Following a series of repurchase operations that were supposed to be temporary, last week Federal Reserve Chairman Jerome Powell apparently felt that the liquidity issue had not yet been solved.
As he said "Indeed, my colleagues and I will soon announce measures to add to the supply of reserves over time." And sure enough, later in the week the Fed announced that it was going to start purchasing short-term treasury bills.
Which is startling in the sense that even after doing almost a month of repo operations, those transactions have not been able to calm the pressures in the funding market. Which in itself is far from ideal, although perhaps only exacerbated in how Federal Reserve officials continue to tell the public that things are normal in the market and there's no cause for concern. Similar to how prior to the financial crisis in 2008 Ben Bernanke and Hank Paulson repeatedly warned the country about how the subprime issues were contained.
So while Powell states that this is not quantitative easing, it sure seems like a matter of semantics at best. For the first couple weeks of repo transactions, the primary reason offered was that it was for quarter-end tax purposes. Now the end of the quarter has come and gone, and the Fed intervention continues to grow. And keep in mind that with each one of these programs that are introduced, they are all adding additional money into the system.
Fortunately Dave Kranzler of Investment Research Dynamics joined me on the show again to provide an update of what's happening, what you should be aware of, and why the Fed is taking these unusual actions.
So to discover what's really going on, click to watch the video now!
Dave Kranzler spent many years working in various Wall Street jobs. After business school, he primarily traded junk bonds for a large bank. Dave graduated from Oberlin College with majors in Economics and English and he also has an MBA from the University of Chicago, with a concentration in accounting and finance. Currently, he co-manages a precious metals and mining stock investment fund in Denver. He has nearly thirty years of experience in studying, researching, analyzing and investing in the financial markets. His daily articles can be found at his site, Investment Research Dynamics.