Last week, the Federal Reserve cut interest rates 25 basis points and injected $278 billion into the securities repurchase, or "repo," market over a four-day period and committed to a series of overnight and term repurchase agreements through October 10.
It did so in order to be able to meet its liquidity needs as short-term rates spiked to approximately 10%.
How common was the Fed's intervention? It hasn't happened since the financial crisis in 2008.
The move is another sign that all is not well. Let's be clear, this is not QE4 as many have called it.
The overnight loans unwind the next morning and the daily amounts are not cumulative.
The important takeaway isn't the amount or whether it's QE4 or not (it's not... yet). The important point is the fact that the central bank of the world was in danger of losing control of short-term interest rates.
The Fed is the central bank of the world and it is trapped.
It's been argued that the spike in short-term interest rates was technical and that the Fed has tools available to address the issue, but the bottom line is without the intervention there would have been a serious dislocation.
The main cause for the intervention is what I've been explaining for years, a shortage - not a surplus - of dollars on a global scale.
Despite what you'll hear from dollar perma-bears, the next move for the dollar is higher not lower.
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The second important takeaway is the rising dissent among the committee. Not unlike what is unfolding in Europe.
James Bullard preferred a 50 basis point cut, while Esther George and Eric Rosengren wanted to keep rates steady.
Meanwhile, the trade war uncertainty continues to present the greatest threat to the global economy, according to incoming ECB President Christine Lagarde.
It also presents a compelling speculative backdrop for the better base metal names, but that's a story for another day.
Lagarde recently told CNBC that tariffs that the U.S. and China have imposed on each other's goods are set to shave 0.8% off global economic growth in 2020.
"That's a massive number," Lagarde said,"It's fewer jobs. It's less business going on. It's less investment. It's more uncertainty. It weighs like a big, dark cloud on the global economy."
Remember that Lagarde oversaw bailout programs for Greece, Portugal, and Ireland during the sovereign debt crisis that peaked in 2011 and 2012.
It's experience that will come in handy if I'm right about what's around the corner in 2020.
To your wealth,
Gerardo Del RealEditor, Junior Mining Monthly and Junior Mining Trader.
For the past decade, Gerardo Del Real has worked behind-the-scenes providing research, due diligence and advice to large institutional players, fund managers, newsletter writers and some of the most active high net worth investors in the resource space. Now, he is bringing his extensive experience to the public through Outsider Club, Junior Mining Monthly, and Junior Mining Trader. For more about Gerardo, check out his editor page.