REPO Madness to QE4, QE5 | James Anderson

Why is the Fed injecting $100 billion into the banking system for overnight lending? James has the answer to that and more in this week’s show…

by James Anderson of SD Bullion

It was a mostly down week for the precious metals complex.

The spot silver price closes the week at $17.50 fiat Federal Reserve notes per troy ounce, down about 50¢ on the week.

The spot gold price ran up thirty bucks an ounce closing right below $1,500 fiat Fed notes per ounce.

The spot platinum price finished flat for the week, right around the $933 mark.

While the spot palladium price hit a new nominal price high fiat Fed notes, closing around the $1,685 fiat US dollar per troy oz mark.

Here we cover a building story we have yet to discuss here on this Metals & Markets wrap.

This week, we dive into details and questions surrounding why is the Federal Reserve now injecting over $100 billion fiat Federal notes daily into the overnight lending facility?

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Silver Podcast | Gold Podcast | When QE4?

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Welcome to this week’s Metals & Markets wrap, I am your host James Anderson of SD Bullion.

This week we will have no guest on the show. Instead, we will dive into details and questions surrounding what the Federal Reserve is up to in the REPO markets.

You can find the massive amounts of short-term REPO loans the NY Federal Reserve has been giving out over the last few weeks.

On Tuesday, September 17th, 2019 the private central bank of the USA, the Federal Reserve, stepped into financial markets to keep short-term interest rates from rising — the first time the central bank has had to carry out this type of “market operation” since the global financial crisis.

US currency markets effectively experienced a bank run, as oversized demand for repurchase agreements (also known in short as REPOs) whose rates spiked overnight to an unprecedented high of over 10%.

Here are some Questions onlookers should be asking themselves.

Why do we see the Fed do Repo operations for the first time since 2008?

Why is demand for overnight cash still being oversubscribed even after the Federal Reserve almost doubled the initial market intervention amount?

If one of the critical arguments for having a central bank is to be the lender of last resort, why is the Fed having to now pump over $100 billion fiat Fed notes per day into the financial system?

The excuse that got initially given that some last-minute corporate tax payments jacked-up overnight bank lending rates are not the real driver here. Common sense knows we have not seen anything like this in over a decade. Every corporation’s accounting and finance department knows when their taxes are due.

Truth is we’re not going to find what’s happening until it is probably too late for most people.

Let’s look at some potential reasons behind how and why this might be happening.

As the US Treasury increasingly continues to issue more bonds and shorter-term notes, it has not collected enough taxes to fund (also known as deficit spending). The increase in IOUs issued with different time frames is supposed to get sold to primary dealers.