There Are No Temporary Measures, Just Permanent Lies

Mish

The Fed announced today that it will buy junk bonds. This exceeds its legal authority. Supposedly, it's temporary.

Under guise of virus support, the Fed Will Buy Junk Bonds, Lend to States to the tune of an additional $2.3 trillion in additional aid.

Dear Jerome Powell, please tell the truth. This is not virus support, it's stock market support.

“We will continue to use these powers forcefully, pro-actively, and aggressively until we are confident that we are solidly on the road to recovery,’ said powell in a speech 90 minutes after the details of the measures were announced.

The key missing word is "legally".

Hussman Blasts the Fed

Pushing the Boundaries

Please consider Powell Pushed to Edge of Fed’s Boundaries in Fight for Economy

By pushing the Federal Reserve into corners of financial markets it has mostly shunned in its 106-year history, Chairman Jerome Powell is running into some thorny questions.

Like, for instance, how to maintain independence from the U.S. Treasury when the economic-support package Congress passed says they should work together? Or whether the same guidelines for companies receiving federal aid, which range from compensation limits to off-shoring restrictions, apply to the Fed if it gets more money from Treasury? And how about which companies -- and perhaps eventually, municipalities and states -- are invited to borrow and at what cost?

“This is going to lead to a complete re-examination of the role of central banking and the Fed’s independence,” warns Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington research firm. The Fed’s steps into credit allocation are tantamount to “a complete redesign of central banking on the fly.”

Pole Vaulting the Boundaries

When you take illegal actions and enter numerous uncharted territories on balance sheet expansion, junk bonds, and bond ETFs you are not "pushing" the boundaries, you are pole vaulting over them.

Temporary Measures

Powell says these are temporary facilities.

Yeah, right. Just like the Fed's announcement that its previous balance sheet expansion was "temporary".

The Fed had 10 years to unwind its balance sheet after the last crisis, but never did. Now we have new balance sheet records every week.

And today the Fed upped the ante by another $2.3 trillion.

There is no reason to expect it will stop there.

Gold Soars

In response to the announcement stocks and junk bonds rose.

Gold jumped as high as $1752. As of 12:50 Central it's up $55 to $1739.

Gold vs Faith in Central Banks

Image placeholder title

Gold's New Breakout is Very Bullish: Here's Why

On April 6, I wrote Gold's New Breakout is Very Bullish: Here's Why

If you believe as I do that the price of gold is reflective of faith in central banks, there is every reason to be bullish rather than pay heed to alleged 5-year cycles.

COT action is icing on the bullish case.

Moral Fraud and Panic

In case you missed it, please note the Small Business Guarantees Are a Bucket of Moral Fraud

The Fed is in panic mode as Unemployment Claims Jump by 16.78 Million in Last 3 Weeks.

Today's Fed actions compound the moral fraud.

Panic and fraud inevitably run on the same track.

Today's Message from Gold

There are no temporary measures, just permanent lies.

No matter what the closing price of gold today, that's the key message.

Mike "Mish" Shedlock

Comments (93)
No. 1-32
Sechel
Sechel

If you buy junk bonds, how close are we do stocks? I fail to see the difference.

I think its way past the time that Congress and the Senate define what are acceptable 'tools' for the Fed. If the Fed were a fund it would have by-laws on procedures and permissible investments along with time horizons etc

KidHorn
KidHorn

I have news for you, but during the 2009 crisis the FED bought a lot of putrid stuff. Mostly MBS. Maybe they technically can't buy junk, but what determines which securities are junk? All they have to do is do their own analysis and declare it not junk. And if they buy an ETF, technically they aren't buying junk bonds.

tokidoki
tokidoki

Mish, who's going to arrest these people? The answer is zero.

I already said it before. Moral frauds are impossible in an economic system based on zero morals. Anything goes.

Hyperinflation is guaranteed. Bankruptcies, etc take time, so it's just "better" for everything to be paid for.

Look for food inflation a couple months down the line. Won't show up in official statistics though.

Tony Bennett
Tony Bennett

"The Fed announced today that it will buy junk bonds. This exceeds its legal authority."

...

No, they are skirting the law, not breaking it. Surprised at Hussman not noticing. Bonds being bought OUTSIDE of Federal Reserve's balance sheet via a Special Purpose Vehicle (SPV) joint venture with Treasury. Treasury put up the equity (first loss position) of $75 billion, while Federal Reserve financing at 7x or 10x capital depending on what purchased.

Since Treasury on the hook for loss, should bring scrutiny from White House / Congress ... and not buried and forgotten on FR's balance sheet.

tokidoki
tokidoki

So a quick look at the Fed's mandate: maximizing employment, stabilizing prices, and moderating long-term interest rates.

