The Banks Unlimited Money Glitch: Reverse Repurchase Agreements Explained
hello everybody my name is true demon and i'm the devil's stockbroker today in this video i want to cover something that i feel is talked about frequently but not necessarily well understood and that is the idea of reverse repurchase agreements this is a tool that's used by the federal banking system to provide cash reserves to the federal bank and it's provided by the smaller district banks or the individual private banks that exist throughout our system you think of bank of america jpmorgan chase goldman sachs and so on reverse repurchase agreements allow the fed to hold on to a significant amount of capital that they can consolidate from all of these banks in a in order to absorb operating costs and for them to continue making banking operations for the federal reserve especially during times of you know trials and tribulations like we went through with coveton since then however what has been going on in the reverse repurchase agreement market shows that this system is working in an unusual way that we have never seen historically before and there is a good chance that there is fraud taking place and that is what we are going to examine and uncover i want to start this video by thanking a member of the hell's trading floor discord tempestuous persephone who did a very very thorough deep dive into reverse repurchase agreements and brought all of this together for me so that i would be able to bring it to you so thanks to her for doing all of this research and with that we'll get straight into it so here we have the fed and all of the district banks so the way that a reverse repurchase agreement works with this very simple diagram is you have the small district banks which have some cash you know they're flush with cash they got some cash to work with they don't need it right now the fed the fed needs cash so in order for the fed to get this cash they need to incentivize the banks in order to deposit the cash at the fed so the fed says hey smaller banks we need some cash how about we offer you a deposit a repurchase agreement a reverse repurchase agreement to give us your cash and tomorrow morning we will deposit that money back to you with interest and the bank says okay so they send a very large sum of money in the tune of millions or billions of dollars to the fed the fed piles up all of this cash and then the morning after all of this money gets distributed back out so all of the individual banks with a tiny sum of interest and that goes all the way back to all the different uh district banks on an individual basis you could think of this as a way for the banks to collect compounding interest as well because what we've noticed is that these small banks they do these reverse repurchase agreements nightly they are overnight reverse repurchase agreements so the fed is only holding this money for a 24-hour period at most at which point it returns the money to the bank now the fed can renew the reverse repurchase agreement but the bank has to redeposit the money and this is often referred to as the money market system which allows the smaller banks to give their customers profit off of individual deposits for cash that are just sitting in the system it's a lot of complexity but under the hood this is all very simple the bank gives the fed a sum of money the fed gives them back the full amount plus a tiny tiny amount of interest and this has allowed us to use our banking system and consolidate it into a single institution which is able to respond to crises such as what we went through during covet so starting in march of 2020 which you see is this little blip here this is the reverse repurchase agreement sum total of cash that has been put in reserve at the fed on each given night in march of 2020 this is exactly when covet hit us which you can see by the spx market took an absolute total dump on everybody in response to this the fed had to come up with some way of offsetting the cost of operations and to stimulate the economy because what was happening was everybody was shutting their doors businesses were closing the economy was shutting down and nobody was going outside in the wake of this the fed realized that we were at a crisis time and they needed to get people money this was done very urgently and hastily in order to save people from sudden fears of bankruptcy not being able to afford food water and essentials and just there was just general panic everywhere and when this happened the fed immediately started putting to work all of this money within the banking system through reverse repurchase agreements they consolidated all of this money into the fed and then they started using the money through their operations in order to push money out into the market and they gave the banks back all of their funds through interest interest which was by the way printed freshly printed money and most of these transactions by the way happen digitally every single night this is not an actual physical transaction of cash it is a digital one so the fed in the bank's transaction they transact this cash through a computer system for the most part and then the fed returns a balance that is just numbers on a screen and that's the number that the bank has so printing money for the fed is extremely simple and it's done through this system i believe intentionally to make the system work more efficiently but it introduces some level of risk because i detect the opportunity for fraud going further on as we look further the entire market the entire market has been absolutely ripping just absolutely ripping for such a long time especially after the reverse repurchase market started to get crazy after march of 2021 at a time when we were going back into lockdown and we weren't sure that whether kovid was here to stay the reverse repurchase agreements overnight deposits started to skyrocket and stayed high every single night and it kept growing and growing and growing and growing and growing and growing and growing all the way up through the peak of the spy and then suddenly things started to turn around for the market but this has continued and i want to know why further to this point if we look at the u.s year-over-year inflation rate we noticed that inflation at this time just before covet hit us in january inflation