The Wall Street Examiner » Wall Street Examiner Exclusives http://wallstreetexaminer.com Get the facts. Tue, 31 Mar 2015 13:23:16 +0000 en-US hourly 1 Where’s The Access King When You Need Him? http://wallstreetexaminer.com/2015/03/wheres-the-access-king-when-you-need-him/ http://wallstreetexaminer.com/2015/03/wheres-the-access-king-when-you-need-him/#comments Sat, 28 Mar 2015 19:23:53 +0000 http://wallstreetexaminer.com/?p=241776 Jon Access King Hilsenrath and Mikentucky Derby posted a report in the Wall Street Journal this weekend on Janet Holleran Yellen’s Friday speech to an adoring crowd of professional conomists in San Francisco. The reporters spent 16 paragraphs on a news free rehash of the Chairlady’s, seeming endless, and endlessly boring, no news is good news, tour d’farce on all the reasons the Fed will take its time raising rates. She, and they, covered everything we already knew about the US economy, while avoiding the elephant in the room– that is, the real reason why the Fed will delay, delay, delay in raising rates. It knows that Abracadabra Theory does not work.

In the good old days the Fed more or less controlled the Fed Funds rate by keeping reserves in the system tight. Each day it would enter the market and add or drain a small amount of money to or from the system to herd the Fed Funds rate toward the target range. Usually that worked. Today they can’t do that. There’s just too much cash in the system.They historically controlled rates by adjusting the supply of money each day. Today, there’s too much cash in the system for them to control.

So the New York Fed is doing a dog and pony road show to try to convince market insiders- the Primary Dealers, banks and money market funds that are active in the short term paper market, that yes, Virginia, the Fed really does have the tools to control interest rates when there’s $2.7 billion in excess cash in the banking system. The Fed is, after all, the great and powerful Oz! All we need do is click our ruby slippers and believe. The Fed will pull a magic wand from its toolbox, wave it around, shout “Abracadabra, rates go UP!” and voila! The market will believe and rates will magically rise, in spite of all that excess cash lying around.

Jonathan Spicer at Reuters was the first mainstream media guy to begin to pull the covers off this subject. Meanwhile, not a peep about it from Access King or Mikentucky. The Wall Street Journal always breaks bad news after the horse has bolted from the stable.

In case you missed it-

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The Biggest Uncovered Story Of Them All Starts To See Daylight http://wallstreetexaminer.com/2015/03/the-biggest-uncovered-story-of-them-all-starts-to-see-daylight/ http://wallstreetexaminer.com/2015/03/the-biggest-uncovered-story-of-them-all-starts-to-see-daylight/#comments Fri, 27 Mar 2015 19:05:26 +0000 http://wallstreetexaminer.com/?p=241661 The New York Fed is doing a dog and pony road show to explain to market insiders, that yes, Virginia, it really does have the tools to control interest rates when there are $2.7 billion in excess cash in the banking system. The Fed is, after all, the great and powerful Oz. All we need do is click our ruby slippers and believe. The Fed will pull a magic wand from its toolbox, wave it around, shout “Abracadabra, rates go UP!” and voila! The market will believe and rates will magically rise, in spite of all that excess cash lying around.

Jonathan Spicer at Reuters is the first mainstream media guy to begin to pull the covers off this subject, which I have been ranting about for months. I just wrote about the credit he should get for finally giving this issue the light of day. It’s only the beginning. That post included a short clip from a Radio Free Wall Street video I posted on February 25 where I briefly and calmly raised this issue.

Just the week before, I had done a longer video about this issue. It was one of the more spectacular meltdowns that I tend to have when discussing the Fed. The following video is a condensed version of that program. I start out cool, calm, and collected, but you can almost see my blood pressure rise as I become more agitated through the duration of the rant. I hope that this helps you to understand the issue here, one of which may be that I am completely crazy. The question you must answer for yourself as you watch is who is crazier? Me or the Fed?

Enjoy.

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Here’s Why The NY Fed’s Head Trader Is Now Doing A Dog and Pony Show That You Need To Know About http://wallstreetexaminer.com/2015/03/heres-why-ny-feds-head-trader-is-now-on-a-roadshow-that-you-need-to-know-about/ http://wallstreetexaminer.com/2015/03/heres-why-ny-feds-head-trader-is-now-on-a-roadshow-that-you-need-to-know-about/#comments Thu, 26 Mar 2015 23:00:48 +0000 http://wallstreetexaminer.com/?p=241525 Jonathan Spicer (@jonathanspicer on Twitter) is one of the best Fed reporters in the mainstream media that you have never heard of. Spicer wrote a piece in Reuters today describing a dog and pony show that the NY Fed has taken on the road to allay fears among market insiders that the Fed won’t be able to control short term rates when the time comes to raise them.

