The Nomad Economist: Get your Money out of the Banks, Bank Runs Start in America


The Nomad Economist
Premiered Feb 26, 2022

We are living in crazy times. I have a hard time believing that most of the general public is not awake, but in reality, they are. We’ve never seen anything like this; I mean not even under Obama during the worst part of the Great Recession.”

Now the Fed is desperately trying to keep interest rates from rising. The problem is that it’s a much bigger debt bubble this time around , and the Fed is going to have to blow a lot more air into it to keep it inflated.

The difference is this time it’s not going to work.

 It looks like the Fed did another $104.15 billion of Not Q.E. in a single day. The Fed claims it’s only temporary. But that is precisely what Bernanke claimed when the Fed started QE1.

Milton Freedman once said, “Nothing is so permanent as a temporary government program.” The same applies to Q.E., or whatever the Fed wants to pretend it’s doing. Except this is not QE4, according to Powell. Right. Pumping so much money out, and they are accusing China of currency manipulation ? Wow! Seriously! Amazing!

Dump the U.S. dollar while you still have a chance. And it is even worse than that, In addition to the $104.15 billion of “Not Q.E.” this past Thursday; the FED added another $56.65 billion in liquidity to financial markets the next day on Friday.

That’s $160.8 billion in two days!!!! in just 48 hours. That is more than 2 TIMES the highest amount the FED has ever injected on a monthly basis under a Q.E. program (which was $80 billion per month) Since this isn’t QE….it will be really scary on what they are going to call Q.E. Will it twice, three times, four times, five times what this injection per month !

It is going to be explosive since it takes about 60 to 90 days for prices to react to this, January should see significant inflation as prices soak up the excess liquidity.

 The question is, where will the inflation occur first . The spike in the repo rate might have a technical explanation: a misjudgment was made in the Fed’s money market operations. Even so, two conclusions can be drawn: managing the money markets is becoming harder, and from now on, banks will be studying each other’s creditworthiness to a greater degree than before.

Those people, who struggle with the minutiae of money markets, and that includes most professionals, should focus on the causes and not the symptoms. Financial markets have recovered from each downturn since 1980 because interest rates have been cut to new lows.


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