The Little Sand in the Hour Glass
It’s often thought that the Federal Reserve comes in-and-out during bad & “good” times to monitor & bail out the financial system. However, this is only part-true in that the Federal Reserves is continually bailing out the financial system. It has numerous channels, facilities, or windows whereby businesses, banks, credit unions, money lending institutions and others have a connection to the money printer when they’re a little short. This has been true since the “real” economy snapped in 2008 and has only gotten worse since 2020. You begin to see that the end-game is more and more centralization under the Federal Reserve as they engulf the entire economy under their control–I digress.
While knowing this reality can be a major help orienting your investments for the future–there’s a moment you should especially be cognizant of as it could generate a shockwave of counter-party scare throughout.
Fed Discount Window
Straight from the horses mouth on their website: Federal Reserve lending to depository institutions (the “discount window”) plays an important role in supporting the liquidity and stability of the banking system and the effective implementation of monetary policy. By providing ready access to funding, the discount window helps depository institutions manage their liquidity risks efficiently and avoid actions that have negative consequences for their customers, such as withdrawing credit during times of market stress. Thus, the discount window supports the smooth flow of credit to households and businesses. Providing liquidity in this way is one of the original purposes of the Federal Reserve System and other central banks around the world.
“Okay Boomer”… here’s a stock that has lasted 171 years and will last many more–Perfect ahead of the 2024 elections!
What changes?
The Federal Reserve Board on Wednesday (February 21st) announced that the Bank Term Funding Program (BTFP) will cease making new loans as scheduled on March 11, 2024. The program will continue to make loans until that time and is available as an additional source of liquidity for eligible institutions.
During a period of stress last spring, the Bank Term Funding Program helped assure the stability of the banking system and provide support for the economy. After March 11, banks and other depository institutions will continue to have ready access to the discount window to meet liquidity needs.
As the program ends, the interest rate applicable to new BTFP loans has been adjusted such that the rate on new loans extended from now through program expiration will be no lower than the interest rate on reserve balances in effect on the day the loan is made (how many corporate entities can afford the higher interest rates?). This rate adjustment ensures that the BTFP continues to support the goals of the program in the current interest rate environment. This change is effective immediately.
A Silver Set Up as Mexican Production Withers
Closing
Please take notice on our article on Reverse Repo and how this can be a great indicator to see when liquidity dries up for collateral to keep lubricating the system. Currently we’re seeing money managers choose between the Fed & the debt market as they weigh political risk vs. interest rate risk as a debt doom-loop could be imminent. In addition, have you seen how many CEO insiders are selling their stock?? Check it out here. We also predict that home prices will fall because of new government regulations as the number of homes of the market sits at an all time low.
The fact that this funding facility is coming to end in about 2 weeks time should put into question how many zombie corporations are able to continue on and if not, if this could create a chain reaction to send markets sharply lower. Collectively, there’s yet again more reason to be skeptical that stock markets can continue to keep this frenzy-level pricing indefinitely into the future.
#StayOnTheBall
