American Reality Check

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The Federal Reserve has reduced its balance sheet by $626 billion since the peak in April 2022, with total assets now down to $8.34 trillion,

Oops! Back up by $300 billion. Stands at about $8.63T today.

The increase accounts for nearly half of the entire reduction over the past 11 Months. Trickle of reductions over Months, zooms back up in a matter of days. Lol

Chart shown in the first minute of this Meet Kevin vid posted about an hour ago.

This is Bank Califorina.

You can check out any time you like, but you can never leave.

No going back. Just gonna have to ride the slide, until they, and we, have to look up to see down.
I see the kid linked above, is arguing FOR...MOAR mega-banks.

Look up "clueless" in the dictionary. Bet his portrait is there.

We didn't HAVE these problems - nor other Woke-related political-lending problems - when we had small regional banks.
This is an opinion piece I think might fit right in here.

CBDCs: A Weapon for Debanking the Banked​

In March 2022, President Biden signed an Executive Order directing government agencies to urgently research and develop a potential US central bank digital currency (CBDC) “in a manner that protects Americans’ interests.” It also encouraged the Federal Reserve Bank to continue doing so. And it isn’t just the Biden Administration in the United States working in such a direction.

As of the time of writing, lists three countries or regions with retail CBDCs already “launched” (Bahamas, Jamaica and Nigeria), another five in “pilot” stage, and another twenty in “proof of concept” stage. Many more have at least researched wholesale CBDCs. (“Wholesale” CBDCs are intended for commercial and central bank use and the like, while “retail” CBDCs are intended for the rest of us). A report by the Bank for International Settlements (BIS) released just this month summarizes the results of a survey of 86 central banks and concludes that “there could be 15 retail and nine wholesale CBDCs publicly circulating in 2030.”

More here:

This is a big milestone of the Fed’s Quantitative Tightening (QT): Total assets dropped by $1.01 trillion since peak-QE in April 2022, to $7.96 trillion, the lowest since June 2021, according to the Fed’s weekly balance sheet today.

In September alone, total assets dropped by $146 billion as another big chunk of bank-panic support unwound.


They have unwound a lot. They still have much more to go. Political and economic conditions might not let them get there.
They can only do it over a long period of time otherwise they will tank the economy. In the meantime they will increase the amount of acceptable inflation.

The first thing that needs to be done is get gas prices down to $2/gal and diesel down to $2.50 and inflation will decrease.
They can only do it over a long period of time otherwise they will tank the economy. In the meantime they will increase the amount of acceptable inflation.

The first thing that needs to be done is get gas prices down to $2/gal and diesel down to $2.50 and inflation will decrease.
Fuel prices right now, have nothing to do with "inflation." They reflect a new contrived scarcity, with relatively-static demand.

Using scarcity of fuels to push prices higher and limit Deplorables' travel options, is an entirely-separate option. Open the closed oilfields, eliminate ethanol mandates, and drill for more, and the price of fuel will fall.

But the Elites don't want that. And they're happy to blame "inflation" for this, just as they're happy to delude us that "inflation" is a natural force, and not the result of currency debasement and seigniorage.
Echos of post #381:
Treasury Secretary Janet Yellen has some explaining to do, according to hedge-fund titan Stanley Druckenmiller.

Yellen missed an important opportunity, Druckenmille says, by not issuing more long-dated Treasury bonds when interest rates were, in the shadow of COVID-19, near zero.

“Janet Yellen, I guess because political myopia or whatever, was issuing 2-years at 15 basis points … when she could have issued 10-years at 70 basis points or 30-years at 180 basis points,” the former hedge-fund manager said during a conversation with Paul Tudor Jones at the Robin Hood Investors Conference, a clip of which circulated Monday on X, the social-media platform formerly known as Twitter.

“I literally think if you go back to Alexander Hamilton, [Yellen’s approach represented] the biggest blunder in the history of the Treasury,” Druckenmiller said.

This omission seems even more egregious, according to Druckenmiller, considering that Americans refinanced their home loans at rock-bottom mortgage rates en masse, and corporations with sturdy credit ratings refinanced their debt.

“I have no idea why she hasn’t been called on this. She has no right to still be in that job.”

“When rates were practically zero, every Tom, Dick and Harry in the U.S. refinanced their mortgage … every corporation was extending their debt,” he said.

He then rattled off some alarming numbers to illustrate the consequences of not reining in spending.

“Here’s the consequences, folks. When the debt rolls over by 2033, interest expense is going to be 4.5% of GDP if rates are where they are now. By 2043 — it sounds like a long time but it is really not; it is 20 years — interest expense as a percentage of GDP will be 7%. That is 144% of all current discretionary spending,” he said.
To be sure, Yellen wasn’t the only Treasury secretary to preside over this latest round of near-zero interest rates. Steven Mnuchin served as Treasury secretary under Donald Trump and didn’t, leaving office in January 2021, nearly a year after the global coronavirus outbreak was formally labeled a pandemic.