was at a modest two and a half percent which is you know that's relatively reasonable that's kind of that's pretty close to the fed's target keeping it below two percent ideally but two and a half percent it's not bad and as long as inflation is not out of control and employment is good the fed doesn't really have to do much of anything however when covet hit us you'll notice that they needed to suddenly address a massive unemployment issue and hence why they stimulated the economy which you can see with this you will no doubt notice that unemployment kind of had a little bit of a blip in its trend but after march of 2021 both unemployment and inflation started to invert each other while the reverse repurchase market continued to surge repeatedly this seems to me like a problem and it kind of boggles the mind as to why the fed didn't respond in any way and to date still hasn't responded to this issue of reverse repurchase agreements surging non-stop and continuously maintaining their highs because let's not forget these deposits are nightly that means that every single time this number grows it's because the bank added more money to the cash reserve system so they have to add this money back into the reserves every single night this is done intentionally so so why is it still growing well that's what we're going to unpack i'm brought to the mrs institute article which is titled who owns federal reserve losses and how will they impact monetary policy this is a excellent article which i feel really well summarizes the issues here and first what reverse repurchase agreements are used for but more importantly why we have a problem in the federal reserve system so i'll ask you to bear with me while i go through this article with you and we're going to find out how this relates what this article is talking about back to reverse repurchase agreements so the article begins among federal reserve officials and many economists it's fashionable to argue that any losses the federal reserve should suffer no matter how large will have no operational consequence is this true if so how does the fed account for its losses and stay solvent and who ends up paying for these losses as the fed executes its strategy to rain and runaway inflation the answers to these questions take center stage as the fed has already experienced mark-to-market losses of epic proportions and will soon post large operating losses something that it has never faced in its 108 year history we estimate that between december 31 2021 and the end of may 31st 2022 the federal reserve lost 540 billion dollars in market value on its huge portfolio of investments in treasury bonds and mortgage-backed securities to put this loss in perspective 540 billion is equivalent to 60 percent of the value of the federal reserve system's entire asset holdings on september 1st 2008 just prior to the onset of the financial crisis 540 billion dollars is more than 13 times the federal reserve's recently reported consolidated capital of 41 billion dollars meaning that the market value of the fed's outstanding liabilities primarily member bank reserves and federal reserve notes exceeds the market value of the assets the fed owns by about half a trillion dollars as interest rates go higher this loss increases remember that to fight inflation the fed has to raise the interest rates the federal refund the federal funds rate must go up this causes interest to rise and this causes the fed's operating costs to rise moreover if the fed's inflation fighting campaign eventually requires short-term interest rates to rise above 2.7 percent we project that the federal reserve will experience net operating losses in addition to its mark-to-market losses the interest rates are already well above that they're well over five and a half percent some are being estimated of over six percent unlike banks and other financial institutions no matter how big the losses it may face and how negative its true capital position the federal reserve will not fail but if losses however large can't end the fed who pays for these losses will the fed's shareholders be hit in some fashion or will the losses be monetized and contribute to spiraling inflation should member banks be paid interest when the interest payments cause federal reserve losses in recent years questions like these have been irrelevant because the fed has made very large profits but this year is different federal reserve officials try to downplay the gravity of these issues for example at the recent federal reserve bank of atlanta financial markets conference federal reserve bank of cleveland president loretta mester said that losses would have no impact on the fed's ability to conduct monetary policy but admitted they could raise quote communication challenges for the system this rather cavalier treatment of the massive federal reserve losses is curious because it is potentially at odds with the way that federal reserve losses should be treated according to the federal reserve act moreover given the large interest that income banks earn on their reserve balances the issue of burden sharing of federal reserve system losses may become much more contentious as the fed executes its inflation fighting policies in the coming months now this statement right here was extremely it this one glowed on the screen for me what this is saying is that the large interest income banks earn money on their reserve balances this is something that we know about but it also brings up the topic of burden-sharing meaning that when the federal reserve starts to lose money the question becomes do the banks that have been cashing in from the fed by receiving these interest payments and these incentives for depositing their cash to the federal reserve do they need to pay something back too should they be forced to share the cost the real story of how the fed accounts for losses how the losses impact monetary policy and who ultimately pays for these losses is a complicated one the details are in some little known provisions of the federal reserve act of 1913 in more recent federal reserve board policy decisions regarding the fed's accounting standards in legislation changing its dividend and capital surplus policies and in its post-financial crisis decision to pay interest on bank reserve accounts so this is not a well understood