This is a subject that I have been ranting about for months. The mainstream media has avoided it assiduously in spite of me constantly haranguing various Fed reporters about it. Now that Spicer has broken the story, the floodgates will open. You can be sure that the Wall Street Journal’s Jon Hilsenrat will be on it like a fly on horseshit to get all the credit for it next week. He’ll report the Fed authorized, whitewashed, rubber stamped, and promoted version of the story.

So kudos to Spicer for getting on this. It’s a huge story. As usual, I raised awareness of what is to become a monster issue months before anyone in the Wall Street captured media either saw it or had the balls to write about it. And I’ll be here to correct the inevitable misimpressions that the Fed captured mainstream media promotes from here on.

Here’s a clip from my February 25 Radio Free Wall Street video. It was by far not the first time I talked about it, and now that the mainstream media has picked up the ball and started to run, I’ll be around to correct their misinformation as they spew it.

Spicer’s post – Fed market gurus prep rate hike amid last-minute anxieties.

Here’s a post I wrote on March 17.

Why Are We Speculating About When The Fed Will Raise Rates When The Real Issue Is How

 

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Here’s How Blinding The Wall Street Media Hype Is http://wallstreetexaminer.com/2015/03/heres-how-blinding-the-wall-street-media-hype-is/ http://wallstreetexaminer.com/2015/03/heres-how-blinding-the-wall-street-media-hype-is/#comments Thu, 26 Mar 2015 17:31:18 +0000 http://radiofreewallstreet.fm/?p=27423 Read more →

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This is a syndicated repost courtesy of Radio Free Wall Street. To view original, click here.

Lee Adler goes behind the paper curtain of Wall Street propaganda to strip away the media hype and hysteria around the financial news headlines to show you the actual facts drowned out by all the noise. This week he looks at why CPI really IS higher than it looks, why housing is not as recovering as the headlines suggest, and why durable goods orders were not as bad as the media hysteria on Wednesday indicated. He shows what real time withholding tax collections tell us about the real trend of the US economy, and pulls back the curtain on the key technical levels that really matter for stock prices.

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Today’s RFWS was absolutely outstanding. (I’m glad I actually watched this one rather than just listening while running.) When it comes to financial journalism, Lee, you remain an island of sanity in a huge sea of crap. Thanks.

Bob

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Here’s Why We Appreciate Housing Sales and The Fraud MUST Go On http://wallstreetexaminer.com/2015/03/heres-why-we-appreciate-housing-sales-and-the-fraud-must-go-on/ http://wallstreetexaminer.com/2015/03/heres-why-we-appreciate-housing-sales-and-the-fraud-must-go-on/#comments Mon, 23 Mar 2015 16:52:37 +0000 http://wallstreetexaminer.com/?p=241021 “Sales of previously owned homes rose in February, a sign that the housing market is healing…” That’s how the Wall Street Urinal reported today as it pointed to a 1.2% increase in the seasonally adjusted (SA)  nonsense National Association of Realtors (NAR) existing home sales (EHS) number. The reported figure is an  annualized number, multiplying the monthly SA error by 12. The report also featured a 4.7% year to year increase which was just plain wrong because it compared 2 SA annualized wrong numbers. The NAR also reported the “good news” that prices rose 7.5% year to year. It’s really good because it’s not inflation, it’s “appreciation.”

The WSJ also mentioned in passing, “News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the National Association of Realtors.” Obviously they have no incentive to report the news with a positive slant, their multimillion dollar customer, the NAR, notwithstanding. Rupert Murdoch would never allow cash to influence the honest financial and political journalism, in which he so fervently believes. Thank God for American patriots like Murdoch who support free markets and the Constitution of the United States.

But I digress. It’s just that my admiration for the WSJ and a great American like Murdoch are so great, I can’t resist throwing kudos their way. But back to the topic at hand…

The NAR is kind enough to report the actual, non-seasonally finagled monthly number of existing home sales. This number is much easier to analyze because it’s actual data, not the abstract impressionist art over which financial journo art critics fawn.

