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Thread: Meet your new Fed chairman, Donald J. Trump.

  1. #1

    Meet your new Fed chairman, Donald J. Trump.

    The Fed's Cure Risks Being Worse Than the Disease

    (Bloomberg Opinion) -- The economic debate of the day centers on whether the cure of an economic shutdown is worse than the disease of the virus. Similarly, we need to ask if the cure of the Federal Reserve getting so deeply into corporate bonds, asset-backed securities, commercial paper, and exchange-traded funds is worse than the disease seizing financial markets. It may be.

    In just these past few weeks, the Fed has cut rates by 150 basis points to near zero and run through its entire 2008 crisis handbook. That wasn’t enough to calm markets, though — so the central bank also announced $1 trillion a day in repurchase agreements and unlimited quantitative easing, which includes a hard-to-understand $625 billion of bond buying a week going forward. At this rate, the Fed will own two-thirds of the Treasury market in a year.

    But it’s the alphabet soup of new programs that deserve special consideration, as they could have profound long-term consequences for the functioning of the Fed and the allocation of capital in financial markets. Specifically, these are:

    CPFF (Commercial Paper Funding Facility) – buying commercial paper from the issuer. PMCCF (Primary Market Corporate Credit Facility) – buying corporate bonds from the issuer. TALF (Term Asset-Backed Securities Loan Facility) – funding backstop for asset-backed securities. SMCCF (Secondary Market Corporate Credit Facility) – buying corporate bonds and bond ETFs in the secondary market. MSBLP (Main Street Business Lending Program) – Details are to come, but it will lend to eligible small and medium-size businesses, complementing efforts by the Small Business Association.

    To put it bluntly, the Fed isn’t allowed to do any of this. The central bank is only allowed to purchase or lend against securities that have government guarantee. This includes Treasury securities, agency mortgage-backed securities and the debt issued by Fannie Mae and Freddie Mac. An argument can be made that can also include municipal securities, but nothing in the laundry list above.

    So how can they do this? The Fed will finance a special purpose vehicle (SPV) for each acronym to conduct these operations. The Treasury, using the Exchange Stabilization Fund, will make an equity investment in each SPV and be in a “first loss” position. What does this mean? In essence, the Treasury, not the Fed, is buying all these securities and backstopping of loans; the Fed is acting as banker and providing financing. The Fed hired BlackRock Inc. to purchase these securities and handle the administration of the SPVs on behalf of the owner, the Treasury.

    In other words, the federal government is nationalizing large swaths of the financial markets. The Fed is providing the money to do it. BlackRock will be doing the trades.

    This scheme essentially merges the Fed and Treasury into one organization. So, meet your new Fed chairman, Donald J. Trump.

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  3. #2
    Baghdad Bob Mnuchin will print as much money as Trump needs.

    Quote Originally Posted by Swordsmyth View Post
    You only show up to attack Trump when he is wrong
    Make America the Land of the Free & the Home of the Brave again

  4. #3
    ^^ Another GOLDMAN SACH's traitor and big Dem donor.

  5. #4
    The antidote is the disease...

    “Conformity is the jailer of freedom and the enemy of growth.'' - JFK

    “I love agitation and investigation and glory in defending unpopular truth against popular error.” - James A. Garfield

  6. #5
    This scheme essentially merges the Fed and Treasury into one organization.

  7. #6
    Does this mean that the Roths lost their central banking? Is the Fed my mortal number one enemy? Could this be true? A new gold back note coming? THat huge amount of money coming to the people? What happens to the IRS. Holy Guacamoli

  8. #7
    Meet your new Treasury Secretary, Jerome Powell.

    Fixed it.

  9. #8
    "An idea whose time has come cannot be stopped by any army or any government" - Ron Paul.

    "To learn who rules over you simply find out who you arent allowed to criticize."

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  11. #9
    "No one is useless in this world who lightens the burdens of another.” ~ Charles Dickens

  12. #10
    End the Fed!
    End the Fed!
    End the Fed!
    End the Fed!

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  14. #12

  15. #13
    Quote Originally Posted by RPtotheWH View Post
    So did Trump End the Fed?

    In effect, the Fed is giving the Treasury access to its printing press. This means that, in the extreme, the administration would be free to use its control, not the Fed’s control, of these SPVs to instruct the Fed to print more money so it could buy securities and hand out loans in an effort to ramp financial markets higher going into the election. Why stop there? Should Trump win re-election, he could try to use these SPVs to get those 10,000 Dow Jones points he feels the Fed has denied everyone.

  16. #14
    FYI BlackRock ticker = BLK
    When life itself seems lunatic, who knows where madness lies? - Miguel de Cervantes, (Don Quixote)

    Quote Originally Posted by Voluntarist View Post
    The tree of liberty must be refreshed from time to time with the Federal Reserve Notes of patriotic central banks

  17. #15
    "He's talkin' to his gut like it's a person!!" -me
    "dumpster diving isn't professional." - angelatc
    "You don't need a medical degree to spot obvious bullshit, that's actually a separate skill." -Scott Adams
    "When you are divided, and angry, and controlled, you target those 'different' from you, not those responsible [controllers]" -Q

    "Each of us must choose which course of action we should take: education, conventional political action, or even peaceful civil disobedience to bring about necessary changes. But let it not be said that we did nothing." - Ron Paul

    "Paul said "the wave of the future" is a coalition of anti-authoritarian progressive Democrats and libertarian Republicans in Congress opposed to domestic surveillance, opposed to starting new wars and in favor of ending the so-called War on Drugs."

  18. #16
    Sounds like Trump can now order the Treasury to make US notes again and we can pay off the Federal Reserve.

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