Those things are so vague, they could mean anything.

  1. Maximizing employment. 100%? Buy all equities so there's no layoffs every again.
  2. Stabilizing prices. Stock prices can only go up. Buy stocks, buy junk bonds, buy bonds.
  3. Moderating long term interest rates. Buy all bonds.

Looks like they are legally covered.

Demolish the Fed.

klausmkl
klausmkl

It's pure fiction. Fictional reserve banking , so what. The show must go on. Now go eat a cookie make yourself feel better, have two

thimk
thimk

This isn't a bazooka , its a weapon of mass destruction . /s

killben
killben

Is it possible that someone would go to court to stop the Fed from buying junk bonds?

Bam_Man
Bam_Man

They are now de facto "nationalizing" what used to be our capital markets. This will end up in a Soviet Union type disaster.

Sechel
Sechel

At least they aren't buying the debt directly but via ETF. This at least limits their ability to subsidize the borrowing costs of individual issuers. I don't like the new policy but at least they've avoided one clear problem......for now

Stuki
Stuki

On a more positive note, it seems ISIS is picking up some of the slack; resulting from the Taliban feigning politeness towards their version of the idiots, and focusing on Corona containment; back in the free world.

njbr
njbr

IMF predicts coronavirus pandemic will trigger worst global recession since the Great Depression in the 1930s - Reuters

STF
STF

@mish, are you maintaining your deflation call?

George Phillies
George Phillies

Reader who read "The Rise and Fall of the Dutch Republic" will find an interesting parallel, namely the Dutch East India company went broke, but the government maintained the dividends (I oversimplify). Approximately speaking this change marked the start of the slow fall into ruin of the Dutch Republic.

Greggg
Greggg

Japan comes to mind... except Japan is not the reserve currency.

thimk
thimk

Bond etf , financial wizardry turns debt obligations into equity allowing a shift from one balance sheet to another . An oxymoron . these should have been banned as part of Dodd/Frank . the problem with most etfs particularly bond etf, the etf price/value becomes divorced from the underlying asset.(NAV) Many pundits have warned of liquidity issues with this type of instrument for years . I think the market makers had to borrow massive amounts of money from the repo window to arbitrage/reconcile NAV to etf price. Feds solve problem by buying etf directly . This is just an arm chair assessment . yes system risk is still in the markets . thank you

tokidoki
tokidoki

Powell Put: the ultimate derivative.

Zardoz
Zardoz

Rule of law is over, and none of the bailout is for you. Adjust your behavior accordingly.

Mish
Mish

Editor

Hyperinflation calls are idiocy

Greggg
Greggg

Collateral Consequences according to the US Department of "Justice":https://www.youtube.com/watch?v=1dE-CdqJel4

Neighbor Dave
Neighbor Dave

Mish is an idiot. PERIOD.

AWC
AWC

Illegal? WTF? Haven’t y’all figured out by now, laws are made to be broken? It was obvious back when the Fed first announced QE that laws no longer apply to the ruling banking elite.

And money and assets no longer belong to the people. They are the property of the Central Banking Cabal.

The only question that now remains is, when does the Fed lose control of massive dollar depreciation and simply confiscate gold, and nationalize all property, including the means of production , for the “Greater Good,” mind you?

Oh, and it’s new found mandate will be temporary, of course, like in the old Soviet Union, and Venezuela.

ghoffa
ghoffa

I've been reading MISH since 2007 and have found him to be quite the opposite and I've learned a tremendous amount from him. A special thanks to you though for providing a textbook example of an ad hominen attack.....

RonJ
RonJ

The key missing word is "legally".

Maybe congress will back date some legislation to make it all legal, like with Citi and the Travelers umbrella that became part of its logo. Maybe they will throw in a provision for the FED to directly buy stock ETF's, while they are at it. Don't let a crisis go to waste.

lol
lol

Repo crisis was the Lehman moment (part 2)banks (and govt)has collapsed to the point now where they can't hide it,so they make up this bs covid nonsense to shut everything down to buy time while they figure out what to do next!Chinese and US banks are insolvent to the point where you can't pretend anymore,instead you deflect and hope the ATM's (that's the tell)don't shut down!

oldereb
oldereb

???? A COUP, ACCOMPLISHED ????
The virus, and MSM, has been successfully used.