There were 294,000 (rounded) homes sold in February. If history is any guide, that’s likely to be revised by a thousand or couple thousand next month, but no biggie. That 294,000 was a gain of 13,000 from February. It compares with a gain of only 1,000 in February 2014 and 13,000 in 2013, so it’s a typical February in terms of the recent market.

In terms of the annual change, the gain was 4.3% from February 2014 (based on actual monthly sales). The market is humming along 24% above the level at the bottom of the housing crash in February 2009, and 27% below the housing mania peak in February 2006.

The chart below shows the level of closed sales and contracts each month. The trend is clear. But WAIT! What’s this? Last month’s level is  3.3% BELOW the level of February 2013! It’s not because of any difference in mortgage rates. They are around the same level now as then. The market is apparently just less active now than then.  Rising prices have a way of excluding more potential buyers from the market.

Existing Home Closed Sales and Contracts- Click to enlarge

Existing Home Closed Sales and Contracts- Click to enlarge

There’s also a gap between the big uptick in January contracts (NAR Pending Home Sales) and smaller gain in February closed sales (NAR Existing Home Sales – EHS). As contracts foreshadow closings in the subsequent month, this gap develops every year in February, possibly because February is a short month or possibly because more people who go to contract in January prefer to settle in March. In any case, expect a bigger jump in EHS in March as these contracts go to closings. But it would take a miracle to catch up with the March 2013 level. Do you believe in miracles?

Perhaps of greatest interest is the 7.5% year to year gain in sale prices (green line in chart below). This is almost a straight line continuation of the housing inflation trend that took off in 2012. Because actual housing prices are not counted in the CPI, you don’t need to worry about this. It’s not inflation, at least according to the BLS or conomists, and the mainstream media shills who regurgitate their idiotic crap.

Home Sale Prices- Click to enlarge

Home Sale Prices- Click to enlarge

The problem is that ZIRP suppresses inventory. Owners who would ordinarily cash out at a certain point in their lives, don’t, because the opportunity cost is too high. Their house is worth more to them as an asset, than cash would be, so they hold on to their properties rather than liquidate. As a result, listing inventory stays near record lows. Low inventories mean that prices will continue to “appreciate” even though demand remains modest.

Housing Sales and Inventory- Click to enlarge

Housing Sales and Inventory- Click to enlarge

If interest rates ever do rise materially and more inventory comes on the market as a result, LTFO! Maybe that’s another reason why the mealy mouthed Yellen is pussyfooting around looking for excuses not to raise rates. It’s why we should all appreciate that the Fed supports asset “appreciation.” The Fed made our bed. Now we gotta sleep in it.

You see, fraud is good. Fraud works. Fraud clarifies, cuts through, and captures the essence of the evolutionary spirit of conomics and central banking.

And the bigger the fraud, the better, as long as they keep it going forever.

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Here’s How To Play The Game Where The Fed Keeps Moving The Goal Posts http://wallstreetexaminer.com/2015/03/heres-how-to-play-the-game-where-the-fed-keeps-moving-the-goal-posts/ http://wallstreetexaminer.com/2015/03/heres-how-to-play-the-game-where-the-fed-keeps-moving-the-goal-posts/#comments Sat, 21 Mar 2015 19:35:17 +0000 http://wallstreetexaminer.com/?p=240873 I gave Lindsay Williams my thoughts on how the Fed is changing the rules and what to do about it in this interview on Fine Business Radio on Thursday, March 18, 2015.

Listen to Lindsay daily on Fine Business Radio live in the US at 12 Noon ET. Or listen to the podcast of the latest programs here at any time.

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Here’s Who The Real Smart Money Is, and Why I Would Not Bet Against Them http://wallstreetexaminer.com/2015/03/who-the-real-smart-money-is/ http://wallstreetexaminer.com/2015/03/who-the-real-smart-money-is/#comments Sat, 21 Mar 2015 18:29:28 +0000 http://wallstreetexaminer.com/?p=240869 The issue of long and short positions on the ES- Emini S&P futures of large traders came up In the course of my Twitter conversations. When I researched it, I found something that absolutely amazed me. The Wall Street conventional wisdom about the Commitment of Traders (COTs) position reports is apparently wrong! Can you believe that! The Street CW…wrong?

The CW is that the Commercials are the smart money and that small specs are the dumb money. But when I looked into it, the truth was exactly the opposite!

