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The U.S. Federal Reserve warned Friday that the financial sector faces “significant” vulnerabilities due to the coronavirus pandemic, as businesses and households grapple with fragile finances for the foreseeable future.
Friday’s report noted the financial stresses that could build if the crisis persists, and households and businesses continue to be deprived of wages and revenue.

In short, no one from hedge funds to major banks to households would be immune from the risk they might default on debt, be forced to sell off assets, end up in bankruptcy, or see the value of assets dwindle.
... Fed Governor Lael Brainard ... highlighted a key worry at the central bank: that what might start as a cash crunch could spiral into something worse. Among highly indebted businesses, she said, “we will be monitoring closely for solvency stresses...which could increase the longer the Covid pandemic persists.”

Few if any parts of the economy are safe. ....

“Financial sector vulnerabilities are likely to be significant, in the near term,” the Fed said. “The strains on household and business balance sheets from the economic and financial shocks since March will likely create fragilities that last for some time.”
Kenneth Rogoff said:
... As an analogy, the IMF or Chapter 11 bankruptcy is very good at dealing with a couple of countries or a couple of firms at a time. But just as the hospitals can’t handle all the Covid-19 patients showing up in the same week, neither can our bankruptcy system and neither can the international financial institutions.

So there are going to be phenomenal frictions coming out of this wave of bankruptcies, defaults. It’s probably going to be, at best, a U-shaped recovery. And I don’t know how long it’s going to take us to get back to the 2019 per capita GDP. I would say, looking at it now, five years would seem like a good outcome out of this.
5/21/20 - $7.085T

$103B increase. Less than half of last week's increase.
The monthly tally of defaults in the U.S. leveraged loan market has hit a six-year high, data from Fitch Ratings showed, as companies are either missing payments or filing for bankruptcy because of the fallout from the coronavirus pandemic.

It's the start of the Fed's worst nightmare (massive loan defaults which could cascade into bank failures):
Banks are selling leveraged loans backing acquisitions at the fastest pace in months as they seek to shed risk accumulated prior to the pandemic.
Analysts are more gloomy on the outlook for loans compared to junk bonds, which have seen spreads tighten about 190 basis points since the Federal Reserve’s historic pledge to buy some speculative-grade debt early last month.

UBS Group AG strategists wrote last week that the global leveraged loan market is vulnerable to a sell-off as earnings weaken and defaults stack up. They expect U.S. leveraged loan spreads to revisit March wides of 825bps from the 672bps level recently seen as default risk increases.
5/28/20 - $7.145T

$60B increase over last week. Balance sheet expansion appears to be slowing down.
Cops are likely making a lot of sweet overtime right now.

Insurance companies going to be paying out a lot of claims. They are probably TBTF so no worries if they end up needing a bailout.
A lot of insurance companies policies don't pay out for damages caused by civil unrest.
Seems like I heard some folks complaining about a month or so ago that their health insurance was balking at claims related to covid 19.
If you are at the bottom end of the american dream and have no certain means of buying food, no liklihood of a job, no hope for a future, you might not be too worried about taking a little of other peoples apparent success.
If you are a bankster or at the upper end of the food chain, you will not be too concerned cos its only money and theres always more

If you have worked for what you have and paid all the hands held out so they would leave you alone and something bad happens, its tough luck but dont worry you can always follow your dream and with hard work, rebuild it all ......... or more likely join the bottom feeders bringing your bitterness and anger to the party.

The short term future doesnt look good.
6/4/20 - $7.213T

$68B increase over last week.

June 03, 2020

Federal Reserve Board announces an expansion in the number and type of entities eligible to directly use its Municipal Liquidity Facility
For release at 1:00 p.m. EDT

The Federal Reserve Board on Wednesday announced an expansion in the number and type of entities eligible to directly use its Municipal Liquidity Facility (MLF). Under the new terms, all U.S. states will be able to have at least two cities or counties eligible to directly issue notes to the MLF regardless of population. Governors of each state will also be able to designate two issuers in their jurisdictions whose revenues are generally derived from operating government activities (such as public transit, airports, toll facilities, and utilities) to be eligible to directly use the facility.

In addition to the expanded terms outlined above, the MLF continues to be directly open to U.S. states, the District of Columbia, U.S. cities with a population of at least 250,000 residents, U.S. counties with a population of at least 500,000 residents, and certain multistate entities.

The MLF was established under Section 13(3) of the Federal Reserve Act, with approval of the Treasury Secretary. It will offer up to $500 billion in lending to states and municipalities to help manage cash flow stresses caused by the coronavirus pandemic.