The Fed’s Quantitative Tightening (QT) and the unwinding of the bank-panic liquidity measures continue on track: Total assets on the Fed’s balance sheet dropped by $89 billion in October, to $7.87 trillion, the lowest since May 2021, according to the Fed’s weekly balance sheet today.

Since peak-QE in April 2022, total assets have dropped by $1.10 trillion. ...


Follow up to Druckenmiller's comments above:
Onto our call of the day, which deals with another worry — a wall of government debt that will be with us for decades. It comes from Bridgewater’s highly regraded co-chief investment officer Bob Prince, who was speaking at the Global Financial Leaders’ Investment Summit on Tuesday, hosted by the Hong Kong Monetary Authority.
“The after effects of offsetting deleveraging and pandemic, you’ve had a massive wealth shift from the public sector to the private sector and that’s left the government with debt to GDP up from 70% up to 120%. And the particular vulnerability of that is in the debt rollovers and the gross issuance that you’re going to see in the coming decades . You’re stuck with that debt until you pay it off and that means you have to roll it over like anybody else does,” said Prince.

NEW YORK/WASHINGTON (Reuters) - Moody's on Friday lowered its outlook on the U.S. credit rating to "negative" from "stable" citing large fiscal deficits and a decline in debt affordability, a move that drew immediate criticism from President Joe Biden's administration.

A record-breaking share of auto loan applicants say they’ve been rejected for loans this year, according to the Federal Reserve Bank of New York.

Based on surveys collected in February, June and October, an average of 11% of automobile-loan applicants said they had been rejected, the highest yearly car-loan rejection rate since the New York Fed began tracking the figure in 2013.

That speeds past the previous record on car-loan rejections, which was set in 2020, when 7.9% of applicants said they were turned away from a car loan.

The potential potholes awaiting car shoppers were just one part of the New York Fed’s quarterly survey on consumer access to credit. Overall, consumer credit is tightening, the report found. Fewer people are applying to see what terms and rates they could get on cars, credit cards, mortgages and mortgage refinances.

Across the board, reported rejection rates for loans climbed while application rates dropped year to date. The report showed hints of households facing financial pressure.
Pandemic-Era Excess Savings updates estimates of the remaining stock of pandemic-era aggregate excess savings in the U.S. economy, defined as the difference between actual savings and the pre-pandemic trend.

Pandemic-related fiscal support combined with a drop in household spending contributed to a sizable increase in household savings in the overall U.S. economy. Aggregate personal savings rose rapidly, well above its pre-pandemic trend.

As U.S. economic activity began to recover, households utilized their excess savings to support spending. By late 2021, household savings dipped below the pre-pandemic trend, signaling an overall drawdown of pandemic-related excess savings.



^^^ They are supposed to update those charts monthly.

Inflation Is Still Burning a Hole Through Your Money​

While we are far from the hyperinflation some have predicted errantly for years, we are back to inflation getting hotter, and the market just got a tiny taste of that lingering spicy burn today with the release of the Fed’s minutes. Investors turned the minutes over and inside out several times looking for some small hint that the Fed’s last rate hike was, indeed, its last rate hike. Nothing. They shook the pages to see if anything would fall out from between the lines. Nothing.

So, with that and reports of declining retail sales, the market’s recent big winning streak hit a wall like a cartoon bird that soars into a wall then slows sinks to the ground. In fact, the only thing the minutes seemed to say about inflation was “higher for longer” or, at least, “longer for longer” in fighting it. Amazing! There was nothing to support the market’s Fed fantasy that the central bank will cut rates four times in the coming year. Ha! Not even enough to suggest they’ll cut them once unless the whole house is on fire by then, and then what does it even matter?

It’s possible that we’re in the middle of [an] infrequent but very significant generational regime shift. And it’s possible that we’re not going back to zero rates,” said Jon Burkett-St. Laurent, senior portfolio manager at Exencial Wealth Advisors.
Ya think? Now, there is a penetrating glance into the obvious! At last, it should be obvious, but apparently it isn’t. Because that is how you get to that hyperinflation if that's really where you want to take this. (See the video linked to below about the five worst hyperinflation train wrecks in history.)

As noted below in a DiMartino Booth tweet (or do we call it an “X” now?)


Did anyone else notice the Chairman of the Federal Reserve casually admit recently that our central bank has no long-term strategy for handling the banking crisis? Jerome Powell was asked recently ... what would happen in March of 2024 when loans begin coming due from the Bank Term Funding Program (BTFP). He literally said that they hadn’t thought that far ahead.