The CFTC puts out the the weekly COT reports for the various futures every Friday for the week ended Tuesday that week. I have found that the positions shown they are only interesting when the numbers for one of the reporting segments is truly extreme. The reporting segments are Commercials, whose primary business is trading in the underlying commodity, Large Specs, which might be hedge funds or other large speculating firms, and Small Specs, who are the schmucks like you and me trading from our laptops while sitting in our dens in our shorts and T-shirts.

I like to run the charts back as many years as I can in order to see where each segment’s positions are extreme. In between it’s hard to see any correlation between any of the reporting segments and subsequent market action. However, we often see consistent correlations between extremes being reached in one of those segments and the subsequent trend.

The tweet that brought me to this point had referenced the large specs in the ES contracts. But it only went back a year, and it made me wonder about the big picture. So I made a chart going back 5 years to get some perspective. This is what it shows.

The Real Smart Money - Click to enlarge

The Real Smart Money – Click to enlarge

Source chart from Barchart.com  (which is an excellent charting service by the way)

It turns out that the real smart money isn’t the Commercials after all. The real smart money is the Small Specs, the “poor schmucks” like me and you that Wall Street likes to belittle as the dumb money!

“How can that be?” I thought. Well, it’s not that the commercials and large specs are necessarily dumb money. But commercials’ primary business is in trading the underlying securities, so their futures positions are usually hedges against an opposite position in the cash markets. In the old days the nomenclature even referred to them as Commercial Hedgers. They are, in essence, the Goldman Sackers and Mohel Lynches of the world–the Primary Dealers trading multiple positions and HFTing their way to their daily skim. Their COT reported positions tell us absolutely nothing about how they are betting on market direction because we have no idea where they are in their underlying positions.

Ditto for the large specs. These are the giant hedge funds and managed money. They too have offsetting hedge positions. We don’t know what their real market posture is. Sometimes the COTs make them look wrong and sometimes not.

But the Small Specs are mostly directional traders. For the most part, they have neither the financial resources nor the algorithms to put on complicated hedge positions. They’re either long or short, not in all cases, but mostly. In my 15 years on the web conversing with successful futures traders on message boards, the one thing that has been absolutely consistent is that virtually all of them were chart traders, from daily charts down to minute charts. They all use technical analysis to the virtual exclusion of fundamental analysis, although they often fade obvious news reaction setups, usually based on studies of support and resistance on the charts.

While the small specs in the futures “can’t get no respect from the Street, I tell ya,” they are the smart money when it comes to knowing how to read charts and knowing how to trade on that basis. The chart above doesn’t lie. The data is clear. Every time the small specs been maxed out long since 2010 the S&P has subsequently risen for months. Right now they have an all time record long position. Are you willing to bet against them?

The Street may not give them respect, but I do. Jack Bogle either has his head up his ass or was blowing smoke when he said he never met a trader who could trade the market short term. I’ve been talking to people who do, every day for 15 years. They’re smart, they’ve dedicated their lives to doing something that is very hard to do and they do it profitably. They know how to follow Professor Berra’s axiom, “You can observe a lot by watching.” They know how to correctly process the information they gain from years of careful, committed observation, and accumulation of historical memory. And they have the guts and cool under fire to act on that information with confidence and precision when their systems tell them to. The Street and its mainstream media PR people may belittle them, but they have my admiration and respect.

I would not bet against them.

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First Time Jobless Claims Continue Bubbling At Record Levels http://wallstreetexaminer.com/2015/03/first-time-jobless-claims-continue-bubbling-at-record-levels/ http://wallstreetexaminer.com/2015/03/first-time-jobless-claims-continue-bubbling-at-record-levels/#comments Thu, 19 Mar 2015 17:04:43 +0000 http://wallstreetexaminer.com/?p=240673 Initial jobless claims have reached an all time record low level for this time in March in a continuing string of record lows has now persisted since September 2013, with the exception of a few weeks here and there. Employers continue to hoard workers at bubble levels.

The data on weekly first time unemployment claims has painted a picture of a US economy that is in a bubble that has been boiling over for 18 months, driven by the massive central bank money printing campaigns and ZIRP.

The headline, fictional, seasonally adjusted (SA) number of initial unemployment claims for last week came in at 291,000. The Wall Street conomist consensus guess was 293,000. That was a near bulls eye.

We don’t play the expectations game, whose outcomes are random and meaningless in the big picture. Our interest is in the persistence of the trend in the actual, unmanipulated, not seasonally adjusted (NSA) data. Tracking and analyzing the actual total of state weekly counts is the best way to see what’s really going on. The Department of Labor reports the actual unadjusted data clearly and illustrates it in comparison with the previous year. The mainstream financial media ignores that data.