OPEN LETTER TO CONGRESS
Dear Congress Critter,
Is Congress going to give exploitative rapists trillions of dollars under the pretext of saving the US economy which they have wrecked??
It is the perpetrators of the pernicious chaos that are being offered the reins of government control, and they have the audacity to ask for immunity from exposure ?
Your constituent,
John Q. Public


If the rumor that the US Treasury (i.e., Mnuchin of Goldman Sachs) has been authorized as of March 27 to purchase bad debt from the Fed and drop the bad debt that was purchased from Too Big To Fail banks [TBTF] onto the US taxpayers [to save Wall Street from bankruptcy] is true --- [[[[and it appears to be confirmed]]]---, we must conclude Wall Street, as hidden owners of the Federal Reserve Board of Governors, Inc., [BOG] has formulated a coup and Wall Street, who is the creators of the crisis, is now wanting to control the economic reins of the Nation to save their *$$.
And the Fed wants to be exempt from FOIA requests ???    I can see why. Wall Street wants to hide all the trashy MBS’s, derivatives, and such they created and now want to dump them on the taxpayers and citizens of this nation. In addition, they want to hide their embezzlement of $23 trillion over the past 100 years.
Pundits have claimed bad debts of the TBTF banks exceed $1,500 trillion. And the bankers will eventually want the citizens of this nation to buy this debt from them ?? Of course, they will start with a paltry $200 billion for a few small businesses they have loaned money.


The – [Ft. Detrick] – virus is the distraction from the economic collapse which was already pending from the Federal Reserve//Wall Street high-risk fool-hardy agenda.
A New York doctor who has treated >500 cases with 100% cure rate. Relief can be in 4-6 hours and cure in 6 days: https://newsthud.com/ny-doctor-successfully-treats-patients-with-drug-cocktail-zero-deaths-zero-hospitalizations-zero-intubations/ The open letter was sent to White House 10 days ago. Also, https://forward.com/news/national/442285/coronavirus-hydroxychloroquine-trump-doctor/ with 500 patients; and https://techstartups.com/2020/03/28/dr-vladimir-zelenko-now-treated-699-coronavirus-patients-100-success-using-hydroxychloroquine-sulfate-zinc-z-pak-update/; https://therightscoop.com/watch-ny-doctor-says-his-hospital-already-using-chloroquine-for-coronavirus-patients-and-have-had-zero-deaths/; and 4 other sites.

The virus was discussed years before the spread from Ft. Detrick; the cure was known. https://vinsuprynowicz.com/?p=8359 . The origin of the virus is identified as Ft. Detrick. Ref. https://www.altermidya.net/opinion-origin-of-covid-19-ecological-historical-and-geopolitical-perspective/

The virus is going to be blamed as the cause of the economic collapse. The TBTF banks have led the nation to insolvency and will use the Fed to cover the bankruptcy of its owners. Then they will use the Fed to foreclose on the US national debt.

The select Primary Dealers/TBTF banks own shares of the BOG, Inc. The BOG is [alleged to be] a closely held corp that does not have to file SEC reports. They have skimmed $22 trillion [illegal] profit over 100 years. They are using the Fed to protect their [bankrupt] banks and their ownership of six mega-corporations. Ref. https://www.spartareport.com/2019/11/the-federal-reserve-a-different-view/.

The ultimate end is the Fed will be used to foreclose on the $23 trillion national debt of the US. https://ppjg.me/2019/11/18/scenario-of-national-bankruptcy/.

The scheme can be exposed by FOIA. Ref. https://thedailycoin.org/2020/02/19/federal-reserve-transparency/.

bradw2k
bradw2k

How does this not result in debt slave revolt?

AshH
AshH

Bianco's comment: "meet the new Fed Chairman, Trump."

Big question is if they start purchasing equities because Trump doesn't think the market is high enough in an election year.

Wmjack50
Wmjack50

Hey why not have the Fed buy equities --It works for Japan NOT

AshH
AshH

How is the Tea Party not going ballistic right now?

Advancingtime
Advancingtime

The buck stops at the President's desk. a great deal of this is happening because Trump sports a distinct view of the financial world that is rooted in his past. The President's "damn tomorrow" attitude is reflected in deficit spending and his constant call for lower interest rates.

Trump's idea the stock market can go straight up forever is not based on years of stock trading but rather seems rooted in his real estate background where inflation has served him well as prices rose ever higher. This does not work for everyone. More on this subject in the article below.

Herkie
Herkie

The Fed declared a situation of "exigent circumstances" back in the height of the GFC and apparently is still operating under than authority. I know I have watched them and do not recall them ever declaring that those circumstances were at an end. That may well give them legal cover to do this according to the Fed charter, but, any reasonable definition of exigent also includes a time limit of some sort.


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