Powell & Co. created a $100+ billion bailout facility with no exit strategy, and now they talk about it like it’s nothing. The attitude extends even to major banking houses like Bank of America, which has openly admitted that it has hundreds of billions of dollars of unrealized losses on its books but expects to realize none of them. In other words, everyone, the Fed included, is acting like the BTFP is a permanent facility.
... The BTFP is loaded with long-term securities that will likely pay below-market rates for 2 to 30 years.

This has created a rachet effect with the new facility, where banks dumps securities on the Fed but can never really pay off the loans before the collateralized assets mature. That has pushed the BTFP to $114 billion, and it’s poised to continue creeping higher each time banks need cash and can’t liquidate the rest of their depreciated assets, except at a loss.


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This is another report on the same story as my previous post:
Total outstanding loans in the Federal Reserve’s bank bailout program jumped by just over $5 billion in November.

There was a sudden spike in banks tapping into the bailout program during the first week of the month with financial institutions borrowing $3.87 billion from the Bank Term Funding Program (BTFP). There was another surge in borrowing between Nov. 15 and Nov. 22, according to Fed data.

As of Nov. 22, there was $114.1 billion in outstanding loans in the BTFP bank bailout program.

I think I didn't highlight enough of the page I cited in my last post (edited just now), but it was a pretty in depth dive on the subject.
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Fed's rate hikes starting to bite the Government's debt service:
So the average interest rate that the government is paying on all its interest-bearing debt – much of it issued years ago with much lower coupon interest rates than now – has been rising from the historic low of 1.57% in February 2022 to 3.05% in October, according to data from the Treasury Dept.

This average interest rate will continue to rise as new securities with higher interest rates replace maturing lower-interest rate securities that were issued often years ago, and as all the newly added debt is piled on at the current higher interest rates.

More (including lovely charts):

US Debt hit $34 Trillion for the first time ever. :paperbag:
That's not a bug; it's a feature.

You vill eat ze bugs. You can have all ze dollars you vant; it will not matter.
Federal Reserve Bank of Dallas President Lorie Logan said the US central bank may need to slow down the pace at which it shrinks its portfolio of assets amid scarcer liquidity in financial markets.

While liquidity and bank reserves in the financial system are still more than ample, she said, individual banks could start to see liquidity constraints, especially as balances in the Fed’s overnight reverse repurchase facility fall. Logan said it’s now “appropriate” to begin discussing the parameters around a Fed decision to slow the pace of its balance-sheet runoff.

Banks having more liquidity problems that the BTFP stealth bailout isn't resolving. Fed having to pivot on QT. Balance sheet explosion was not transient. The Fed has to choose: stoke inflation (allow massive QE to normalize) or kill banks. They will choose door #2. Fed to America: Don't be poor.
This has been in the works for a while and has come out in bits and pieces, but today the Fed made it official in the FOMC meeting minutes: It doesn’t know how far it can take QT without blowing up stuff, but it wants to reduce its balance sheet as far as possible without blowing up stuff. QT has already reduced the Fed’s balance sheet by $1.34 trillion. And so far, nothing has blown up. But last time it did QT, the repo market blew up.

The issue with withdrawing liquidity from the market via Quantitative Tightening is that this liquidity is taken out through a couple of drains that are close together – the Fed’s roll-off of Treasury securities and MBS – but liquidity has to flow there from all directions, and it may drain out faster in one corner, and that corner then runs out of liquidity and blows up, while there is still excess liquidity in other corners.

Yields solve that problem normally. The corner that is running out of liquidity will be willing to pay higher yields to attract liquidity from the corner that has excess, but the process is not instant; it can take too much time, and then something runs out of liquidity and blows up while at the other side of the markets, there is too much liquidity.

This hasn’t happened yet in QT-2, which is still running “smoothly,” as the FOMC minutes said today.

But it happened with QT-1 in September 2019, when the repo market blew out because banks were running low on excess liquidity and refused to lend to the repo market, and a repo-market panic ensued and threatened with contagion, and so the Fed stepped into the repo market and helter-skelter doused it with nearly $400 billion in liquidity, which raised its balance sheet again, thereby undoing a big part of QT-1. And that is to be avoided this time.


With the U.S. national debt surging above $34 trillion, many prominent investors and financial leaders are raising alarm over a looming crisis. Even Federal Reserve Chair Jerome Powell has weighed in expressing concern that U.S. debt is unsustainable. However, the U.S. central bank is a major part of the problem, according to Charles Payne, Host of Making Money on FOX Business Network and the author of ‘Unbreakable Investor.’

Powell issued his own candid warning on U.S. debt during CBS’s ’60 Minutes,’ criticizing lawmakers for effectively borrowing from future generations with their unsustainable fiscal policies and stating that it was time for “an adult conversation.”

Various tweets echoing dollar doom:

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