According to the Department of Labor the actual, unmanipulated numbers were as follows. “The advance number of actual initial claims under state programs, unadjusted, totaled 259,671 in the week ending March 14, a decrease of 18,254 (or -6.6 percent) from the previous week. The seasonal factors had expected a decrease of 19,127 (or -6.9 percent) from the previous week. There were 285,970 initial claims in the comparable week in 2014.”

Initial Claims and Annual Rate of Change- Click to enlarge

Initial Claims and Annual Rate of Change- Click to enlarge

The week to week change was better than average for that week of March for the second straight week, reversing 2 weeks of below average performance. The actual week to week change was a decrease of 18,000 (rounded). The 10 year average for that week is a decrease of 23,000 (rounded). The current drop compared with a decrease of 16,000 in the comparable week of 2014.

Looking at the momentum of change over the longer term, actual first time claims were 9.2% lower than the same week a year ago. That’s not materially different than the previous week when the drop was -8.1% Since 2010 the annual change rate has mostly fluctuated between -5% and -15%. The current number is solidly within that range.  There’s no sign of the trend beginning to weaken.

At the last bubble peak in 2006, claims began to increase late in that year. The housing bubble had already peaked a few months earlier but the stock market continued on its merry way for 9 more months, not finally ending its run until September 2007. In that instance a clear breakout in the number of claims toward the end of 2006 gave plenty of advance warning that all was not well before stock investors got a clue. Conversely, at the 2000 top, claims had given little advance warning. They began to break out concurrently with the top in stock prices through midyear 2000.

Huge cracks have begun to show up in the oil producing states. The impact of the oil price collapse started to show up in state claims data in the November-January period. While most states show the level of initial claims well below the levels of a year ago, in the oil producing states of Texas, North Dakota, and Louisiana, claims have recently been above year ago levels. North Dakota and Louisiana claims first increased above the year ago level in November. Texas reversed in late January.

In the most current state data, for the March 7 week, claims in these states were well above year ago levels after a huge surge that week. Texas was up 22.7% (from 13% the prior week), Louisiana +50% (up from +20%), and North Dakota +44% (up from +28%). I also looked at Oklahoma this week. It is up 43.5% from the same week a year ago. These increases are probably just the tip of the iceberg, with more layoffs and ripple effects to come.

With its huge and widely diversified economy, Texas could be the harbinger of things to come for the entire nation as the ripple effects of the oil collapse and the disappearance of those $85,000 per year jobs spread through the US economy.

In the February 28 week, 25 states had more claims than in the same week in 2014. Many states are on the hair trigger between an increase or decrease versus a year ago. In the March 7 week, just 13 states had more first time claims than the year before. A month ago only 10 had a year to year increase. At the end of 2014 only 8 were up year to year. At the end of the third quarter of 2014 there were just 5. It’s pretty clear where the momentum has been headed.

The growing number of states with year to year increases in claims is akin to a stock market advance-decline line in a negative divergence from an advance in the market averages. It may be a warning sign of deterioration that is not apparent in the topline numbers.

I track the daily real time Federal Withholding Tax data in the Wall Street Examiner Professional Edition.  The growth rate of withholding taxes had run red hot through early February, hitting a 12 year record of +8.7% that had the feel of an economy that had reached the boiling point. That tipped us off that the BLS nonfarm payrolls would blow out the consensus estimate and spook Wall Street traders. Very few if any Wall Street pundits or bloggers made a similar call, but the real time tax data was absolutely clear that February had been a barn barner on the jobs front. There’s nothing like good old-fashioned, real-time, hard, unmanipulated data to give a clear picture of what to expect from the BLS and other economic data that are released well after the fact.

The growth rate of withholding taxes, while still strong, has receded over the past month through this week. So far, this is consistent with the normal short term cycle we have seen in this data for the past few years. The year to year change of over 5% is still a strong number, just not as strong as in February.

Big employers have been partying and hoarding workers like it’s 1999, and that’s not a good sign. The tech bubble topped out in 2000 and the recession followed. The housing bubble peaked in 2006, but the damage did not begin to scare businessmen, policy makers, Wall Street and mainstream pundits until late 2007, and the real collapse followed a year later. The clock is ticking toward a similar end today, and this time the central banks will be hard pressed to engineer another credit bubble recovery.

