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https://www.cnn.com/2019/10/25/business/overnight-lending-market-federal-reserve/index.html

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Overnight lending market drama continues, forcing the Fed to pump in more and more cash
Matt Egan

By Matt Egan, CNN Business

Updated 2:30 PM ET, Fri October 25, 2019


New York (CNN Business)The New York Federal Reserve has vowed to ease the turmoil that erupted last month in the overnight lending market. Keeping that promise is proving to be a very heavy lift.
Borrowing costs in this critical corner of Wall Street have gotten back to normal. But that's only because--behind the scenes--the NY Fed is pumping in vast amounts of money to ease the cash crunch before it spills over into the real economy or dents consumer and business confidence.

    Without the Fed, the repo market just wouldn't function anymore."

    Philip Marey, senior US strategist at Rabobank

For instance, the NY Fed pumped in $99.9 billion of cash into the financial system on Tuesday alone. It topped that by injecting $134.2 billion on Thursday. In addition to that short-term liquidity, which gets paid back quickly, the NY Fed purchased $26 billion of Treasury bills this week. Those T-bill purchases drew enormous demand, with banks requesting nearly four times as much cash from the Fed.
These aggressive steps from the Fed, along with the strong demand from banks, shows that the overnight lending market is not back to normal. Banks are still clamoring for cash -- and the Fed is rushing to fill the vacuum.

"There is something wrong with the plumbing of the financial system. The stress is still there," said Philip Marey, senior US strategist at Rabobank.
Precisely why a cash shortage exists is up for debate, with everything from post-crisis regulations to the $1 trillion deficit being blamed.
And the Fed is still trying to figure out how much cash is needed to ease the stress.
Earlier this week, the NY Fed announced it increased the size of its overnight repurchase agreement (repo) operations to at least $120 billion. That's up from $75 billion previously. And the NY Fed lifted the size of its term repo operations, which span multiple days, to at least $45 billion.
All that is on top of the $60 billion in Treasury bills the Fed has promised to outright purchase each month. That permanent liquidity will boost the size of the central bank's massive balance sheet, reversing recent efforts to shrink it.
"Without the Fed, the repo market just wouldn't function anymore. That's the sad conclusion of what we've seen since September," Marey said.
'Fiddling with the dials'
The overnight lending market gets little attention when it is functioning smoothly. Banks, hedge funds and other financial institutions quickly and easily borrow money. This dull but critical market hums along in silence.
But that changed in September. Borrowing costs suddenly spiked well above the range set by the Fed, raising fears that the Fed was losing its grip on short-term borrowing costs -- the central way it speeds up and slows down the economy.
The NY Fed eased the stress by injecting tons of cash, marking its first rescue in the overnight lending market since 2008. By pumping in cash, the Fed was essentially acting like the plumber.
Elizabeth Warren is alarmed about turmoil in overnight lending markets
Elizabeth Warren is alarmed about turmoil in overnight lending markets
Continued pressure has forced the Fed to repeatedly step up its response, suggesting that officials are struggling to determine how much cash is required to get the market operating smoothly again.
"They are basically fiddling with the dials," said Nicholas Colas, co-founder of DataTrek Research. "That's not a comfortable feeling, because this is an important market."
Why the market stress matters
So far, this market stress hasn't had an impact on the real economy. Borrowing costs for mortgages and other loans remain low. But the risk is that there could be is a spillover, either through a severe cash crunch or a blow to confidence.
Colas compared the situation with going to the ATM and finding out there is no cash and customers must go into the branch. It's more of an annoyance than a real problem.
"But if it happens enough times, you start to wonder: What the hell is wrong with the ATMs at the bank?" Colas said.
If it lasts long enough or gets out of hand, the pressure in the overnight lending market could raise questions about the Fed's ability to influence short-term borrowing costs.
"The Fed lives and dies by confidence. And this does not inspire confidence," said Colas.
Although it seems unlikely, it's also possible that the Fed badly underestimated how much cash is needed in the system.
"A financial institution could get into trouble. If it falls over, that could have repurcussions for other institutions," said Marey. "Accidents can happen, as we saw in 2007 and 2008."
No one can agree on what's causing it
Even though the overnight lending market stress first emerged in mid-September, its cause remains a mystery.
Fed officials initially blamed one-off events: The withdrawal of cash by US companies to make quarterly tax payments to the Treasury Department and the settlement of a large amount of Treasury purchases. Both those factors have since passed, and they should have been anticipated by investors.
Some analysts and bankers blamed post-crisis rules that limit the ability of banks to provide cash to short-term borrowers when needed. For instance, big banks must comply with the liquidity coverage ratio, or LCR, which requires them to keep a large amount of easily tradeable assets on their balance sheets.
Earlier this month, Senator Elizabeth Warren warned against the overnight lending market stress being used as a catalyst to push for deregulation.
"It would be painfully ironic if unexplained chaos in a small corner of the banking market became an excuse to further loosen rules that protect the economy from these types of risks," Warren wrote in a letter to Treasury Secretary Steven Mnuchin.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, argued that the overnight lending market problems show that the system is having trouble swallowing the record amount of Treasuries being issued to finance America's $1 trillion budget deficit. He says it's creating a cash shortage.
"What has become crystal clear is that the massive US budget deficit and funding needs has finally overwhelmed the system," Boockvar said.
Others don't buy that argument, because Treasury rates remain low and the massive budget deficit has been well anticipated.

