The following article was originally published by Michael Snyder at The Economic Collapse Blog. (Used by permission)
Why Does The Federal Reserve Keep Slamming The Panic Button Over And Over If Everything Is Okay?
By Michael Snyder – Sept 18,2019
What in the world is the Federal Reserve doing? For months the Fed has been trying to publicly convince us that the U.S. economy is “strong”, and Fed Chair Jerome Powell recently unequivocally stated that “the Federal Reserve is not currently forecasting a recession”, but the Fed’s actions tell a completely different story. If the U.S. economy really is performing well, any economics textbook will tell you that the Fed should not be reducing interest rates. Interest rate cuts should be saved for times when the economy is in serious trouble, and using up all of your ammunition before a downturn has begun is simply foolish. And the Federal Reserve continues to insist that the financial system is functioning normally, but meanwhile things are spinning so wildly out of control that they felt forced to announce overnight repurchase agreement operations for Tuesday, Wednesday and Thursday. We haven’t seen this sort of emergency intervention since the last financial crisis, but the Fed’s message to the general public is that “all is well”.
Unfortunately, the truth is that all is not well, and we continue to get more troubling economic news with each passing day.
In a desperate attempt to inject some vigor back into the U.S. economy, the Fed cut interest rates for the second month in a row on Wednesday…
For the second time in two months, the Federal Reserve on Wednesday agreed to press down on the economy’s accelerator to keep the 10-year-old expansion chugging along.
A divided Fed lowered its benchmark interest rate by another quarter percentage point to a range of 1.75% to 2% in an effort to stave off a possible recession triggered by a global economic slowdown and the U.S. trade war with China.
Of course this wasn’t enough to please President Trump, and shortly after the rate cut was announced he posted the following on Twitter…
Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!
Apparently Trump wanted an even larger rate cut with the promise of more rate cuts in the future, but if the U.S. economy really is in good shape we shouldn’t be having any rate cuts at all. This was a panic move by the Fed, and they are going to find themselves very short on ammunition when things really start to get crazy.
And conducting overnight repurchase agreement operations for three days in a row also reeks of desperation. If you are not familiar with the repo market, the following is how Yahoo News described the key role it plays for our financial system…
Financial institutions use money markets to borrow for very short periods, from one day to a year, a crucial function to keep the gears of the economy running.
In so-called repurchase or “repo” agreements, banks borrow by putting up assets like Treasury notes as collateral and then repay the loans with interest the following day.
In a fit of panic, the Fed injected $53,000,000,000 into the system on Tuesday and another $75,000,000,000 on Wednesday.
But it turns out that Wednesday’s injection wasn’t nearly large enough. The following comes from Zero Hedge…
20 minutes after today’s repo operation began, it concluded and there was some bad news in it: as we feared, yesterday’s take up of the Fed’s repo operation which peaked at $53.2 billion has expanded substantially, and according to the Fed, today there was a whopping $80.05BN in bids submitted, an increase of $27 billion, or 50% more than yesterday.
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