While we have been teased with signs of change in the claims data from time to time, the trend is still in force. This data will continue to encourage the Fed to engage in the charade of pretending to raise interest rates sooner rather than later.

Initial Claims and Stock Prices- Click to enlarge

Initial Claims and Stock Prices- Click to enlarge

 

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How High For The Fed Policy Resubstantiation Rally? http://wallstreetexaminer.com/2015/03/how-high-for-the-fed-policy-resubstantiation-rally/ http://wallstreetexaminer.com/2015/03/how-high-for-the-fed-policy-resubstantiation-rally/#comments Thu, 19 Mar 2015 01:32:25 +0000 http://radiofreewallstreet.fm/?p=27142 Read more →

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This is a syndicated repost courtesy of Radio Free Wall Street. To view original, click here.

Lee Adler goes behind the paper curtain of Wall Street propaganda to ferret out the really important facts and show you what they mean to the market outlook. This week he looks at the technical indicators and the ECB’s balance sheet to get a handle on where the stock market is headed. He also looks at real time Federal Withholding taxes for an indication of whether the US economy is really slowing or whether it might be entering a blowoff phase. If the latter, it would mean the Fed will raise rates sooner, and more, than anyone expects.

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Free preview clip to be posted on Thursday

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Today’s RFWS was absolutely outstanding. (I’m glad I actually watched this one rather than just listening while running.) When it comes to financial journalism, Lee, you remain an island of sanity in a huge sea of crap. Thanks.

Bob

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Why Are We Speculating About When The Fed Will Raise Rates When The Real Issue Is How http://wallstreetexaminer.com/2015/03/why-are-we-speculating-about-when-the-fed-will-raise-rates-when-the-real-issue-is-how/ http://wallstreetexaminer.com/2015/03/why-are-we-speculating-about-when-the-fed-will-raise-rates-when-the-real-issue-is-how/#comments Tue, 17 Mar 2015 19:47:09 +0000 http://wallstreetexaminer.com/?p=240412 Back in the good old days the Fed more or less controlled interest rates by keeping reserves tight and by adding or removing reserves daily, mostly via its open market repo operations. The Fed would announce a target rate for Fed Funds, and the market would trade around that rate because the Fed could make these daily adjustments to the cash in the system, tightening or loosening the market as needed day to day.

But today there are $2.8 trillion in excess reserves on its balance sheet. Those reserves are the banks’ cash assets that are on deposit at the Fed. It’s the banks’ cash. They can do what they want with it. They usually buy short term paper or maybe bonds or even stocks. But it’s always there sloshing around the banking system, as noted on line 33 and footnote 21 of the Fed’s H8 weekly statement on the US banking system. It circulates around from bank to bank, or to and from the US Treasury to the banks, but it never leaves the banking system. So the Fed can’t manipulate the market by fiddling with reserves as it once did.

Apparently the Fed’s new method of raising rates will be to wave a magic wand, say “Abracadabra, rates go up!” and rates will magically rise just because everybody believes that the Fed is the great and powerful Oz. Now that might work for a little while, but all that excess cash will still be out there in one form or another, and I think that anyone who thinks that banks won’t bid aggressively to make loans or buy short term paper is kidding themselves. There might be a published official Fed rate of one kind or another that’s 25 basis points higher than before, but in the real world, unless that excess cash begins to be removed from the system, actual market rates at which banks transact actual bidness probably won’t rise much, if at all.

Since the Fed hasn’t made a peep about selling assets, or even just letting them run off as they mature, those reserves aren’t going anywhere any time soon. All that cash will still be out there in one form or another, regardless of whether the Fed calls them deposits, or RRPs, or Term Deposits, on its balance sheet. To the banks, it makes little difference. All are cash or near cash assets to them. A deposit, by any other name, is still a deposit.

Now the Fed says no worries, we can raise rates by paying the banks a higher interest rate on their reserve accounts, or by paying them more interest via reverse repos or term deposits, both of which increase the taxpayer subsidy to the banks. Yeah that’s the ticket, the banks will raise market interest rates because the Fed will be giving them billions more each month in guaranteed, money for nothing, free income.

That in turn will come out of our pockets because it will reduce the Fed’s income, which it returns to the Treasury. So we end up paying a subsidy to the banks. They get more guaranteed free income. I’m just wondering.  What do we get in this shell game? That’s right. We get scammed. Again.

I had a bit of a rant about this in my interview with Lindsay Williams last month. The audio below is set to begin where I hit on this issue at the 7:30 mark.

 

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