Here are the latest news items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. And it bears mention that most of these items are from the “tangibles heavy” contrarian perspective of SurvivalBlog’s Founder and Senior Editor, JWR. Today, we focus on the Federal Reserve’s recent massive intervention via the Repo Market. (See the Economy & Finance section.)
Economy & Finance:
A “must read” piece at Zero Hedge: The Repo Market Incident May Be The Tip Of The Iceberg. A quote:
“In essence, what the repo issue is telling us is that the Fed cannot make magic. The central planners believed the Fed could create just the right inflation, manage the curve while remaining behind it, provide enough liquidity but not too much while nudging investors to longer-term securities. Basically, the repo crisis -because it is a crisis- is telling us that liquidity providers are aware that the price of money, the assets used as collateral and the borrowers’ ability to repay are all artificially manipulated. That the safe asset is not as safe into a recession or global slowdown, that the price of money set by the Fed is incoherent with the reality of the risk and inflation in the economy, and that the liquidity providers cannot accept any more expensive “safe” assets even at higher rates because the rates are not close to enough, the asset is not even close to be safe and the debt and risk accumulated in other positions in their portfolio is too high and rising.
The repo market turmoil could have been justified if it had lasted one day. However, it has taken a disguised quantitative easing purchase program to mildly contain it.
This is a symptom of a larger problem that is starting to manifest in apparently unconnected events, like the failed auctions of negative-yielding eurozone bonds or the bankruptcy of companies that barely needed the equivalent of one day of repo market injection to finance the working capital of another year.
This is a symptom of debt saturation and massive risk accumulation. The evidence of the possibility of a major global slowdown, even a synchronized recession, is showing that what financial institutions and investors have hoarded in recent years, high-risk, low-return assets, is more dangerous than many of us believed.
It is very likely that the Fed injections become a norm, not an anomaly, and the Fed’s balance sheet is already rising…”
Forbes reports: As Congress Asks The Fed To Look Into A Digital Dollar, Former FDIC Chair Sheila Bair Is Ahead Of The Curve … Again. (Thanks to G.P. fort the link.)
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Tech Startup Insanity:
Simon Black of Sovereign Man posted this commentary on WeWork: We Not So Crazy after all…
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And here are some realized prices, at RIA: Past Auction Sales of Rare Firearms Last 5 Years.
SurvivalBlog and its Editors are not paid investment counselors or advisers. Please see our Provisos page for our detailed disclaimers.
Please send your economics and investing news tips to JWR. (Either via e-mail of via our Contact form.) These are often especially relevant, because they come from folks who closely watch specific markets. If you spot any news that would be of interest to SurvivalBlog readers, then please send it in. News from local news outlets that is missed by the news wire services is especially appreciated. And it need not be just about commodities and precious metals. Thanks!