or even well documented process and now we're going to get into who is actually going to bear the cost when this inflation situation gets out of hand because it is already getting out of hand the federal reserve act stipulates that federal reserve shareholders the member banks should bear at least some federal reserve system losses but to date this has never happened innovations in accounting policies adopted by the federal reserve board in 2011 suggested the board intends to ignore the law and monetize federal reserve losses thereby transmitting them indirectly through inflation to anyone holding federal reserve notes dollar denominated cash balances and fixed rate assets this this is the statement this is the smoking gun if the losses are monetized it means that the fed is going to take these operational losses and print more money and printing more money will create more inflation and it passes off the operating costs of the fed off to the taxpayer directly it does go directly to the taxpayer because it devalues the dollar in such a way that reduces the buying power of your cash at the cash register and it also directly affects the value of bonds and treasury notes which are fixed income assets they have a maturity meaning that after a certain date you get payments but you have to wait until those maturity dates and that is a fixed asset you get a fixed rate of return and the problem with that is that inflation if it outpaces the return of the bond then you take a loss because by the time you receive the cash yield from the bond you've already lost buying power in the same way that we lose buying power when inflation attacks the value of our dollars that we have in our savings bank account and let's go and take this a little bit further and go back up to what was stated earlier regarding the federal reserve's asset holdings it me it specifically mentions treasury bonds and mortgage-backed securities i would like to point out to you that since december of last year the value of vmbs which is the vanguard mortgage-backed securities etf index has tanked massively by 13 almost it's slightly recovered with this latest bounce that we've had in the market but overall the mortgage-backed securities industry has been falling ever since may of 2020 it has not recovered and that's telling because right now like understand mortgage-backed securities are generated by the creation and origination of new mortgages which are created by people buying homes and right now we're having a housing surge that's going to lead us to a housing crash inevitably at least in my opinion but why why are mortgage-backed securities dying in value why are they deflating in value when the amount of new mortgages are just going absolutely bananas it doesn't make sense well think of it this way we've had more cash buyers which means that people are getting out of their mortgages and if you get out of a mortgage early then that devalues the mortgage-backed security that it's that it is attached to because the recipient of that mbs gets fewer returns at the end of the year and the more people that pay off their mortgages eventually the mortgage-backed security is actually it's fully paid out and there are no more returns so it's fully matured so whatever the person bought it for may actually take a loss because they were expecting those returns there's other parts of this that play into the market more broadly but the point here is that mortgage-backed securities are bleeding in value and it's signaling that the fed and other banks are losing their asses on fixed rate assets like mortgage-backed securities and they're quickly abandoning them and this etf reflects that sentiment here's another one which is mbb the ishares mortgage-backed securities etf created by blackrock which got started in april of 2007 or march 2007 and recovered after the mortgage backed securities cratered in value and we saw new highs from them since then but after the fiscal crisis we hit during the fiscal crisis these hit an all-time low and we have surpassed that low the value of this etf is far below the value that we had we had hit the low of during the 2007 subprime crisis and the subsequent crash that happened in 2008 in september so you want to tell me that mortgages are fine housing is fine and mortgage-backed securities are fine the fed's fine inflation is fine and that's only transitory like there's so many things wrong with this picture i don't even know where to start but i'm going to try to get back to this article and we're going to figure it out so the article goes on in the federal reserve system's most recent financial statements for the quarter ending march 31st 2022 the fair value note to the statements show a total unrealized capital loss of 458 billion dollars during the quarter on the fed's 8.8 trillion book value of the fed system open market account this is think of this as their portfolio the fed's stock portfolio took an unrealized four and a half billion 458 billion dollar loss during the during the march 31st quarter of this year that's massive they've got 8.8 trillion dollars in book value that they're going to be dumping
on the market here and it's already lost 450 billion dollars that's insane and this all of these assets that are going to be just shoved down the throats of investors in the stock market are going to feel the pain because they're going to sell no matter how low the price gets if there's no demand for these assets and there isn't there already isn't it's going to cause massive crashes throughout the rest of the stock market that we're going to feel instantaneously and the banks know this so the banks are looking for any way that they can possibly squeeze any money out of this system as risk-free as possible because that's their job but also they're going to look for some way of getting the money out of this market because right now the us economy is absolutely at its weakest that it has ever been since the great depression i'm i'm absolutely convinced that at this time we are in the throes of what what may be a total financial meltdown of our entire stock market and economic system coupled with the total hyperinflation of the u.s dollar that will lead to it being lost as the federal reserve current or as the world reserve currency it's it's a really scary thing to think about because