The Upside of The Great Depression of the 2020s

“The bank is something more than men, I tell you.  It’s the monster.  Men made it, but they can’t control it.” – John Steinbeck, The Grapes of Wrath

Mass Dollar Debasement

The monster of all monsters is rampaging far and wide.  The Federal Reserve, the central bank responsible for issuing U.S. legal tender notes, is going big.  But its aim is small.

The Fed’s working 24/7 with singleness of purpose.  Fed Chairman Powell’s applying what Minneapolis Fed President Neel Kashkari recently called “infinite cash” to the financial system.  The sole purpose is to destroy the dollar to save it.  The stakes are high.  The odds are higher.

The greatest asset bubble in human history, a bubble that was inflated by the Fed’s endless supply of cheap credit, has popped.  At the same time, coronavirus containment measures have collapsed the economy.  The forthcoming cascade of job losses, bankruptcies, oil gluts, and economic destruction could far exceed the Great Depression of the 1930s.

The economy may be toast.  But the Fed’s doing anything and everything it can to salvage the dollar’s world reserve currency status.  If the dollar falters, it’ll be game over for life as the world’s known it for the last 75 years.

Destroying the dollar to save it requires flooding the financial system with an infinite supply of cheap credit.  In the short term, the Fed must bailout the big banks and big corporations without hesitation.  But the Fed’s real objective is to inflate debts away via mass dollar debasement.

What to make of it?

Match Made In Hell

An obscene insult, if you’re in favor of what’s good and upright, is that the taxpayer – that’s you – is supplying cash to the Fed via the U.S. Treasury to make this all happen.  A big chunk of the $2.2 trillion stimulus bill, auspiciously known as the CARES Act, is specifically for this purpose.

The mechanics of the Fed’s and Treasury’s match made in hell are both crude and obscure.  But it is important you understand it.  While it may make your blood boil.  It will also shine a light on the breadth and depth of the fake money order we’re indentured to.

The Treasury, if you recall, is part of the Executive Branch.  The Treasury gets its funding from taxpayers – including you.  As part of the CARES Act, the Treasury just received $454 billion.

What’s the Treasury going to do with $454 billion?  Is it going to allocate the $454 billion to different federal agencies and programs to spend into the economy?  Is it going to increase the nation’s gold reserves?

Of course not.  The Treasury, rather, is handing over the $454 billion – of taxpayer money – to the Federal Reserve.  The Fed plans to lever this equity base up 10-to-1.  The $454 billion contributed by taxpayers will turn into $4.5 trillion in credit.

Through this process, the Fed’s then going to supply this $4.5 trillion as credit to bailout big corporations – like Boeing.  In effect, the Fed will take companies that would otherwise die, and will sustain them as zombies.  What’s more, how the Fed goes about it, will be a secret…as noted by Zero Hedge:

“The Senate-approved stimulus bill repeals the sunshine law for the Fed’s meetings until the President says the coronavirus threat is over or the end of the year (spoiler alert: the coronavirus threat will never be over).  That could make any FOIA lawsuits to disclose details of what is taking place in Fed meetings a non-starter since it has been codified in a federal law.”

Now if that doesn’t get you exercised, nothing will.  But, wait, there’s more…

The Upside of The Great Depression of the 2020s

The Fed, the same bankers the Treasury just supplied $454 billion in taxpayer dollars to, is not only bailing out bankrupt American corporations.  Come Monday, the Fed will be supplying cash to foreign central banks for temporary exchange of their Treasuries.

Specifically, the Fed’s launching a new liquidity facility on April 6.  It’s called the foreign and international monetary authorities facility (FIMA Repo Facility).  The purpose of the facility is to allow foreign central banks to exchange Treasuries held in custody at the Fed for U.S. dollars.

This is the seventh liquidity facility established by the Fed since the financial system seized up following the coronavirus-precipitated popping of the greatest asset bubble in human history.  What’s going on?  Aren’t Treasuries supposed to be the safest most liquid financial asset on earth?

Perhaps not.  You see, foreign central banks have Treasuries.  But they need dollars to make dollar payments.  So they’re selling Treasuries to get dollars…and they’re selling a lot of them.

In fact, for the month of March, foreign central bank Treasuries held in custody at the Fed have declined by a record $109 billion.  This marks the biggest monthly drop in history.  It’s also why the Fed’s launching the FIMA Repo Facility.

There is, however, a much simpler much more elegant way to reconcile these imbalances.  It doesn’t require a new liquidity facility.  It doesn’t require Jay Powell pump liquidity all around the globe.

What is it?

Stop the madness.  Allow markets to work.  Let interest rates rise.

The financial system’s already collapsing.  Why not let it collapse all the way?  Would that be suicidal?  Would the result be far too destructive?

Down would go the hopes and dreams of three generations, which may happen regardless.  But the experience of having civilization uprooted and overturned as the final result of decades of maniac money changers does have an upside.

With a little luck, The Depression of the 2020s will gift the world honest banking for three generations or more.


MN Gordon
for Economic Prism

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