Illiquidity & Gold And Silver In The End Game / Commodities / Gold & Silver 2019

…the financial systemexperienced some serious liquidity shortages in August 2007, and the Fedinjected funds to help keep financial markets operating effectively so thatthey would continue to support ongoing economic activity
FederalReserve Bank of San Francisco, August 2007

In August 2007, a credit crunchswept global markets forcing central banks to provide billions in emergencyliquidity to ensure markets remained functioning. Despite the emergency infusion,financial markets and investment banks collapsed one year later in the greatestfinancial crisis since the 1929 stock market crash and the Great Depression ofthe 1930s.

The financial market turmoilin 2007 and 2008 has led to the most severe repercussions on the realeconomy…money market participants had become reluctant to lend to each other… Repurchase agreements, or “repos,” allow market participants toobtain collateralized funding by selling their own [and/or their clients’] securities and agreeing to repurchase them when the loan matures.
Decipheringthe liquidity and credit crunch 2007-2008, Markus K. Brunnermeir,Princeton University, 2009

The repo market is, in fact, thebankers’ pawnshop, where banks—and, now, money market and hedge funds—in needof quick cash can pawn their (or their clients’) securities when they needquick overnight loans to meet cash obligations the next day.

Illustration by Martha Schoon

SEPTEMBER 2019 - THE RETURN OFTHE REPO CRISIS
September's repo operations on September 17th were the first from the Fed since the 2008 financial crisis, and marked another government action meant torelieve pressure on the nation's economy.
Business Insider, September 26,2019

The Fed has been forced to provide hundreds of billions ofdollars in emergency liquidity to keep overnight repo rates from spiking since September17th when they reached 8.5 %, i.e. the Fed’s target rate is 2 %.

…Had the New York Fed not stepped in to offer a $75billion injection on Sept. 17 and repeated its operations daily sincethen, trouble in repo could’ve spread and caused tighter credit conditionselsewhere,
Gennadiy Goldberg, TD Securities senior rates strategist,Bloomberg News, October 1, 2019
Of the Fed’s serial repo interventions, George Selginwrote, "perfect storm" is not the right metaphor, since such astorm is a freak event that's unlikely to be repeated. What happened in therepo market is, in contrast, quite likely to repeat itself, and might berepeating itself as I write this were the Fed not repeatedly offering freshreserves to the money market. Perhaps "climate change" is more likeit.
Reflectionson the Repo-Market Imbroglio, October 3, 2019

On October 4th, Reuters noted: The New York FederalReserve will continue to boost liquidity in money markets into November... Thebank will offer daily repurchase agreement, or repo operations, offering atleast $75 billion a day in daily cash injections through November 4,

On November 5th,the Wall Street Journal reported the New York Fed had added permanent liquidityto the repo markets by purchasing more than $42 billion in Treasuries inaddition to open-ended interventions.
NewYork Fed Adds $102.14 billion to Markets, Buys More Treasury Bills

-----------------------------------

On September17th, the financial system suffered a severe and inexplicablesetback and was sent to urgent care. There, monetary specialists recommended amassive injection of liquidity to bring rapidly rising indicators of systemicstress back down to normal.

Thespecialists soon discovered the financial system was in need of even moreliquidity and announced the massive daily injections of liquidity involvinghundreds of billions of dollars would continue through October 4th.

On October 4th,they announced the injections would continue for one more month. On November 5th,it was announced liquidity injections would continue perhaps ad infinitum andsome would become permanent.

Throughoutthe crisis, the Fed has issued explanations regarding possible causes for theunexpected bout of severe systemic distress. Many observers found the Fed’s explanationsto be confusing, inadequate and, perhaps, intentionally obfuscatory.

Some believethe underlying conditions are, in fact, fatal, that the temporary stay inurgent care will be followed not by a return to health, but by hospice. Someeven suspect the financial system is already on life-support and hasartificially been kept alive since 2008 by a reinsurance company that would bebankrupted by the historic death benefit due at its demise.

With noviable alternative, the reinsurance company has clearly opted to pay for theincreasingly expensive end-of-life care the financial system demands…until itcan’t.

PROFESSOR ANTAL E. FEKTE, SANDEEPJAITLY AND THE ARMAGEDDON ALERT

I have had the pleasure and honorof knowing Professor Antal E. Fekete for twenty years. A monetary scientist bynature and a mathematician by training, Professor Fekete’s understanding ofgold and money is perhaps more critically relevant today than at any other timein history.

It was Professor Fekete whointroduced the idea of gold backwardation after having bought a seat on theWinnipeg Commodity Exchange (on a professor’s salary) in 1972 to observe howthe world’s first futures market in gold would operate.

It was from this unique vantagethat Professor Fekete saw the importance of the gold basis in signaling whenfiat capital markets might implode—A POINT WHICH WE ARE NOW APPROACHING—shouldgold not be reintroduced into today’s increasingly unstable monetary system.

Sandeep Jaitly, like ProfessorFekete, a mathematician, in addition to then being a London fund manager andexpert in gold and silver derivatives, was introduced to the Mengerian schoolof Austrian economics by Professor Fekete.

 In 2010, Jaitly made a seminal contribution toProfessor Fekete’s study of the gold basis with his concept of the co-basis, acontribution so important Professor Fekete called it “the Armageddon Alert”.

I interviewed Professor Feketeand Sandeep Jaitly on the co-basis and Armageddon alert at Professor Fekete’sGold Standard University in Hungary in March 2010., see https://www.youtube.com/watch?v=rFTPHqQzDg8,

The Gold Basisas a Trading Tool and Armageddon Alert with Sandeep Jaitly

On April 4 & 5, 2020, SandeepJaitly, I, and others will be speaking on the topic Money: Rock, Paper,Scissors to be held at the Royal School of Mines at Imperial College inLondon. To register, see https://purelytheoreticalresearch.com/register.php.

These aremost interesting times. They are about to become even more interesting. Join usin London.

Buy gold, buysilver, have faith.

By Darryl Robert Schoon
www.drschoon.com

About Darryl Robert Schoon
In college, I majored in political science with a focus on East Asia (B.A. University of California at Davis, 1966). My in-depth study of economics did not occur until much later.

In the 1990s, I became curious about the Great Depression and in the course of my study, I realized that most of my preconceptions about money and the economy were just that - preconceptions. I, like most others, did not really understand the nature of money and the economy. Now, I have some insights and answers about these critical matters.

In October 2005, Marshall Thurber, a close friend from law school convened The Positive Deviant Network (the PDN), a group of individuals whom Marshall believed to be "out-of-the-box" thinkers and I was asked to join. The PDN became a major catalyst in my writings on economic issues.

When I discovered others in the PDN shared my concerns about the US economy, I began writing down my thoughts. In March 2007 I presented my findings to the Positive Deviant Network in the form of an in-depth 148- page analysis, " How to Survive the Crisis and Prosper In The Process. "

The reception to my presentation, though controversial, generated a significant amount of interest; and in May 2007, "How To Survive The Crisis And Prosper In The Process" was made available at www.survivethecrisis.com and I began writing articles on economic issues.

The interest in the book and my writings has been gratifying. During its first two months, www.survivethecrisis.com was accessed by over 10,000 viewers from 93 countries. Clearly, we had struck a chord and www.drschoon.com , has been created to address this interest.

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.