CNBCs Santelli; Fed actions could be a “de facto nationalization” of the short-term credit markets

The Fed is the market maker and lender of last resort

Chris,
I cant believe the number Grant just gave (3 trillion).

CNBC, Santelli Exchange: The Fed’s quiet about-face

Dave

A subscriber passed along a short video of a CNBC interview between CNBC’s Rick Santelli and Jim Grant of the Interest Rate Observer, and I thought it would be a useful watch. Both participants essentially agree with what we have been discussing all along; the domestic short-term debt markets are now centrally managed from top to bottom.

Here are the major points to keep in mind as you watch;

  • Rick Santelli wonders if recent Fed actions represent a “de facto nationalization” of the overnight lending markets and if they will be permanent.
  • Jim Grant estimates that total overnight, temporary, and permanent Fed lending has amounted to roughly $3 trillion since early September.
  • Grant says that the Fed is centrally administering the short-term lending and credit markets.
  • Grant and Santelli both mention the word “insouciance” to describe Fed behavior and their responses to market forces.
  • The Fed has replaced the large banking institutions in the overnight lending market and has become the market maker and lender of last resort.
  • Mr. Grant erroneously conflates Federal Reserve action as representing the actions taken by the federal government. He says that the government is now in charge of the credit markets.
The Fed’s actions are deliberate and it doesn’t care what we think anymore

If you have been reading my articles over the years then nothing these gentlemen discuss should come as a surprise. However, there two are important differences between what Messrs. Santelli and Grant discuss and what we discuss.

  • First, Mr. Grant uses the term “insouciance” to describe the Fed’s behavior during its recent actions, which just means that the Fed is carrying out their market operations with a sense of nonchalance or indifference. But you and I both know that these “stimulus” programs are well-planned from behind the scenes and are designed exclusively to keep the United States federal government in business, while fooling the general population behind these true intentions.
  • The Fed is effectively in charge of managing the entire yield curve, not just the short-term markets.
The central banks control this steamroller, which means higher global stock, real estate, and bond prices

I think there is a more effective way of describing the Fed’s behavior. The Fed’s success in its endless stimulus programs is hinged on the public’s willingness to accept them. Ten years ago, it took a potential catastrophe to get the world on the plantation, but the investing public has been conditioned properly to accept the current Fed psychology. The Fed and its owners know this, so they carry out their operations with little concern for what we think, because what we think no longer matters. Perhaps in this regard, Mr. Grant’s choice of wording is correct; the Fed is indifferent to our anxieties.

When I employ the term “Marxist” to describe the current financial and economic systems, I use this word deliberately. The privately-run central banks are now in charge of the entire process, including price discovery and credit availability, and there is nothing we can do to stop this steamroller. The only thing that will end its forward momentum is if the elites want it to. They obviously seem intent on driving the asset prices higher and we must accept that they have the power to control these markets.

Up, up, and away; Trillions of dollars need to find a home and global real estate is still an asset of choice.

I go back to my original theses from 2013-2016. My primary observation; in the wake of last decade’s manufactured crisis, the elites had carefully placed the global economy on a financial IV-drip that could be removed at will. I submitted that their intent was to buy up the world and that they could crash the global economy whenever they felt compelled, but that if they did so they would get the blame. Thus, I still believe that they are propping up the global asset markets and economy for some future course of events.

We will find out in the future, but for now, these trillions of dollars are going into dollar-denominated assets. Global real estate is essentially priced in US dollars, so be prepared for higher prices. That’s right; prices in Hong Kong, Sydney, Moscow, London, Washington DC, and Toronto will continue rising even if their residents can no longer afford to buy. Domestic stocks will keep rising, too. I wish I had better news, but the news is especially grim if we don’t own the income-generating assets that are going up in value.