that's the like that's armageddon for the u.s economy but it's also going to be like the worst day ever for the entire world's economy because the u.s dollar is the backbone for the world economy being the world reserve currency so the article goes on to say that the interest rates continuing to increase we estimate that the fed's unrealized capital loss grew by an additional 210 billion it's just isn't that great so that brings the fed's total unrecognized capital loss to an estimated 540 billion as of may 31st 2022. the losses continue to grow through mid-june and should the fed maintain its plan to continue raising interest rates to fight inflation these losses will only increase if the fed was a bank or other regulated financial institution it would be closed because it is already deeply economically insolvent so i don't think that i need to break this down for anybody but just just for the sake of putting it in simple terms right now the fed is hemorrhaging money at such a rapid rate that any other bank if jpmorgan chase or if bank of america or goldman sachs any of them posted these kinds of losses that bank would be shut down today it would have been shut down yesterday so in addition to the deleterious impact of rising interest rates on the market value of the soma portfolio rising interest rates will sharply reduce the fed's net interest income in the first quarter of 2022 the fed reported net earnings net interest earnings of 35 billion which when netted against expenses yielded a reported total operating income of 32 billion a figure that excludes the mark to market losses on its securities portfolio so i think it's essentially breaking down to the fed is is if you do not count their total losses they're barely barely holding their head above water while printing money at a massive massive rapid rate that they have never done in the past and this is where the reverse repurchase agreements start to come into this and this is where the truly scary ship begins so as interest rates continue to increase the fed net interest revenue and operating income will decline as the fed pays higher interest rates on 3.3 trillion dollars in member bank reserve
balances and it's nearly 2.3 trillion as of june 1st in reverse repurchase agreements while it earns interest on largely fixed rate securities its soma portfolio according to our estimates if short-term interest rates were to reach 2.7 percent the fed's net interest income would no longer be sufficient to cover its approximately 9 billion dollars in annual operating costs and the fed would post an annual operating loss this fact is especially relevant given that the fomc forecast has the federal funds rate at 3.4 percent by year end 2022
so this is already a bad enough situation because as the banks member reserve balances increases and the interest rates that the fed raises continue to increase the fed's going to continuously be posting operating losses and it's eventually going to hit a point where it's net negative and then the operating losses will exceed their operating revenue if that happens then the fed is upside down and they're considered totally insolvent but they're already in that state right now the only reason why they're holding their head above water is because they're printing money at a ridiculous rate so with annual inflation currently running at 8.6 percent that's a figure as of april 3.4 percent may not be as high enough short-term interest rate to tame inflationary pressures since this article was written this has been this has been driven up massively to nearly six percent so the federal funds futures and several bank economists project that policy rates will need to rise to four percent again it's already higher and we're not even into 20 23 yeah we're not even halfway through the year ignoring mark to market losses on its soma portfolio and absent any realized losses from soma asset sales we project that the fed will post an annual operating loss of 62 billion dollars if short-term rates rise to four percent again already passed it a 62 billion loss is 150 percent of the federal reserve's system's current capital this is all bad enough this all is a really terrible situation for the fed and the u.s economy but this is really only just to illustrate to you the situation that we are in economically speaking and the position that the fed has put us in because it was their decisions and their monetary policy and their decision to ignore inflation that brought us here they didn't address it in march of 2021 when they should have seen it and instead the reverse repurchase agreement started to skyrocket and that has a very detrimental effect on inflation that we're going to address right now because the reverse repurchase agreements that's a voluntary action by the member banks and what i suspect is that the member banks are abusing this system to create risk-free capital for themselves they are using it at the expense of the federal reserve and by extension indirectly the taxpayer because of generating inflation and also forcing additional operating losses on the federal reserve bank and in the meanwhile the member banks are profiting they're laughing all the way and what they are doing is they are taking this money elsewhere and it's going to have a absolutely detrimental nuclear destructive effect on the united states dollar so i'm going to skip ahead just a little bit into this article that that we get into the relationship between reverse repo and the member banks because this is the part that matters and this is this is where we get into the i guess a conspiracy that the member banks are purposefully and intentionally deflating the dollar in order to get more of it so that they can push it out to other markets okay so member banks earn dividends on the federal reserve district bank stock holdings and the federal reserve system dividend policy which impacts the fed's capital surplus account that's reverse repo and also their cash reserve which according to the gao is quote intended to cushion against the possibility that total reserve bank capital would be depleted by losses incurred through federal reserve operations so this this is only going this is only meant to be used as a way of propping up the federal reserve during emergencies but it's not being used that way because the federal reserve