginning Of The End (Free Premium Report)
2019: The Beginning Of The End (Free Premium Report)
Welcome to our new readers and a very Happy New Year to everyone!
Now that it’s 2019, we’re going to start the new year here at Peak Prosperity by responding to the wishes of our premium subscribers and making our most recent premium report free to everyone.
For those unfamiliar with our work, it’s based on the idea that humanity is hurtling towards a disaster of our own making. Several powerful and unsustainable trends are all converging towards an ever-narrowing gap in the future.
Because of this, the individual and collective choices we make today take on ever-increasing importance. Our collective choices — around such issues as rampant money-printing by central banks, the failure to wean ourselves off of fossil fuels, and tossing an entire younger generation under the bus because that’s most convenient for an older generation afraid of living within its actual means — are all pointing to a diminshed and disappointing future. We need to make better choices that align ourselves with these (and many other) looming realities.
This is our work here at Peak Prosperity.
For ten years now, we’ve been pointing out the many predicaments society faces. And we will continue our vigilance. No because we enjoy crisis, or that we relish delivering hard messages, but because these are the times in which we live — and those, like you, who are awake to reality, need unvarnished facts and data to make informed decisions.
So we offer to you, today, a peek behind our premium subscription curtain. The people who subscribe to our work do so to make themselves more resilient, as well as to support Peak Prosperity financially as we carry on our mission of “Creating a world worth inheriting”, which invoves bringing difficult messages to reluctant audiences.
…click on the above link to read the rest of the article…
Red Screen At Morning, Investor Take Warning
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Red Screen At Morning, Investor Take Warning
Growing up as I did in coastal New England, this old rhyme was drilled into us as children:
Red sky at night, sailor’s delight;
Red sky at morning, sailor take warning.
Because many of the people in town still made their living on the sea, the safety of person and property depended on being able to recognize the signs of approaching danger.
A notably red sky at morning is usually due to sunrise reflection off of moisture-bearing clouds, signifying an arriving a storm system bringing rain, wind and rough seas. Those who ignored a red sky warning often did so at their peril.
Red Sky In The Markets
I’m reminded of that childhood rhyme because the markets are giving us a clear “red sky” warning right now. One that comes after (too) many years of uninterrupted fair winds and smooth sailing.
The markets have plunged nearly 8% over just a single week. And the losses are across the board. Nearly every asset class from stocks to bonds to commodities to real estate are participating in the pain. Market displays are a sea of red.
We’ve written so often and recently of the dangerous level of over-valuation in asset prices (caused by years of central bank intervention) that to re-hash the premise again feels unnecessary.
But the chart below is worth our attention now, as it really drives home just how dangerously over-extended the markets have become. It’s a 20-year chart of the S&P 500, showing how it has traded vs its 50-month moving average (the thin green line).
Importantly, the chart also plots the Bollinger bands for this moving average. These are the thin red (upper) and purple (lower) lines above and below the green one.
…click on the above link to read the rest of the article…
