Peter Schiff QE extra light view was laid bare in his latest podcast.
The Fed’s last 25 basis point hike, which took the Fed fund rates to 4.75%, triggered a wave of bank runs as bank account depositors seek a higher return on capital in short-term treasuries than that offered by their bank deposit account. So, the first wave of the bank run began with depositors seeking higher returns, which triggered a liquidity crisis. The second wave of depositors pulling their accounts was triggered by fear that depositors would be unable to withdraw their funds due to a bank failure.
“The Fed’s last 25 basis point hike, which took the Fed fund rates to 4.75%, triggered a wave of bank runs”
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The liquidity crisis was so acute that two regional banks failed, Silver Valley Bank, and Silvergate Crypto bank.
But the banking sector was waving a red flag of liquidity crisis back in November when the Reverse Repo Market hit $351 BN in the biggest weekly jump in history.
The Repo market is where banks go for short-term finance to finance day-to-day funding operations.
So if banks rely heavily on the Repo market, that indicates banking stress, a looming liquidity crisis, and potential bank runs.
Moreover, the technical definition of a recession is two consecutive quarters of negative GDP. So the US economy has been in a recession for six months. The Fed is tightening in a bust, and it is a futile inflation fight. The current Fed fund rate of 4.75% is pitiful in the face of double-digit inflation.
Core Inflation (a useless measure of inflation) excludes housing and food costs and is currently 5.58%.
But the Federal Reserve has an army of PHDs economists, and it owns all the think tanks, so the Fed head knew about the Repo crisis in November, an indication of a bank liquidity crisis. Nevertheless, The Fed hiked rates three times with the economy in a recession.
“back in November when the Reverse Repo Market hit $351 BN in the biggest weekly jump in history”
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We believe the real story is not about inflation but about weaponizing monetary policy with an agenda of consolidating wealth and power in the hands of a few in a kleptocracy. When regional banks collapse, the banking cartel feasts on the carcass, leaving toxic assets for government bailouts, and money printing passed down to the serfs in the form of inflation.
It is neo-feudalism, where future generations own nothing and are happy living in pods eating bugs.
“In effect, this Federal Reserve loan program will have some of the same systemic impacts as QE” – Peter Schiff
Peter Schiff QE’s extra light view is all about bank bailouts, which will accelerate the trickle-up wealth effect
“You could categorize this plan as quantitative easing extra lite.
Understand, this is not exactly QE. The Fed is not buying Treasuries. It will only hold them as collateral for the loans. Once the loans are paid back, the Treasuries will go back on the bank’s books.
But it is like QE in the sense that the Fed will create money out of thin air to make these loans. That is inflationary, just like quantitative easing, although the inflation is ostensibly temporary. When the bank pays back the loan, that money will drain out of the system. Of course, that assumes the loans get paid back,” said Peter Schiff.
So in other words bailouts, QE will ensure that depositors and bondholders get their money, but the purchasing power of the currency will be so diluted that they will lose to inflation.
“Also like QE, the Fed is putting its thumb on the bond market by incentivizing banks and other institutions to hold Treasuries instead of selling them into the market. In effect, it creates an artificial limit on the supply of Treasuries, which will artificially keep prices higher than they otherwise would be,” he added.
“In effect, this Federal Reserve loan program will have some of the same systemic impacts as QE, but on a much more limited basis – thus the term “QE Extra Lite,” said Peter Schiff.
“The powers that be insist this is not a bailout. But it is absolutely a bailout”
– Peter Schiff
Peter Schiff QE’s extra light view reinforces that this is a bank bailout
“The powers that be insist this is not a bailout. But it is absolutely a bailout.
The plan creates a mechanism for banks to acquire the capital they couldn’t otherwise access under normal market conditions. Meanwhile, uninsured depositors will get their money back,” he said.
The government can plausibly claim it is not bailing out SVB or Signature Bank. Both institutions appear to be doomed. But the government is bailing out uninsured depositors and it is setting the stage to bail out other banks that would have suffered the same fate without the loan program.
In effect, the loan program and deposit guarantee signal to other banks that they have nothing to worry about. It also calms the public and lowers the likelihood of bank runs,” said Peter Schiff.
Peter Schiff QE extra light view is a tax on everyone
“The powers that be also insist this won’t cost taxpayers. Agins, in one sense, this is true. The US government isn’t going to raise taxes. And the only way the taxpayer would be directly implicated is if any of the banks taking loans defaults and the Fed taps into the $25 billion in credit protection extended by the US Treasury. But as Peter Schiff pointed out in a tweet, the taxpayer will be on the hook for the inflation tax,” he said
“The government bank #bailout won’t cost taxpayers any money. That’s a lie. While it’s true that no one’s taxes will be raised to pay for it, the #Fed will print lots of money to cover the cost. That’s #inflation, and everyone will pay higher prices as a result,” tweeted Peter Schiff.