shouldn't be needing this much capital right now what they should be using is they what they should be doing is selling assets and they should have been doing it a year ago but there's something wrong here now in return for providing the district bank's capital base all member banks were initially entitled to receive a generous six percent dividend on the par value of their paid in shares this is important the dividend was cumulative in the event that a district bank had insufficient operating revenues to cover expenses and dividends in any given year essentially member banks purchase shares of the federal reserve bank and then they get dividends out the same way that we get dividends on stock but just like everything else that requires them to res they have to purchase the shares for one they have to buy it and they have to hold it in order to receive those dividends and that was how the system worked in the past but ever since 2016 it's no longer the case so more recently the dividend rate was reduced for large banks currently defined to be banks with assets in excess of 11.2 billion dollars this is because
most banks hold on to trillions of dollars they have massive assets and because of these massive asset portfolios six percent dividend on that much money would be absolutely crazy the dollar would be deflated to hell so rapidly it's an insane amount of money so just to make sure that we did the math i i went and calculated it and six percent of one trillion dollars if a bank had deposited that and received a single dividend from it a single dividend on a trillion dollar deposit of purchase shares would pay out at 60 million dollars now the key here is that buying the buying buying the federal reserve shares they have to hold on to those shares for a certain period of time to receive the dividend that's how the system works but if it's not being used that way and it doesn't exist this way anymore and as well this interest rate of six percent is no longer the case this is how it works now so now the annual dividend rate for these banks is the lesser of the high yield of the 10-year treasury note auctioned at the last auction held prior to the payment of such dividend or six percent so it's a lot of gobbledygook to say that it's basically the banks are capped at an absolute maximum of a six percent dividend or the yield of the 10-year treasury notes that's bonds 10-year bonds now the 10-year treasury bond as we'll look here is actually way lower than that and it's been that way for quite a while as you can see that from this chart this is the this is the u.s 10-year bond the bonds haven't been six percent since the dot-com bubble the bonds have not been worth that much for a very long time because honestly they shouldn't be the amount of money that is generated by our system because we have so much money in our system if it was above six percent it would result in just it would as i said it would result in a massive inflation of our dollar because it's creating money out of thin air now the banks however they realize that they receive whatever the bonds yield is capped okay the the max that this thing can ever be is six percent but if the bonds go to a super ridiculous value no matter what six percent is the highest that they can absolutely go to now when we hit the when just after we had hit the covid crash the bonds had dropped to a ridiculous like 0.6 percent yield is the lowest that it's ever been and ever since then the bonds have gone up and that's interesting but they especially started to get ridiculous after the reverse repurchase agreement started to go up now why am i talking about bonds all of a sudden when we were talking about reverse repurchase agreements remember what i said that reverse repurchase agreements they receive an interest payment every time a bank deposits this cash overnight they get an annualized payment that is paid out for the day so it's an interest payment you would normally compound for yearly interest you divide that amount by 365 you get the daily the that's a daily interest payment so that interest payment directly relates to these 10-year bonds because the lower this value is the less the banks get paid but we notice that after march of 2021 all of a sudden reverse repurchase agreements started to get ridiculous and you'll notice that the bonds were going up at the same time the bonds went from 0.8 percent up to nearly 1.7 percent and that all of a sudden triggered a lot of buying
in the reverse repurchase agreements market and suddenly the fed was getting flush with cash now who decides the price and the yields for these bonds well the fed does and the thing is is that this is dictated by supply and demand the same way as everything else in the market is so let's think about this just for a second during the covet crash bonds were worth basically nothing the 10-year bonds were almost totally worthless they were barely paying out anything and for a long time bonds have been like totally useless anyway but also this change was instituted only since january of 2017. so this is a new change and the the dividends for reverse repurchase agreements were albeit they were very large but it had only included dividends for shares in the federal reserve before 2017 you had to buy shares in the federal reserve to receive the dividend and you were only receiving those dividends every so often the same way as you receive a stock dividend with the reverse repurchase agreements being added into this you could get reverse repurchase agreement interest daily and that computes that if you kept putting this money back into the system every single day if you kept depositing the same amount every single day you get daily compounding interest over and over and over again and this is exactly what the banks are doing they're they're depositing this money back into reverse repurchase agreements back into the bank which they only have to hold overnight they get the cash immediately the next day and then the bank gets to use that money however they want and then they just deposit it back in before the close of business that day and suddenly it's getting it's money making money and it's risk-free because the federal reserve can't fail so understand that the smaller banks are using this system to generate liquidity they build this they built this system