Is The Fed Dead?

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.

 

It’s Time To Practice A Little Social Distancing

Ahh yes, Friday finally got here and I don’t have to be back to work until Monday.

Since there ain’t fuck all open I do believe I am going to split my time between either sitting here on my ass or playing in the disaster area.

I mean sure, Harbor Freight of all places is open but I’m pretty sure there isn’t anything over there that I desperately need, the Wifely Unit will be parked on the couch watching that infernal idiot box as usual, so yeah.

Besides, I has ten thousand projects lined up, not to mention my brand new 4 inch, 4 jaw chuck for my mini lathe came in earlier this week so I need to put that on and see how it runs out.

Literally.

I fucked up my 3 inch 4 jaw. Over tightened one of the jaws and snapped off a paper thin casting so it’s junk now. Ya cain’t buy parts for the damn things, all you can do is replace them. The Little Machine shop just happened to have the 4 inchers on sale for $95 and that was $30 cheaper than the 3 incher cost in the first place.

Sign me up.

I also have some serious rearranging to do, again. I got that Kennedy tool box riser in a swap with a buddy from work so I have to unload the top box and stick the riser under it, then go through a shit load of tooling and get them loaded back up.

I already know they are both going to wind up stuffed to the gills with extra left over.

There is still the card board and other crap out there from the little freezer and a whole shit load of other crap that needs to be gone through.

For once I’m glad it’s supposed to rain all weekend too.

No fucking yard work.

I have a huge bunch of that needs to get done, at least I got lucky and had a nephew mow the fucking lawn last weekend.

So that’s what I am doing, so far.

What the heck are all y’all going to be doing while you are cooped up?

Besides staying out of kicking distance of the little woman if you are so blessed.

Better to have something to do before they remind you of all the shit you said you were gonna do when you finally found the time, eh?

Are We Staring At 1930 In The Mirror?

The stock market crash of 1929 has been pointed to historically as the root cause of The Great Depression that followed soon after and basically lasted until WWII.

 

I believe we are on the cusp of another one except this time it will be Main Street that causes it.

With the current “Lockdowns” in place in multiple states and cities restricting the movement and employment of literally millions of people and hundreds of thousands of businesses, life as we knew it is grinding to a halt.

Think for a moment about the fact that millions of Americans already lived paycheck to paycheck.

Thousands of small businesses are going to disappear.

Those people who can’t work now are going to take an economic hit that they can’t recover from.

This “Stimulus” farce of sending everyone a check for $1200 is going to do exactly what for these people?

Maybe keep them from starving and that’s about it. Even that is only if people are smart enough to buy food with it instead of splurging on unneeded luxuries.

Rent, power, water and any other bills will keep piling up in the mean time.

Not to mention that millions of Americans are already up to their eyeballs in Credit Card debt.

All those shiny new cars and trucks everyone just has to have come with hefty payments and insurance requirements too.

Unemployment insurance may, just may, reduce some peoples burdens until this current round of pandemic runs out.

In the mean time the hole gets deeper and deeper.

Maybe someone in the Rose Colored Glasses group can see a different ending but economic devastation from Sea To Shining Sea is what I am seeing from where I am at.

As predicted from several sources, the number of COV-19 cases has exploded, now reaching the milestone of over 500,000 cases .

New York city and New Orleans are cranking them out like widgets in a factory running on race gas.

It took 4 months to get to 250K and one week to double that.

Not only is this far from over, it’s just getting warmed up.

I don’t see us returning back to what was an already fucked up position that we called normal, anytime soon.

L.A. County Board Of Supervisors seek to remove Sheriff Alex Villanueva as head of emergency operations

Read this first and then I’ll show you something that JUST MAY, be related to his situation.

The L.A. County Board of Supervisors is taking steps to remove Sheriff Alex Villanueva as head of the county’s emergency operations center during the coronavirus pandemic, a move he called “a pure power grab at the worst time possible.”

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Gee, I wonder why they are after his ass all of a sudden, the guy has been an asshole for years. It couldn’t possibly have something to do with this could it?

 

LA sheriff clashes with county lawyer over closing gun shops

 

March 24, 2020 at 5:49 p.m. PDT

LOS ANGELES — The Los Angeles County sheriff said Tuesday gun shops are not essential businesses and ordered deputies to make sure they were closed during the coronavirus crisis — a move that was contradicted hours later when the county’s top lawyer said the shops could be open.

Los Angeles, the nation’s largest county with 10 million residents, enacted a stay-at-home order last week that required all nonessential businesses to close to slow the spread of the virus.

The county order — and an executive order from Gov. Gavin Newsom — did not specifically mention gun shops, prompting the Los Angeles County counsel’s office to issue a statement late Tuesday saying it has “opined that gun stores qualify as essential businesses.”

It was not immediately clear what the conflicting guidance meant for gun stores.

More here.

 

Stepped on your dick one too many times Alex?