Emphasis is mine:
With highly questionable legality on top of a 100% certain moral hazard, here are the details of the Fed's new Secondary Market Corporate Credit Facility
  • The Facility will leverage the Treasury equity at 10 to 1 when acquiring corporate bonds of issuers that are investment grade at the time of purchase.
  • The Facility will leverage its equity at 7 to 1 when acquiring corporate bonds of issuers that are rated below investment grade at the time of purchase and in a range between 3 to 1 and 7 to 1, depending on risk, when acquiring any other type of eligible asset.
I think we need a new name to properly explain what it really is: an asset price support mechanism.

Not only is the facility a legally questionable moral hazard, it is also nothing but an asset prices support system that keeps zombie corporations alive.

So about them zombies...
I wasn't near my computer for the last few days... Missed the Fed report last Thursday...

6/11/20 - $7.217T

Just a $4B increase over the week before. That's incredible. Lowest I've seen since the recent madness started.
6/18/20 - $7.143T

Incredibly, the Fed is reporting that their balance sheet actually shrunk $74B over the last week.

This $74 billion decline in total assets during the week was powered by a plunge in repo balances and foreign central bank liquidity swaps, while some alphabet-soup programs also unwound. And the junk-bond and ETF buying program stalled.

And there is a big shift happening: The Fed has started lending to entities, including states and banks, under programs that channel funds into spending by states, municipalities, and businesses, rather than into the financial markets. These types of programs are propping up consumption – not asset prices. That’s a new thing. I don’t think the hyper-inflated markets, which have soared only because the Fed poured $3 trillion into them, are ready for this shift.

I guess that once the CB's get the hang of helicopter money they will explore different ways of pushing it out.
Public awareness of where it has been going is increasing and unrest is a significant possibility.....
Got any 'shovel readies' ?
Perhaps all the crazy housebuilding ( certainly here in Blighty) resources can be redirected to infrastructure ?
6/25/20 - $7.130T

$13B decrease. More or less holding steady right now. If CV19 hospitalizations continue to grow, and shot downs expand, I expect more stimulus will be on the horizon.
So I slacked off a bit on keeping tabs on the Fed balance sheet. July's numbers:

7/2/20 - $7.057T (76B decrease from week before)
7/9/20 - $6.969T (88B decrease from week before)
7/16/20 - $7.007T (38B increase from week before)
7/23/20 - $7.013T (6B increase from week before)

Balance sheet might have gone as low as it's going to go for the near term.
Federal Reserve Chair Jerome Powell has likely heard it all about negative U.S. real yields: How they’re devastating for pensions and life insurers, causing equity valuations to outpace the economic recovery, encouraging a stampede into gold and out of the dollar and giving the green light for American companies to gorge on cheap debt once again.

The message he and his colleagues are likely to convey at their meeting this week: That’s all fine with us.

Somehow, I really doubt the Fed will be fine with a stampede into gold.
7/30/20 - $6.996T (17B decrease from week before)
8/6/20 - $6.993T (3B decrease from week before)
Running Score

  1. Hard Lockdowns: Two Fed Presidents, Neel Kashkari (Minneapolis) and Charles Evans (Chicago) support hard lockdowns.
  2. More Free Money: Three Fed Presidents, Neel Kashkari (Minneapolis), Charles Evans (Chicago), and Thomas Barkin (Richmond) support more free money.

It is a certainly that all or nearly all the Fed presidents are in the Free Money group.

Kashkari, Evans, and Barkin have made it official.

8/13/20 - $7.005T (12B increase from week before)
8/20/20 - $7.059T (54B decrease from week before)

Balance sheet was mostly flat (small increases/decreases) since July 16 report until this last week. Start of a trend, or just more noise? They've managed to hold the line on the balance sheet more or less around the 7T mark. That will likely change if war breaks out or Congress passes another stimulus bill (or the economy/financial markets get pressured by [an] oddly colored swan[ s ]).
8/27/20 - $7.039T (20B decrease from week before)
9/3/20 - $7.065T (26B increase from week before)

how much can the CB's get out there before 'The Great Reset ' takes care of it all ?

Its a delicate balancing act.
The dethroning of the dollar from its pandemic supremacy is changing the trading game across stocks, emerging markets and commodities.
The dollar’s decline has also helped thrust gold onto center stage, since the two are considered to typically move in opposing directions. Though the relationship isn’t straightforward, the greenback’s descent as real yields plumb fresh lows is being met with outsize demand for gold.