as a way of protecting the federal reserve from operating losses but it's being abused this system is now actually working against the fed because the reverse repurchase agreements are being used by the member banks to increase their own liquidity and let's also remember that it's specifically the 10-year bond that this affects now how do you raise the value of a bond what dictates that the fed does right remember i said that the fed dictates what the value or the yield of the bond is well that is controlled by supply and demand so really quickly let's understand that there there is a relationship between bond prices versus bond yields okay a bonds price is what you pay to buy the bond okay the yield is what the bond pays you in interest okay these are inversely related the more demand there is for a bond the higher its price is but the higher its price is the lower its yield is the bond's yield goes down as the price rises right and this is in order to control supply and demand normally this is controlled by the fed and the fed in order to raise demand will increase the yield and thereby drop the price of the bonds this creates a increasing interest relationship that makes the bond more attractive to banks and investors this is what causes people to want to buy bonds because if the interest rates are high then they get a safe return but if the bonds yields are low and the price is high it's not as attractive it's going to cause people with less cash to be able to qualify to buy a bond meaning they don't have the cash to actually purchase the damn thing and also the banks don't want to bother because they can make more money elsewhere now what is this is where this is where the key is though if nobody is buying the bonds no matter how low the price gets the yield has to go up and now we see a conflict of interest so now we're going to take a look at reverse repurchase agreements overlaid by the bonds so here we're looking at in the blue in the light blue we're seeing the yield curve of the u.s 10-year bonds and we're seeing it up against reverse repurchase agreements in the dark blue and then inflation in orange now what we see is that the value of the bonds absolutely cratered to basically nothing it's like next to worthless it's like 0.56 percent that's that's almost no return and then all of a sudden when reverse repurchase agreement started being made it happened right as the bond started to bounce and what i think this triggered was a it triggered a connection for the individual member banks the the low the the lowly investment banks that are members of the federal reserve district banks to notice a correlation between the 10-year bonds and they started looking at this and realizing after making these deposits that they could be incentivized that they could make better returns if they could lift the yield of the 10-year bond without having to actually buy the damn things and if you notice after we got out of the initial lockdown period and the banks started operating again in august after all of the checks had arrived in u.s citizens hands suddenly the yield on the 10-year curve started to rise and i suspect it's because the banks decided to stop buying them if the banks refuse to buy these bonds it causes their price to drop and if the price drops aren't enough to attract more investors and buyers then the next step is for the fed to raise the yields when they raise the yields that increases the interest payments that these banks receive on reverse repurchase agreements and what you will notice is that all of a sudden as the bonds started to rise in their yields at a certain point reverse repurchase agreements at a time when the bond yields were above 1.6 percent that's when reverse repurchase agreement started to rise and it rose fast conversely the 10-year yield on the bonds started to drop really quickly but reverse repurchase agreements kept going up now remember this is an annualized interest return that the banks are making on reverse repurchases nightly it's daily compounding interest annualized at a rate of interest that's basically pinned to the yield of the bond every single day so let's let's just go calculate it out how you would calculate this to do it for a single day you would take whatever the value is of the initial of the initial deposit so we take the reverse repurchase agreements here and that would be 450 billion dollars nice round number 450 billion you multiply that by the interest rate which is currently sitting at 1.56 so
one 0.015 six okay this **Correction: 7.02 Billion!!!** is the annual return you divide this by 365 and one uh **Correction: 19.5 Million!!!** is how much the banks get back that's an immediate nightly return okay now that's pretty modest it's a small amount for like billions of dollars but now now where we currently are shows just how quickly the banks figured this [ __ ] out and how quickly they started [ __ ] abusing it currently i'm going to mark june 14th that's just before last friday uh they're the friday before last that the 10-year yield was at 3.475 percent and there was more than 220 there excuse me i'm sorry i'm just getting so damn mad there's 2 trillion 223.8 billion dollars in reverse repurchase agreements so let's go ahead and bring that up in the calculator 2 trillion 180 billion 980 million and that's the number that they are depositing nightly multiplied by 0.03134
