In September of 2019, there were some shockwaves that were being felt within and throughout the plumbing of the financial system. This was most apparent in the overnight lending market or repo facility. These overnight loans are supposed to have an accompanying interest rate that mimics the Federal Funds Rate, which is set by the Federal Reserve. In essence, these rates have a ceiling because they are controlled by the Fed, or at least they are supposed to be. However, what occurred that shook the markets was that typical market participants were hesitant to make overnight loans while charging such small interest. In order to make a loan, institutions were demanding much higher rates, which in turn nearly brought down the overnight lending market. Higher rates were likely charged because the lending party must have believed that the borrowing party was a default risk. This caused the Fed to get involved. At first, they told us it was all temporary and just a little volatile because it was the end of the quarter and had to do with tax obligations. Then they said it would be a few more weeks, then it was a month, and then it was into the first quarter of 2020. You get the picture.
Now, the opposite is occurring. Before, there was not enough liquidity in the system, and now the markets may finally be coming to terms that there is too much liquidity in the system. The reverse repo market is now nearing all-time high volumes. These transactions seemingly came out of nowhere as only a couple of months ago, there was virtually no action in this market. And now, we are near all-time highs. Something is definitely afoot and the last thing we will hear about this matter is the truth. Yet, this could turn out to be one of the biggest stories that is not getting enough attention. Is this a point or the point of system exhaustion? And if so, what, is anything, can be done about it? This serves as further evidence that the Fed is trapped and running out of options. If they attempt to draw liquidity out of the system, then it is lights out for the equity markets and quite possibly the bond market as well. This whole house of cards is being kept afloat by these artificial liquidity injections. Remove them and it is look out below. Stay diversified, stay vigilant, and stay with The Kapital News. #Economy #Inflation #Fraud #Gold #Silver #EndTheFed