No matter the cause, it's clear the Fed will be forced to continue pumping tens of billions of dollars into the system daily for the foreseeable future..
"It is worrisome that these numbers continue to rise, and we don't yet have a very clear explanation," said Colas.
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Why Nobody Chants “End the Fed” Anymore
« Reply #301 on: October 29, 2019, 11:22:20 AM »

By Clint Siegner

Americans hated it when the Federal Reserve handed trillions of dollars to crooked Wall Street banks following the 2008 Financial Crisis. Politicians were confronted about the merits of central banking and bailouts.

For the first time in history, college students were chanting “End the Fed” at campaign rallies as Ron Paul took the central bank to task during his presidential campaigns.

Virtually everyone in America vehemently opposed the central bank handing piles of cash to the same bankers whose greed and fraud had caused the Financial Crisis.

Little has changed, but the public’s revulsion taught them an important lesson. If they give handouts to greedy and fraudulent bankers, they had better do it in secret.

Avoiding a public outcry is probably why there is scant information about what is actually happening in the repo markets right now. The Fed continues to ramp up its overnight lending operations and has now poured in just short of three quarters of a trillion dollars in the past month.

The stated reasons for injecting all of this freshly printed cash are dubious at best.

We know private banks suddenly priced the risk of overnight lending to other banks multiples higher. The Fed’s program, which was originally presented as a fix to a very temporary problem, has now been expanded and extended multiple times.

The actual problem has turned out NOT to be short-lived, and the sums involved in addressing it are staggering.

The Fed just ramped up its commitment to now provide $690 billion in supposedly short-term funding. It will onboard the associated risk at a rate far below what the private market dictates.

One or more banks are seriously short of cash. Their peers won’t, or can’t, extend a short-term, fully collateralized loan at less than punitive rates.

That’s why the Fed stepped in with another massive handout. As far as the Fed is concerned, no bankers should pay for whatever sins and mismanagement led them into trouble.

Jerome Powell and other Fed officials aren’t going to admit that, of course. They also don’t want the public to know which firms are getting these backdoor bailouts, or why.

They want Americans not to worry or pay much attention. We’re told repo loans are secured by bullet proof collateral – U.S. Treasuries. They aren’t talking about why this collateral isn’t providing comfort to private sector lenders who want much higher rates.

The Fed might just get away with it, too. Nobody is chanting “End the Fed” anymore. Candidates aren’t talking about the central bank… with the exception of Donald Trump, who has done an about-face since his election. He now lambasts the Fed for not doing nearly enough.

The wealth transfer from Main Street to Wall Street looks set to continue unchallenged. When the next bubble pops, Americans may again remember why a central bank which responds to every problem by printing vast sums and handing it to other bankers is a terrible idea.

