$450 Billion Overnight Reverse Repayment Agreements bought yesterday. A new record! What are they and what does this mean?

Every day I learn something new. Overnight Reverse Repayment Agreements. Ever heard of them? Do you know what they are or why they exist?

I didn't fully understand but when I saw a graph showing that the Federal Reserve purchased $450 BILLION yesterday, breaking last weeks record of $354 BILLION, then I wanted to know what this was. Now we all know that the Central Banks are printing money like crazy. This is QE or Quantitative Easing. Where to keep the market functioning, liquidity is pumped into the economy.

One of the main dangers of this policy is inflation. As too much money printed from thin air dilutes the value of the currency and then you need more of it to buy things. As a result prices appear to rise when its not prices that have risen but the value of your banknote that has fallen.

Now here’s the thing. Too much liquidity in the economy is as dangerous as too little. So the Federal Reserve created clever little instruments to help with short term liquidity issues. Namely the Repo Market and Overnight Reverse Repo Market. It all sounds complicated but it isnt and depending on which one is being used to excess can be an indicator of where we are in the greater scheme of things.

Right now the ON Reverse Repo Agreements are going through the roof indicating too much liquidity in the market. Basically the Fed have pumped so much money into the system that the Banks are holding too much of it. Ordinarily in a healthy economy, bank lending would take this cash from their vaults but no-one is borrowing as the economy is on its knees. The housing market is at the top of an inflated bubble already and people, worrying about inflation and the economic outlook are reigning in their spending.

Now you may not know this but Banks are charged an overnight interest rate by the Central Banks for any overnight cash reserves on their books. This is used to 'incentivise' the banks to lend and to keep the velocity of money circulating in the economy. The banks therefore, having huge sums sitting on their balance sheets want rid of it. So the Federal Reserve invented a short term solution. Namely the Overnight Reverse Repayment Agreement or ON Repo as its known.

Whereby the Fed will accept the banks cash reserves overnight, thus taking it off the banks ledger accounts and in return they issue Treasury Bills to the Banks, redeemable for their cash deposits after an agreed period. These T-Bills as they are known provide the Banks with security for their cash and also help them avoid paying interest on cash just sitting there doing nothing. The banks can't lose by this method as the Government (read taxpayer) now pays them an agreed interest rate for holding T-Bills. Marvellous isn’t it?

Neither can the Central Banks and Politicians lose either because even though they are printing currency into oblivion, they are then 'selling' T-Bills to Banks in exchange for the excess cash reserves they’ve created and then by clever accounting and sleight of hand, declare that they are selling record numbers of Government Treasuries, which is supposed to be an indicator of faith in the strength of the $ but this actually isn't. Its due to excess liquidity but there is no mechanism to distinguish between investment banks buying T-Bills knowing the US Dollar is strong and T-Bills issued because the Fed has printed too much currency which the banks can’t lend. Its all smoke and mirrors as usual. So right now, the Economy is tanking. The Fed is printing money like its going out of fashion. No-one is borrowing. No-one is lending but because T-Bills are 'sold' overnight to mop up the excess cash in the system that they’ve created, the algorithms interpret this as validation of faith in the US Dollar, so the DXY or Dollar Index, which is the market indicator for the strength of the dollar, rises above the key 90 point marker as it did yesterday due to the Fed issuing $450 billion of ON RRA.

Which then has a knock on effect of convincing the market that the Dollar is strong so hedges against inflation weaken. Which is why #silver lost $0.60 an oz. despite the worst economic indicators everywhere. Like I said, you learn something new every day and this whole system is rigged, fake and manipulated beyond belief because according to this, theoretically the Fed could keep the printers running indefinitely, banks would be flooded with cash, the economy could crater but because the Fed then 'sells' T-Bills to the banks to absorb their overnight balance sheets, the US Dollar can be manipulated to appear healthy and they can claim that all is well, even though the world is turning to rat shit around them. Truly mind-blowing manipulation of the highest order by the Bankers and politicians and for us stackers intent on bringing about a #silversqueeze, the question has to be asked whether is it possible for them to maintain this sham indefinitely whilst we are buying up all the physical silver that we can?

As surely reality has to bite at some point. Doesn't it?

Pumping stimulus into an economy is often needed to kick start things back into life. Its a tried and tested Keynesian policy that has worked time and time again. The problem this time appears to be massive amounts of cash simply being handed to the banks with no real sense of targetted stimulus where its needed. If it was targetted then maybe just maybe the economy could recover but this current policy does nothing of the sort and only serves to create extreme bubbles in the economy which will pop at some point, whilst make the bankers richer & handing them even greater leverage over the public by increasing the debt burden placed upon us.

We are being screwed badly but then not content with that, they're then demanding that we pay them time and again for something they created and we must say thanks and be grateful every time for them 'saving us and bailing us out'

This is beyond perverse and how they are getting away with it can only be down to how many palms they've crossed with Silver. I just hope its the paper variety as we're the ones with all the physical shiny 🦍

https://fred.stlouisfed.org/series/RRPONTTLD/