The Banks Unlimited Money Glitch: Reverse Repurchase Agreements Explained

The Banks Unlimited Money Glitch: Reverse Repurchase Agreements Explained

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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 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

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