Clint Siegner is a Director at Money Metals Exchange, a precious metals dealer recently named “Best in the USA” by an independent global ratings group. A graduate of Linfield College in Oregon, Siegner puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals’ brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.



https://www.activistpost.com/2019/10/why-nobody-chants-end-the-fed-anymore.html
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🏦 Fed cuts interest rates, but indicates a pause is ahead
« Reply #302 on: October 31, 2019, 02:55:48 AM »
https://www.cnbc.com/2019/10/30/fed-decision-interest-rates-cut.html

Fed cuts interest rates, but indicates a pause is ahead
Published Wed, Oct 30 20192:00 PM EDT  Updated Wed, Oct 30 20193:56 PM EDT
Jeff Cox   @jeff.cox.7528   @JeffCoxCNBCcom
   
<a href="http://www.youtube.com/v/MiC5Xw_p3xQ" target="_blank" class="new_win">http://www.youtube.com/v/MiC5Xw_p3xQ</a>
   
   
Key Points

    The Federal Open Market Committee lowers its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%, as expected.
    The Fed indicates it may pause rate cuts from here.
    It did so by removing a key clause that had appeared in post-meeting statements since June saying it was committed to “act as appropriate to sustain the expansion.”
    Regional presidents Esther George of Kansas City and Eric Rosengren of Boston again vote against the reduction, with both maintaining that the committee should have held the line at the previous rate.

watch now
VIDEO01:02
Federal Reserve cuts interest rates by quarter-point

The Federal Reserve approved an expected quarter-point interest rate cut Wednesday but indicated that the moves to ease policy could be nearing a pause.

In a vote widely anticipated by financial markets, the central bank’s Federal Open Market Committee lowered its benchmark funds rate by 25 basis points to a range of 1.5% to 1.75%. The rate sets what banks charge each other for overnight lending but is also tied to most forms of revolving consumer debt.

It was the third cut this year as part of what Fed Chairman Jerome Powell has characterized as a “midcycle adjustment” in a maturing economic expansion.

Along with the decrease came language pointing to a higher bar for future easing.

The FOMC removed a key clause that had appeared in post-meeting statements since June saying it was committed to “act as appropriate to sustain the expansion.” Powell had used the phase in early June to tee up the July rate cut, and it has been incorporated into the official language since.

In its place was more tempered language.

“The Committee will continue to monitor the implications of incoming information for the economic outlook as it assesses the appropriate path of the target range for the federal funds rate,” the statement said.

Fed Chair Jerome Powell was even clearer in a news conference, saying central bank officials “see the current stance of monetary policy as likely to remain appropriate.”

Market participants had been looking for whether the Fed might start to signal that the policy accommodation, which had come following nine rate hikes since December 2015, would be winding down. The new language suggests an increased level of data dependence rather than an ongoing intent to adjust rates lower. While market pricing had been around 100% for a cut at this meeting, traders had seen only about a 25% probability of a move at the Fed’s next meeting on Dec. 10-11, according to CME data heading into Wednesday’s decision.
VIDEO05:01
Stocks drop and bond yields rise after Fed cuts rates for third time since July

In their public speeches, Powell and multiple other Fed officials have characterized the U.S. economy as strong, led by solid consumer spending but threatened by exogenous factors such as global weakness, the U.S.-China tariff war and uncertainties associated with Brexit.
Other changes to statement

The statement continued to view the labor market as one that “remains strong” and economic activity as “rising at a moderate rate.” Descriptions of virtually all other benchmarks of activity remained unchanged, though the committee made a minor tweak regarding business fixed investment and exports to note that they “remain weak.”

The decision comes the same day that the government reported GDP growth of 1.9% that, while reflecting a deceleration, was above Wall Street estimates for 1.6%. Job gains, meanwhile, have slowed in recent months but are well above the 109,000 or so that the Atlanta Fed estimates are necessary to keep the unemployment rate at the 50-year low of 3.5%.

In addition to the solid performance in the jobs market and in consumer spending, stock market averages are around new highs.

Within the Fed, there has been disagreement about whether additional cuts are needed. Regional presidents Esther George of Kansas City and Eric Rosengren of Boston again voted against a reduction, with both maintaining that the committee should have held the line at the previous rate.

President Donald Trump, on the other hand, has pushed hard for the Fed to keep cutting rates and to resume the quantitative easing program the central bank used during and after the financial crisis to stimulate the economy.

The Fed has been buying bonds again, but officials insist it is an effort to stabilize the funds rate within the target range rather than a resurrection of QE. Still, the central bank balance sheet has expanded by about $100 billion over the past month and is back above the $4 trillion mark, $3.6 trillion of which is in Treasurys and mortage-backed securities.

The expansion was due mostly to growth in Treasurys and T-bills.

