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Breakout Delayed Is Breakout Denied 6/11/24

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Yesterday's breakout has been erased. A 5-day cycle of phase has failed early. This morning's pulled back is currently at a critical point. 

I'm on a train headed for Italy. More later!


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Oops voice text typo in the heading. Can't change it because it will change the link and no one will be able to find the thread.


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  • DrStool changed the title to Breakout Delayed Is Breakout Denied 7/11/22

"The Fed has to issue debt to buy debt." What an absolute load of crap. The Fed creates "reserves" out of thin air by issuing a credit to the accounts of the dealers from which it purchased the debt. It paid an interest subsidy to the banks and MMFs as a policy matter. It did not have to do that. In fact, it set the level of those payments at zero for years, and then arbitrarily started subsidizing the banks when it raised the Fed Funds Rate, the IOER, and the RRP rate. Purely arbitrary monetary policy actions. WHen the Fed created that excess money in the system, it had to go somewhere. It went into stocks and bonds, creating the greatest bubbles in history. 

The deposits it created in the dealer accounts instantly became money. The Fed can arbitrarily decide to sell its assets and thereby remove those deposits from the banking system, which the banks don't hold any reserves on. It's simply excess cash that they have on deposit at the Fed. They can trade with each other, but the money can only leave the system if and when the Fed decides to remove it by redeeming or selling the assets it holds. 

So as the Fed lets the Treasury debt roll off the balance sheet the deposits that it created also disappear. 

On the other hand, Treasuries can be repoed. So when the dealers, hedge funds and others buy government debt with repo paper, the money supply also expands. But so does the leverage and the danger. The difference between Fed created money and repo created money is the leverage. It will blow up if they allow prices of stocks and bonds to fall. Under QE, they couldn't fall because the Fed was a constant buyer. 

These crumbbums are a bunch of self congratulatory bunko artists. 

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1 hour ago, potatohead said:

I also learned the real reason we can not afford a recession.....The Feds balance sheet would balloon.

Not gonna be a recession with 1.5 trillion in deficit spending every year. That's crackup boom material. It's like giving crack to a speed junkie. 

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As long as the players are willing to repo the paper and use margin, this BS can continue. That's a realization I came to more than a year ago. Originally I thought QT would crush everything, but Treasury borrowing is exactly the same as money printing because the financial community sees that paper as money. They can't spend it directly but they can use it as collateral up to I think 97 cents on the doolah. 

On that, I'll say, Ciao ciao from Sanremo, Italy. 

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I couldn't listen to the whole video because I have a bad wifi connection at the apartment where I'm staying in Sanremo. Beautiful old town. 

I just heard that one section and of course, it was disheartening to hear him say that the Fed borrows money and there's no change in the amount of debt. Like, huh?

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  • DrStool changed the title to Breakout Delayed Is Breakout Denied 6/11/24
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