Fed’s Crisis Strategy: Keep Extending, Keep Pretending

Oct. 15, 2019 (EIRNS)—The New York Federal Reserve Bank had to make almost $90 billion in short-term liquidity loans (“repurchase agreements”) to banks Tuesday morning, the third-largest emergency loan volume in one day since “repo” operations suddenly started on Sept. 17. The New York Fed then announced that these overnight and term “repo” lending operations are now extended to January 2020, at least. These will continue to be (at least) the overnight repos at up to $75 billion/day and the Tuesday and Thursday two-week repos at up to $35 billion.

The Federal Reserve had initially announced (on Sept. 18) that these liquidity loans to the big banks would continue to the quarter-end on Sept. 30; then they were extended to “at least” Oct. 10; then until “at least” Nov. 4; and now, “at least” until January. The pattern of steadily growing holes in the “everything bubble” of debt, is clear.

The Fed has now added outright purchases of securities from these banks as well, insisting on calling them “not-QE.” These will be purchases of $7.5 billion/day on each Monday and Wednesday (though starting with Thursday of this week, Oct. 17) of one-month, three-month and six-month T-bills. When these mature they’ll be rolled over by the New York Fed, along with their interest, into new T-bill purchases. Estimates by wiseguys at various banks are now of about $400 billion in such Fed money-printing by the second quarter of 2020; again, “at least.”