Wednesday’s statement reflects the recent balance sheet expansion, noting that open market operations will continue at least into the second quarter of 2020, while term and repo operations aimed at stabilizing overnight markets will continue at least through January.
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https://www.rawstory.com/2019/10/why-the-fed-has-no-choice-but-to-keep-cutting-interest-rates-if-it-wants-to-avoid-a-financial-crisis/

Why the Fed has no choice but to keep cutting interest rates – if it wants to avoid a financial crisis

Published 6 hours ago on October 31, 2019

By The Conversation


The U.S. Federal Reserve is stuck between an apparently booming economy and a financial crisis that might be right around the corner.

That’s why its decision to cut interest rates by another quarter point on Oct. 30 – its third reduction in as many months – seems so odd. Lowering rates when the economy is as strong as the numbers make it out to be is practically unheard of. And, according to textbook economics, lowering interest rates during a boom is a sure recipe for disaster.

The trouble is, as someone who studies financial booms and busts, I know that not lowering rates may be even worse. That’s because the corporate sector is dangerously over-indebted, creating a financial bubble.

A hike in borrowing costs could kick-start a cascade of bankruptcies in a financial contagion that would derail the U.S. economy.
00:26
00:45

Troubles below the surface

On the surface, the U.S. economy appears to be humming along just fine.

Unemployment’s at a half-century low. Inflation is near its target of 2%. And, at about 125 months, the U.S. is charting its longest economic expansion since at least the 1850s.

Look under the hood, however, and things look very troublesome.

Numerous trade wars have cost U.S. companies, farmers and consumers dearly. The manufacturing industry – once America’s job engine and ostensibly the sector the trade war was supposed to support – is seeing its worst year since 2009.

And looking abroad, the situation is even worse, with the global economy slowing and the International Monetary Fund warning there’s little ammunition left to fight a recession.
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The corporate debt bubble

While that’s bad, we haven’t gotten to the scary part yet.

A key cause of the 2008 financial crisis was too much debt in the housing market, much of which ultimately went bad.

Today, the problem is in corporate America. Since 2008, when the Fed drove its target interest rate to a record-low 0.25%, markets have been flooded with cheap money. That was too much to resist for U.S. companies, which went on a borrowing binge.
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All American companies are currently sitting on a record US$15.5 trillion in debt, equivalent to about two-thirds of U.S. GDP. Unfortunately, this debt was not primarily used to finance expansion and growth but more commonly to jack up stock prices through dividends, stock buybacks and acquisitions.

The problem will come when the party stops – when interest rates begin rising and companies, particular the ones that took more risks, can’t refinance or pay back their debts. This is what turns a credit boom into a financial crisis, as happened in 2008.

The IMF estimates that half of corporate debt – excluding small businesses – is high risk, or junk rated, which has a much higher chance of default than investment grade debt.
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What makes the situation even worse is that $660 billion of companies’ so-called leveraged debt is held in collateralized loan obligations that have been sold to a variety of investors and financial institutions. While this has helped keep rates even lower, a rise in delinquencies and defaults would cause losses in this market as well and a stampede of selling by investors.
The downward cycle

As this cycle spirals, it spurs rising unemployment, a drop in consumer spending, more bankruptcies and – if it’s not stopped – an economic recession. This is what happened in 2008 when subprime borrowers couldn’t pay back their mortgages in large numbers.

In other words, in this environment of high – and in some pockets highly risky – corporate debt and faltering profits, the slightest interest rate move in the wrong direction has the potential to transform debt into junk worth pennies on the dollar.

This is why the Fed has no choice but to keep lowering interest rates and keep them there. The gamble is that companies will use the breathing space to get their houses in order.
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If they don’t, we could be in for a world of pain.
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🏦 Last Week Confirms It. Goodbye, Recession - Hello, Bull Market
« Reply #304 on: November 06, 2019, 03:59:13 AM »
BullSHIT Marekt is more like it!  ::)

RE

Nov 3, 2019, 09:23pm
Last Week Confirms It. Goodbye, Recession - Hello, Bull Market

John S. Tobey
Contributor  Markets


Recent good news could spark bullish actions. (Photo by Bryan R. Smith / AFP)AFP via Getty Images

It is time to get excited, optimistic and bullish. Last week put the final nails in the “Oh, woe is me” recession coffin. RIP.

