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Another Day, Another Couple of Trillion Dollars from the Fed in Bailout Largesse

April 1, 2020 (EIRNS)—Yesterday the Federal Reserve announced that it would be opening a new set of financial floodgates to dozens of foreign central banks, by allowing them to join in the repo feeding frenzy at the Fed trough. Concretely, those banks (which so far have not been named) can now get their hands on urgently needed dollars through an overnight exchange of their holdings of U.S. Treasuries for cash from the Fed, with the promise of repurchasing them (repo) the next day. Only, of course, nobody really expects them to return the cash and buy back their Treasuries; the loans can be “rolled over as needed” every 24 hours, the Fed stated. The program is slated to start up on April 6, and last at least six months. How much money this will involve has not yet been revealed.

One day earlier Fed Chairman Jerome Powell had announced that the Fed balance sheet now stands at $5.3 trillion, and counting. Some analysts believe that it could reach $10 trillion by year-end; but under the British Empire’s current policy of trying to bail out the entire global speculative bubble of $1.8 quadrillion—a fool’s errand, if ever there was one—we will be seeing that $10 trillion in the rearview mirror in another few weeks—if the system survives that long.

The problem that the new repo facility is meant to solve is that the desperately illiquid central banks around the world have been dumping Treasuries on the open market, wreaking havoc on the market. As the Fed put it in their announcement, “This facility should help support the smooth functioning of the U.S. Treasury market by providing an alternative temporary source of U.S. dollars other than sales of securities in the open market.” Reuters noted taciturnly in a March 31 wire: “That could be particularly important in coming weeks as measures to control the spread of the virus shuts down commerce and potentially leaves companies and countries that do business or borrow in the U.S. currency struggling to stay afloat.”

Yesterday’s announcement, according to a compendium published by Reuters under the headline “What the Federal Reserve Has Done in the Coronavirus Crisis,” adds to an alphabet soup of desperate bailout operations that the Fed has already activated. “The Federal Reserve has moved into overdrive rolling out new efforts almost weekly,” Reuters wrote. They now include:

• Interest rate cuts;

• Repo market operations;

• Quantitative easing;

• Discount windows;

• Central bank foreign currency swap lines;

• Term Asset-backed Securities Loan Facility (TALF);

• Commercial Paper Funding Facility (CPFF);

• Primary Dealer Credit Facility (PDCF);

• Primary Market Corporate Credit Facility (PMCCF);

• Secondary Market Corporate Credit Facility (SMCCF); and

• Money Market Mutual Fund Liquidity Facility (MMFLF).

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