that's an annualized return of 68.35 billion dollars that's more than some of these banks manage in their total assets so now we have to mult we have to divide this number by 365 and then you get the daily return this is the actual daily return so on this on this two trillion dollars they're getting uh 187.3 rounded million dollars 187 million dollars every single day for this [ __ ] and the more that this yield goes up on the bonds the more they make now this is being done on purpose these reverse repurchase agreements is an infinite money glitch for the [ __ ] member banks of the federal reserve and they know it that's why this is going up they're getting [ __ ] risk-free returns on this [ __ ] and they're not buying the 10-year bonds purposefully to drive up their yield and this is why the 10 and two year yield curve has been inverting this is all part of it as long as the banks continue to buy all of the other bonds and driving up demand for those bonds while refusing to buy the 10-year bonds the 10-year bonds yield will continue to go up and because of all of this just the the 10-year the 10-2-year yield curve that's the difference between the returns of the two year bonds versus 10-year bonds whenever it inverts that means when two-year bonds have better returns than the 10-year bonds when that happens that's a signal a great big red warning flag of recession coming for the entire economy so if the banks are [ __ ] with the bond prices by either they're either denying or applying supply and demand for those particular bonds it's affecting their prices and they're doing it because the reverse repurchase market is a risk-free vehicle for them to continuously be making infinite [ __ ] money and if they deposit enough of their cash into this they can just continuously generate unlimited returns and the money is safe because it's sitting there parked at the fed this is where all this is the reason this is the reason why reverse repurchase agreements are just going absolutely bananas and nobody understands why now i want to know is does the fed [ __ ] know this and if the fed knows this then what are they doing about it are they content to be sitting flush on this cash and paying out these interest payments are they complicit to this and does congress know about this that's what i want to know congress has been sitting here going through like all kinds of [ __ ] over the game stopped situation with you know the the giant squeeze that happened in january 2021 they're dealing with a war in ukraine they're dealing with the supreme court running away with all kinds of different federal cases and overturning roe v wade and all kinds of ridiculous [ __ ] all of this is happening at the same time there's so much [ __ ] happening geopolitically right now it's a miracle that anyone can even pay attention to it all it's no wonder that nobody wants to even look at the news anymore we all want to shove our head in the sand and this is all happening under the under the [ __ ] hood nobody's talking about this i know nobody's talking about this there's no way that anybody noticed i want to i want to especially thank again tempestuous persephone for figuring this out it was her it was her observations and deep dive into this market to figure this out and i secondarily want to thank scrap queen for turning up all of these articles that led us down this rabbit hole this has been the oh my god it's it's it's so eye-opening just the creative ways that these banks figure out to just generate money out of thin air but this is a serious problem because this this infinite money glitch as i'm calling it is a way that the this is how the banks are inflating the dollar and this is a serious problem because if you look elsewhere in the markets there they are moving their money elsewhere and i want to thank randall cornett in advance for this information so just in the last six months not even like eight months since january of 2022 this is the u.s dollar versus the japanese yen usd jpy this is a this is the forex market which is showing money moving into the japanese yen the higher this value is the more valuable the japanese yen is versus the dollar and look at where this is going [ __ ] march [ __ ] march this thing exploded in value out of nowhere 18 18 increases on the japanese yen versus us dollar these [ __ ] banks are moving all of their money into foreign assets they're putting it all into foreign currencies and they're taking it overseas because and they're pulling it out of the [ __ ] reverse repurchase market they're taking money from the fed inflating the dollar generating cash pushing it into the economy and then when they feel like they've got enough of it they shove it into another asset somewhere overseas where they can't [ __ ] touch it anymore and they hyper inflate the value here and this is the market that they're going to go with this isn't the only one they're moving it into all kinds of assets you can see this in the metals market they've been moving it into gold starting in january gold exploded from what's this value from the xau usd 4x market it went from 1787 all the way up to a freaking peak of 2060 yeah 2060. it's a 50 increase and it correlates with the us dollar and jpy increase so at the same time they took all of this [ __ ] money and they pushed it into all of these other assets the the [ __ ] banks are are using the fed as a liquidity engine they are using the fed to just generate them dollars out of thin air and the fed is either complicit or they're unaware i doubt however that they are totally unaware of what's going on because this has a direct effect on the amount of money that they put back into the money market and that is how they push money out to the other banks so i know that the fed has the power to shut this off they can turn this off but they are choosing not to for some reason and this is what i want i want to challenge congress to look at this because this is a serious [ __ ] problem the if the fed doesn't get control of inflation it's going to absolutely destroy our economy it's going to hurt us all we're going to be paying a different kind of tax that comes in the form of our buying power being next to nothing we'll have to be wheelbarrowing our dollars up to the counter to go and buy bread it's the exact same situation that we saw in post-world war one germany it's that's the kind of crisis that we are talking about if this happens we're talking about going back to the days of 1970 when the interest rates were above 18 percent this is something that our economy cannot sustain right now and the fed is backed up into a corner and the banks i feel are taking advantage of it if there is not something done to get control of this if the greed of the banks is not put under control and this this abuse doesn't stop right now it's going to crash the dollar this is actively inflating the dollar as we speak and it's going to continue and something is going to come out of this something is going to happen very very soon i have a feeling that this is going to trigger a market crash even bigger than what we just saw recently and the 2008 crash after this is going to look like [ __ ] nothing i want everybody to be very acutely aware that we're we're seeing we're seeing signals coming from the market that there is obviously we're in a bear market right now and there's all kinds of news articles that are trying to convince people that oh it's going to be fine the market's going to be totally okay and i we even read this article that um i can't believe this it was this article by investing.com that insists that that the worst that things can get for the s p 500 is 3