Last week’s good news supported and confirmed recent anti-negative and pro-positive improvements. Here is the wonderful list:

Earnings reports are driving a shift to the positive

Compare these two headlines from The Wall Street Journal:

    October 9: “U.S. Earnings Flash a Worrying Signal”
    November 2: “Earnings Tide Lifts Most Stocks – Investors are getting a more positive picture of American corporations’ health than that painted by analysts in buildup to earnings season”

Today In: Money

The cause? Earnings reports continue to be positive on balance, with most of the September quarter-end earnings reports now in. The 336 S&P 500 companies reporting September results so far (from October 15 through November 1) represent 67% of the 500 companies and 75% of the $27T market capitalization. (Many of the remaining 164 companies will report October or November quarter-end results later.)

While reports of companies beating expectations are widespread, a good way to view investors’ complete evaluation is by examining stock performance. Below is a graph of the one-month returns (including dividend income) for all of the 336 reporting companies. I have broken out the so-called “safe” stocks (REITs and utilities) because they have been beneficiaries of both reduced interest rates and bearish thinking – therefore, expect them to underperform.
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Spread of returns average about 7% for past month, excluding REITs and utilities that average about 0%

S&P 500 stock performance for companies reporting earnings Oct. 15 through Nov. 1John Tobey (Financial Visualizations (FinViz.com)

Clearly, Wall Street views this earnings report season as favorable. Additionally, the need and desire for “safe” stocks has given way to the pursuit of growth.

The Federal Reserve cuts and quits

Finally! While rates remain abnormally low (meaning there is music to be faced in the future), at least the game of will-they-or-won’t-they looks over for now. That is helpful because businesses, consumers and investors now can make decisions based on a stable rate environment.

GDP growth is just fine

A good example of how negativity can take time to turn positive is the last week’s third quarter GDP growth report. Expectations had been for a seasonally adjusted, real (adjusted for inflation), annualized rate of 1.6%, down from 2% last quarter. Instead, it came in at 1.9%. That is good news, but most reports focused on the “continued slowing” instead of the desirable surprise.

Think of that report this way. For a quarter that had its problems, growth was still around 2%, in line with the average post-recession growth rate. Looking at a longer time period provides a good perspective for that 1.9% growth rate.
10 years of quarterly data show average growth rate of about 2% -- right where latest measure is

Annualized quarterly GDP (solid line) and annualized quarterly growth rate (dashed line)John Tobey (FRB of St Louis - FRED)

Employment and consumer spending are good

The recession pundits keep expecting these shoes to drop, but they do not. The problem is the factors leading up to reduced employment are absent. Following, so long as consumers are employed, they will spend. Therefore, in spite of that previous sharp drop in consumer confidence, consumer spending has remained strong and consumer confidence has improved.

The Wall Street Journal’s November 2 lead story (print edition) says it best: “Jobs, Consumers Buoy Economy, Defying Slowdown Across Globe.”

The bottom line

Last week offered an outstanding combination of good news that removes recession pessimism and reintroduces growth optimism for 2020. Stock ownership (excluding “safe” stocks) continues to look desirable.
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John S. Tobey
John S. Tobey

During my 30-year career, I managed and consulted to multi-billion dollar funds. Using the “multi-manager” approach, I worked with leading investment managers. I now ma...

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Offline azozeo

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U.S. Debt JUMPS $1,000,000,000,000.00 In A Month !
« Reply #305 on: November 11, 2019, 04:09:07 PM »

From Birch Gold Group

It first worried Federal Reserve Chair Jerome Powell in January, then billionaires started to panic in February. Turns out, both may be right.

We’re talking about the national debt, which sits at $22.986 trillion as of November 5, according to the U.S. Treasury. Since February 1, the debt has jumped over $1 trillion.

The alarming fact is, most of that debt increase came in just the last 3 months. Plus, according to Zero Hedge, “under the last two US presidents, total US debt has increased by 115%, to a record $23 trillion.”

You can see the big jump in debt since August 2019 on the chart below (which reflects the total through October 31):


https://prepareforchange.net/2019/11/10/u-s-debt-jumps-1-trillion-in-3-months-is-the-economy-healthy/
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You don’t know what it is but its there, like a splinter in your mind

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https://www.bloomberg.com/news/articles/2019-11-11/this-is-why-the-repo-markets-went-crazy-and-why-december-could-be-even-worse

This Is Why the Repo Markets Went Crazy, and Why December Could Be Even Worse
By Joe Weisenthal and Tracy Alloway
November 11, 2019, 12:00 AM AKST


LISTEN TO ARTICLE
:57

Subscribe to the Odd Lots podcast (Spotify)
Subscribe to the Odd Lots podcast (Apple Podcasts)

Every week, hosts Joe Weisenthal and Tracy Alloway take you on a not-so-random walk through hot topics in markets, finance and economics.