Going forward, some investors are betting that bullion will prove a better haven than Treasuries as inflation bites ...

9/10/20 - $7.059T (6B decrease from week before)
9/17/20 - $7.113T (54B increase from week before)

Looks like liftoff from the 7T mark has begun.
9/24/20 - $7.141T (28B increase from week before)

If the Fed averages $30B a week increase, the balance sheet should hit $8T in about 29 weeks - just over half a year.
10/1/20 - $7.103T (38B decrease from week before)

OK. It's not going to go straight up then...
Catching up...

10/8/20 - $7.123T (20B increase from week before)
10/15/20 - $7.199T (76B increase from week before)
10/22/20 - $7.225T (26B increase from week before)
10/29/20 - $7.194T (31B decrease from week before)
11/5/20 - $7.206T (12B increase from week before)
11/12/20 - $7.224T (18B increase from week before)


Vaccine rollout and loose monetary policy will weigh on the U.S. dollar next year, with the currency at risk of falling 20%, Citi said in a note this week.

"When viable, widely distributed vaccines hit the market, we believe that this will catalyze the next leg lower in the structural USD downtrend we expect," Citi wrote. "Given this set-up, there is the potential for the dollar's losses to be front-loaded, with the USD potentially falling by as much as 20% in 2021."

so eerrr gold up 20% ?
bring on that vaccine then ...........

Am I missing something here ?
11/19/20 - $7.291T (67B increase from week before)
11/27/20 - $7.265T (26B decrease from week before)
12/3/20 - $7.270T (5B increase from week before)

Seems the balance sheet expansion isn't going up in a straight line.
12/10/20 - $7.291T (21B increase from week before)
12/17/20 - $7.411T (120B increase from week before)

Big increase reported last week. New stimulus bill was signed last night, so more brrrt baked into the cake.
12/28/20 - $7.452T (41B increase from week before)
12/31/20 - $7.411T (41B decrease from 3 days before - was previous report real? Back to where we were 12/17/20)
1/7/21 - $7.383T (28B decrease from week before)


Aside from exponential M1/M2 money supply growth over the last month or so, America's insane political theater seems to be coming to a head. I haven't been posting much lately with the holidays and such. Central banks et al seem to be keeping a lid on precious metals while crypto seems to have exploded. New strains of Covid are running rampant in the USA right now. The economy is set for another slowdown in spite of vaccines starting to trickle out to the public. There are probably more risk factors threatening the stability of life (markets, economic, politics) right now than at any other point in my lifetime.
Yes, no matter what happens, half of America is seriously unpappy with the other half and theres no fence sitting area.
Trump does not seem to be acting like he is about done and his Sun Tsu way of doing things suggests we could yet be in for some surprises.....

A log cabin in the mountains would seem an appropriate location right now.
1/14/21 - $7.382T (1B decrease from week before)
1/21/21 - $7.463T (81B increase from week before)
1/28/21 - $7.453T (10B decrease from week before)

The Fed has now put on ice five of its SPVs (Special Purpose Vehicles) which had been designed back in March to bail out the bond market. It unwound its repo positions last June. Its foreign central bank liquidity swaps are now down to near-nothing except with the Swiss National Bank, which seems to have a need for dollars. The Fed has been adding to its pile of Treasury securities at the rate spelled out in its FOMC statements, thereby monetizing part of the US government debt. And it has been adding to its pile of Mortgage Backed Securities (MBS).

The result is that total assets on its weekly balance sheet through Wednesday, at $7.4 trillion, are roughly flat with the level in mid-December and are up by $200 billion from early June, with an average growth rate over the six-plus months of $30 billion a month.

2/4/21 - $7.459T (6B increase from week before)
2/11/21 - $7.491T (32B increase from week before)
2/18/21 - $7.606T (115B increase from week before)

Last edited:
In response to a questions posed by Congressman Warren Davidson about whether “M2 [money supply] going up by 25% in one year” is going to “diminish the value of the U.S. dollar,” Powell responded, “there was a time when monetary policy aggregates were important determinants of inflation and that has not been the case for a long time.”

Powell added that “the correlation between different aggregates [like] M2 and inflation is just very, very low, and you see that now where inflation is at 1.4% for this year. Inflation dynamics evolve over time, but they don’t tend to change overnight.”

Asset bubbles aren't inflation, so cool, cool...brrrrrrrrrrrrrrrrrrt
I thought the definition of inflation was an increase in the money supply.
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