000 um which i i think is grossly underestimating just how serious our economic situation is and how bad it can possibly get but there's there's articles like this coming out all over the place i hate google ads um but suffer through it with me for just a second the the the situation that we're in economically speaking is is putting us in a combination housing crash of 2008 with the inflation crisis of 1970s and the dot-com bubble when the nasdaq collapsed all of this is happening at the same exact time this is going to be without a doubt the worst market crash that we've ever endured in the history of our nation and it's going to affect the world economy the banks are going to figure out a [ __ ] way to profit from this and i think they're actively doing it through reverse repurchase agreements because they can use it to generate cash and as soon as they feel like they've got enough they move it into an asset class and they move the market and that's going to be a problem for us because the banks are going to use this as a vehicle to escape into international markets and retain their assets but the le the rest of us left here behind in the united states are going to be holding the bag and we're going to be stuck using dollars that are damn near worthless this is something that needs to be looked at congress needs to get their asses on this and stop sleeping at the [ __ ] wheel this has gotten out of control and this is going to continue after this cry after the i'm i'm i'm [ __ ] serious after this crash plays out and we're back down below the lows from the covet crash and we're still going down then only then will they finally [ __ ] look at what happened here after this crash occurs and it's too late people are losing their homes and their jobs all over the place i'm really [ __ ] worried about where we're going and i i know that people are upset at me for being all doom and gloom and just shouting about armageddon from the mountaintops but this is a serious serious situation and people need to understand this i'm going to keep repeating this as many times as i have to i'm never going to stop talking about this and i'm begging i'm begging you all please please do your research please try and figure out how to save your money and how and how to protect yourselves figure out a way to move your assets into something with intrinsic value figure out some way to make sure that you're saving your cash holding onto it and putting it somewhere safe and if you're able to i i it's it's it's a risky business but if you can figure out a way to make something out of this market as it goes down then it is in your interest to do so it's in all of our interests to do so because the only way that we're going to end up on top after this happens is if we have a full understanding of the mechanics of this market as we go down it is coming down and it's not even a matter of when at this point anymore we're in the middle of it so i'm sorry that this turned into such a flaming rant but i'm so concerned for everybody that's not just in my community but elsewhere on social media and especially for the ape community and and for just americans in general because it's average people that are going to be hurt by this all across the board all over the united states and even across the world people that are in the lower half of the 50 income gap are the ones that are going to suffer the most for this because they're we're going through a we're going through a combined inflation housing crash tech bubble on top of wars happening across the world massive prices of oil skyrocketing the price of gasoline skyrocketing and and we're even going through food shortages now and food has been rotting on the vine for months and farmers aren't getting access to fertilizer like there's so many things happening all at the same time that people aren't even aware is going on and there's still people that are buying houses at hyperinflated values and throwing their money carelessly at the stock market this isn't the time it's just not and all the while while this whole system burns around our heads we're just sitting at the table just sipping our coffee and insisting that it's all fine it just floors me i'm sorry that this turned into such a rant video uh that went on for so long but i want to thank you for taking the time to read through this with me um and i hope that i was able to explain it in the way that uh that made sense and uh and that i was able to give you some information that you found useful the situation right now is extremely dangerous and i want to caution absolutely everyone who is willing to listen against being careless with your money right now it's not a good time and i really want to help protect as many people as possible by letting them know what to look out for what triggers and what markers there are for a crash and so far thank god hell's trading floor has somehow been able to maintain its profitability and i'm seeing more wins from the community than i have as we've been going through this crash than i have since we started um it's obvious to me and it's obvious to the analysts and the mods that we're collectively getting more intelligent and we are getting better at this and i'm really really grateful for everybody who is in the community that came together and made this possible so the list is too long to name everybody but thank you all for being a participant in health's trading floor i'm so thankful for all the mods the managers the analysts and every every single one of you who has been a part of this it's been a it's been a [ __ ] revelation and a revolution of tremendous magnitude and it's really changing a lot of people's lives i hope that it will end up being for the better and that we come out on top of this thing no worse for the wear thank you guys so much for watching and i will look forward to seeing you tomorrow at the bell at which time we will have a hell of a time in the markets
2022-07-01 00:35