Back in September, chaos erupted in short-term funding markets, as the cost for financial institutions to borrow reserves soared. Immediately a major debate broke out over whether this represented a systemic problem for the financial system or merely a technical problem with the "plumbing." Things have quieted down since September, but the debate hasn't stopped. And there's still no permanent fix.

On this week's Odd Lots podcast, we spoke with Zoltan Pozsar of Credit Suisse, who has a reputation for understanding the mechanics of these funding markets better than anyone else in the world. He broke down what really happened, and why we could see more craziness as soon as next month.

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economics
Trump Threatens Substantially More Tariffs If No China Deal
By Brendan Murray
November 12, 2019, 9:04 AM AKST Updated on November 12, 2019, 5:19 PM AKST
Donald Trump comments on the state of U.S.-China trade relations during a speech at the Economic Club of New York.
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President Donald Trump said the U.S. will increase tariffs on China in case the first step of a broader agreement isn’t reached.

“If we don’t make a deal, we’re going to substantially raise those tariffs,” he said Tuesday in a speech to the Economic Club of New York. “They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.”

China is “dying” to make a trade deal with the U.S., Trump said, adding that he’d only sign it if it’s good for American companies and workers. Still, “we’re close -- a significant phase one deal could happen, could happen soon.”

Trump and Chinese President Xi Jinping had planned to sign “phase one” of the deal at an international conference this month in Chile that was canceled because of social unrest in that country.

Shanghai stocks opened lower and the yuan was weaker against the dollar on Wednesday. Other Asian markets also declined. Hong Kong’s benchmark declined 2% as the city faced heightened tensions.

A new site for the signing hasn’t been announced. U.S. locations for the meeting that had been proposed by the White House have been ruled out, according to a person familiar with the matter. Locations in Asia and Europe are now being considered instead, the person said, asking not to be identified because the discussions aren’t public.

Trump reiterated complaints about China’s ascendance in the global economy. “Nobody’s cheated better than China,” he said. “The theft of American jobs and American wealth is over.”

U.S. stocks have rallied to records in recent days partly on optimism that tensions are cooling in an 18-month dispute involving tariffs on some $500 billion in trade between the world’s two largest economies. The S&P 500 Index was up about 0.3% as Trump delivered his remarks.
U.S. trade with China tumbled in September amid intensifying standoff

The economic stakes of a prolonged trade war are rising for both countries.

China’s exports and imports continued to contract in October, though slightly less than forecast by economists. The nation’s trade surplus with the U.S. widened in the month to $26.4 billion -- heading in the opposite direction from the narrowing that Trump has called for to balance the countries’ trading relationship.
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Putting Federal Debt In Perspective Against those Responsible In The Future
« Reply #307 on: November 18, 2019, 02:03:30 PM »


Since 2007, US federal debt has risen 150% while annual US births (legal and otherwise) have fallen almost 14%.  Said otherwise, over the dozen years since 2007, federal debt has increased by $13.8 trillion while 5.2 million fewer births have occurred over the same period than the Census projected.  This is probably worth a little closer look.  Starting with…
US federal debt, split between publicly held debt and IG (Intra-Governmental holdings; aka Social Security trust fund, etc.).  Clearly, publicly held debt is skyrocketing since 2007 while IG growth is decelerating and will turn to net declines (as SS turns to a net seller) within the decade.  Relatively soon, all debt issued will be marketable and significantly more debt will be needed in order to pay for both the spiraling deficit alongside the declining IG holdings.


https://econimica.blogspot.com/2019/10/putting-federal-debt-in-perspective.html
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Offline Surly1

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Re: Putting Federal Debt In Perspective Against those Responsible In The Future
« Reply #308 on: November 18, 2019, 02:22:47 PM »


Since 2007, US federal debt has risen 150% while annual US births (legal and otherwise) have fallen almost 14%.  Said otherwise, over the dozen years since 2007, federal debt has increased by $13.8 trillion while 5.2 million fewer births have occurred over the same period than the Census projected.  This is probably worth a little closer look.  Starting with…
US federal debt, split between publicly held debt and IG (Intra-Governmental holdings; aka Social Security trust fund, etc.).  Clearly, publicly held debt is skyrocketing since 2007 while IG growth is decelerating and will turn to net declines (as SS turns to a net seller) within the decade.  Relatively soon, all debt issued will be marketable and significantly more debt will be needed in order to pay for both the spiraling deficit alongside the declining IG holdings.


