Insulting the Captive Audience This week, while perusing the Federal Reserve’s balance sheet figures, we came across a rather curious note. We don’t know how long the Fed’s had this note posted to its website. But we can’t recall ever seeing it. The note reads as follows: “The Federal Reserve’s balance sheet has expanded and contracted over time. During the 2007-08 financial crisis and subsequent recession, total assets increased significantly from 0 billion in August 2007 to .5 trillion in early 2015. Then, reflecting the FOMC’s balance sheet normalization program that took place between October 2017 and August 2019, total assets declined to under .8 trillion. Beginning in September 2019, total assets started to increase.”
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Insulting the Captive Audience
This week, while perusing the Federal Reserve’s balance sheet figures, we came across a rather curious note. We don’t know how long the Fed’s had this note posted to its website. But we can’t recall ever seeing it. The note reads as follows:
“The Federal Reserve’s balance sheet has expanded and contracted over time. During the 2007-08 financial crisis and subsequent recession, total assets increased significantly from $870 billion in August 2007 to $4.5 trillion in early 2015. Then, reflecting the FOMC’s balance sheet normalization program that took place between October 2017 and August 2019, total assets declined to under $3.8 trillion. Beginning in September 2019, total assets started to increase.”
Directly below this note is the following chart:
Does this look like a balance sheet that expands and contracts over time?
Quite frankly, the Fed’s balance sheet chart, and the extreme dollar debasement that it illustrates, is a disgrace. The fact that the Fed had to add this flagrantly false note as preface to its disgraceful chart is an insult.
This is a direct offense to anyone who has built a modest savings account by exchanging their time for dollars. The time and effort put to obtaining these dollars is being stolen by the insidious process of central bank engineered money supply inflation. Year in and year out, these earned dollars will be worth less and less.
Moreover, normalization is a Fed lie. It never happened. Yes, $700 billion was contracted from the Fed’s Balance sheet between October 2017 and August 2019. But that was in the wake of a $3.5 trillion expansion. And it was quickly followed by another $3 trillion balance sheet expansion this spring.
The Fed’s real priority was never to reduce its balance sheet. The Fed’s real priority is to keep the Treasury and the big banks flush with cash.
As of June 2020 the year-on-year growth rate of the US broad true money supply TMS-2 accelerated to 34.4%, setting a new multi-decade high and surpassing the previous Greenspan and Bernanke shenanigans by a huge margin. [PT]
Money Printer Go BRRR
A secondary effect – for now – of the Fed’s balance sheet expansion is a booming stock market. This, like the Presidential election, is a distraction.
The real noteworthy thing taking place that will have a real impact on your life, has less to do with the stock market or who will be the next President. Rather, the real noteworthy thing taking place today – at this very moment – has everything to do with the Fed’s attempt to suspend the credit cycle.
What we are talking about here are interest rates. If you have not noticed, they have been going down as of late. In fact, they have been going down a lot. The yield on the 10-Year Treasury note dropped to nearly 0.5 percent earlier in the week.
Modern era Treasury rate data has been continuously recorded since 1871. The lowest yield on the 10-Year Treasury on record dating back 149-years was reached this week. What is going on?
Attaining this remarkable milestone took decades of lies, propaganda, and relentless intervention by central planners. A good portion of the Fed’s balance sheet assets, shown on the chart above, are US treasuries.
The Fed expands its balance sheet, via digital ledger notations, and buys treasuries. This is called monetizing the debt. This, in essence, is printing press money – as in, money printer go BRRR. Washington then spends this fake brrr money via government contracts, government programs, CARES Act stimulus, and whatever other spending bills Congress passes.
The vertical jump on the right side of the chart of Fed assets, for the year 2020, is composed of Treasury notes that were bought with fake brrr money to fund the CARES Act. This coordinated attack on your dollars by the Fed and the US Treasury is what makes the $26.6 trillion national debt possible.
Capitalism has bought the farm – meet the undertakers… [PT]
The Dollar Is Dying
This fake brrr money functions just like Federal Reserve Notes (i.e. dollars) that were obtained through honest labor. Yet, as the fake brrr money’s spent, the wealth of savers – including your wealth – is debased. The dollar becomes worth less and less.
One of life’s unspoken delights is the rich satisfaction that comes with bearing witness to the spectacular failure of an offensive and unjust system. We just wish it wasn’t so damaging to so many good and honest people.
The dollar is being destroyed before us. This destruction has been going on for 107 years; since the passage of the Federal Reserve Act in 1913. And it has been going on in earnest since President Richard Nixon closed the gold window in 1971.
But with the Fed’s and U.S. Treasury’s attempt to paper over the economic consequences of government lockdown orders by running a $4 trillion budget deficit, something special is going on. The dollar is dying. Yet the clowns in Congress are the last to see it.
King dollar has that sinking feeling again… [PT]
The art of plundering and the increasing corruption of public officials is on full display in the next stimulus bill that’s making its way through Congress. The general premise is that the ordinary needs of people, including housing and living expenses, may be legitimately met by the means of fake brrr money.
Then there’s all the pork, stuff like a new FBI building, that’s larded into the bill. All the while, the increase in the money supply grows every day more appalling.
Such vigorous and persistent attempts to substitute natural laws in finance for the wishes of legislatures are doomed. We are headed to complete financial, moral, and political collapse. The rush to exit dollars is gaining momentum…
NASDAQ: 11,000. Nvidia: 453. Tesla: 1,500. Shopify: 1,000. Apple: 450. Amazon: 3,200. Microsoft: 215. S&P 500: 3,350. And many, many more…
There is also: Gold: $2,000. Silver: $28. Bitcoin: $12,000.
Choose your dollar escape vehicle wisely.
Charts by St. Louis Fed, acting-man.com, stockcharts.com
Cartoons by hedgeye.com
Editing and chart & image captions by PT
MN Gordon is President and Founder of Direct Expressions LLC, an independent publishing company. He is the Editorial Director and Publisher of the Economic Prism – an E-Newsletter that tries to bring clarity to the muddy waters of economic policy and discusses interesting investment opportunities.
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