https://econimica.blogspot.com/2019/10/putting-federal-debt-in-perspective.html

Unless we claw back the obscene tax jubilee granted the superrich.



https://www.washingtonpost.com/business/2019/10/08/first-time-history-us-billionaires-paid-lower-tax-rate-than-working-class-last-year/
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https://www.cnbc.com/2019/11/21/yellen-good-reason-to-worry-about-us-economy-sliding-into-recession.html

Janet Yellen says ‘there is good reason to worry’ about the US economy sliding into recession
Published Thu, Nov 21 20194:24 PM ESTUpdated Thu, Nov 21 20195:36 PM EST
Jeff Cox  @jeff.cox.7528  @JeffCoxCNBCcom
   
   
Key Points

    Former Fed Chair Janet Yellen said the U.S. economy is in “excellent” shape but facing several risks.
    One of the most prominent is in wealth disparities that she said are “extremely disruptive.”
    In a downturn, the Fed would have little room to move, due to low rates, she added.
    Yellen also said tariffs the U.S. has leveled on Chinese imports aren’t doing any good.

CNBC: Janet Yellen 190205
Janet Yellen
Scott Mlyn | CNBC

NEW YORK — Pronounced wealth inequality that has built up for decades poses a major threat to a U.S. economy that is in otherwise “excellent” shape, former Federal Reserve Chair Janet Yellen said Thursday.

The central bank leader from 2014 to 2018 also said the U.S.-China tariff war is having a detrimental impact both on businesses and consumers through higher prices and a general air of uncertainty.

While she doesn’t see a recession on the horizon, she also noted that the risks are piling up.

“I would bet that there would not be a recession in the coming year. But I would have to say that the odds of a recession are higher than normal and at a level that frankly I am not comfortable with,” Yellen said at the World Business Forum.

With three rate cuts this year, there remains “not as much scope as I would like to see for the Fed to be able to respond to that. So there is good reason to worry.”

One particular area she cited was inequality, specifically the extent to which benefits during the longest expansion in U.S. history have flowed mostly to top earners and those with post-high school education levels.

Despite the central bank’s efforts to guide the economy, Yellen cited “a very worrisome long-term [trend] in which you have a very substantial share of the U.S. workforce feeling like they’re not getting ahead. It’s true, they’re not getting ahead.”

“It’s a serious economic problem and social problem because it means the gains of our economic system are not being widely shared,” she added. “It leaves people ultimately with the feeling that the economy is not working for them, a sense of social discontent that is extremely disruptive.”
VIDEO13:09
CNBC’s full interview with former Fed Chair Janet Yellen
Trade war also faulted

The trade war initiated by President Donald Trump isn’t helping, she added.

For the past year and a half, the U.S. and China have been lobbing tariffs back and forth on billions in goods as part of the White House’s efforts to level the global playing field and halt the theft of technology and intellectual property.

“I see no sign that that’s been successful in turning around these trends,” she said of the protectionist trade actions. “These tariffs are taxes on American consumers and businesses. It’s making it more difficult and more expensive to do business, to control costs, and consumers are seeing higher prices from it.”

Yellen also acknowledged the burden that some of the Fed’s own policies, such as historically low interest rates, put on Americans.

She recalled getting emails during her time from people trying to save for retirement but were being penalized by low interest rates.

The Yellen Fed held the near-zero short-term rates that came into play during and after the financial crisis. She oversaw just two rate increases and the beginning of a reduction in the bonds the Fed holds on its balance sheet, the product of stimulus efforts during and after the crisis.

“Some of the most disturbing notes came from people who said, ’I work and I played by the rules and I save for retirement and I have money in the bank, and you know, I’m getting absolutely nothing,” Yellen recalled. “Savers are getting penalized. It’s true.”
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RE

https://www.marketwatch.com/story/the-repo-market-is-broken-and-fed-injections-are-not-a-lasting-solution-market-pros-warn-2019-12-04

The repo market is ‘broken’ and Fed injections are not a lasting solution, market pros warn

Published: Dec 4, 2019 2:09 p.m. ET

   

Banks prefer to keep money at Fed instead of lending to other banks


By Joy Wiltermuth
Markets reporter

The Federal Reserve’s ongoing efforts to shore up the short-term “repo” lending markets have begun to rattle some market experts.

The New York Federal Reserve has spent hundreds of billions of dollars to keep credit flowing through short term money markets since mid-September when a shortage of liquidity caused a spike in overnight borrowing rates.

But as the Fed’s interventions have entered a third month, concerns about the market’s dependence on its daily doses of liquidity have grown.

“The big picture answer is that the repo market is broken,” said James Bianco, founder of Bianco Research in Chicago, in an interview with MarketWatch. “They are essentially medicating the market into submission,” he said. “But this is not a long-term solution.”

This chart shows the more than $320 billion of total repo market support from the Fed since Sept. 17, when for the central bank began pumping in daily liquidity after overnight lending rates jumped to almost 10% from nearly 2%.
Bianco Research
Fed injections since Sept.

Initially, the central bank rolled out roughly $75 billion in daily lending facilities to arm Wall Street’s core set of primary dealers with low-cost overnight loans to keep the roughly $1 trillion daily U.S. Treasury repo market running.
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The facilities allow banks to snap up loans by pledging safe-haven U.S. Treasurys or agency mortgage-backed securities with the New York Fed, but crucially without the typical risk-based pricing that lenders regularly charge when funding each other.

Check out: Here are 5 things to know about the recent repo market operations

The goal was to keep banks flush as they deal with month-end funding issues, corporate tax payments, and the deluge of Treasury debt being sold by the federal government to fund its deficit.

Shortly thereafter, former New York Fed markets group head Brian Sack, now director of global economics at hedge fund D.E. Shaw Group, coauthored an article saying that the Fed could get a better control of overnight rates if it were to boost banking system reserves by purchasing $250 billion of Treasury debt.

But the Fed’s total support already has eclipsed that threshold with the expansion of daily operations, the introduction of longer-term loans, and its balance sheet expansion through monthly T-bill purchases.

“This is now far bigger than anyone thought this was going to be,” Bianco said. “I think they’re hoping the market will magically fix itself. I don’t see why it would.”

Amid sustained clamor for Fed funding, the central bank in the last two weeks said it would increase two longer-term facilities to help carry borrowers through any year-end turbulence.

The changes came as U.S. stocks fell from November’s all-time records with the Dow Jones Industrial Average ( DJIA, +0.10%, S&P 500 index SPX, +0.15%  and Nasdaq Composite Index COMP, +0.05% retreating on fading hopes for a U.S. - China trade dea.

“The Fed really hasn’t figured out the problem,” said Bryce Doty, a senior portfolio manager at Sit Fixed Income in Minneapolis. “But they kind of have created their own problem.”

By that, Doty meant the Fed’s rescue operations have worked in terms of supplying banks with quick and cheap funding, but less so when it comes to luring them back to funding each other.

“The big banks are just hoarding cash,” he said. “They told the Fed they have more than enough cash in excess reserves to meet regulatory issues, but they prefer having money at the Fed where they can still earn 1.55%, rather than in the repo market.”

J.P. Morgan Chase CEO Jamie Dimon said bank regulations were a factor in September’s repo crisis while speaking on the bank’s third-quarter earnings conference call, and in other recent forums he warned that short-term lending rates could again soar without more “permanent fixes,” while avoiding an express call for rule changes.

In Congressional testimony on Wednesday, Randal Quarles, the Federal Reserve’s point man on banking supervision appeared to side with Dimon, saying the existing regulatory framework “may have created some incentives” that contributed to recent repo funding stress.

See: Dimon says money-market turmoil last month risks morphing into a crisis if Fed falters

Also Read: JPMorgan anticipates ‘disorderly’ year-end funding pressures again as banks retrench

To be sure, not everyone sees the Fed’s tight grip on repo operations as problematic.

“I do think the Fed’s intervention has helped calm the markets,” said Paresh Upadhyaya, director of U.S. currency strategy at Amundi Pioneer.

But Upadhyaya also sees potential knock-on effects from the Fed’s stabilization efforts, including short term yields being pressured lower and investors taking advantage of the liquidity to rotate to riskier assets, as the central bank’s share of the T-bill market expands to an estimated 20% of the market by mid-2020 from 1% currently.

“We’re very much on track for that,” he said.
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