FED’s Powell Announces Additional $60 Billion Per Month Of “NOT QE” - a podcast by McAlvany ICA

Only 4% of CEO’s see economy improving over next 6 months

FED still providing up to $75 billion in overnight loans

GE freezes pensions for 20,000 employees



 



The McAlvany Weekly Commentary

with David McAlvany and Kevin Orrick



FED’s Powell Announces Additional $60 Billion Per Month Of “NOT QE”

October 16, 2019



“I think without those reference points you might be tempted to think of your brand of politician as having the country’s best interest in mind. After reading both of those books I think you will look at all politicians the same way, as being incredibly self-interested, and not particularly interested in what is best for the country.”



- David McAlvany



Kevin: David, if you forgot when we were talking – let’s just say I said that the Federal Reserve has just promised 60 billion dollars a month addition to the market, a little bit like quantitative easing I, only larger. And corporate CEOs have the lowest confidence level, actually very, very low level, where they look ahead and say, okay 4% of us believe things are going to be better in six months, when would you think I was talking? Remember, the 60 billion, the corporate CEOs.



David: 2008, 2009, middle of the global financial crisis.



Kevin: How about October of 2019? (laughs) Those are the facts right now. We have to talk about this. Powell says that that 60 billion is not quantitative easing. Well, what is it?



David: We may think of present tense problems at Deutsche Bank, and they have had problems for the last couple of years, or if you reflect back to 2008-2009 and the role that systemically important banks played in the global financial crisis, would anyone think about or reflect on BNY, that is, Bank of New York Mellon as a very important player today? That is not the topic for October 17th Tactical Short call. We are doing our quarterly call and it is at the periphery of the topic.



We are going to be talking about managing short side beta in an extraordinary environment. But it is on topic today because you have Bank of New York Mellon who is the bottleneck of a 2.4 trillion dollar repo market, the Tri-Party repo market. Just a few years ago J.P. Morgan exited the business. They left Bank of New York Mellon the sole provider of clearing and settlement for these repos, again, 2.4 trillion dollars’ worth.



Kevin: You’re talking about just general liquidity to the short-term market. That is what these repos provide, right? And they are the bottleneck of trillions.



David: Wondering if all is well in the repo market is, by default, asking if all is well with one of the financial market’s largest custodial giants – custodial in this sense not being the cleaning crew of Wall Street (laughs).



Kevin: And speaking of CEOs, usually when the captain of the ship gets off first, the ship might be going down.



David: You are referencing the CEO leaving Bank of New York Mellon here in the last few days, they are losing their CEO, and that may an issue in months ahead as there is pressure which remains in the repo market, and you have the primary player in that market searching for new leadership.



Kevin: Yes, but we have the Federal Reserve. They can smooth out everything these days, can’t they?



David: Yes, and I think, actually, that CEO departure was for greener pastures. Fixing what is broken at Wells Fargo is, I think, where that CEO is headed. But you have this context, back to what you said of the Fed, this is a context of concentrated responsibility with BNY, and it is easy to see how the Fed has stepped in to provide liquidity, and may, in fact, remain in the role of market smoother. We used to think of the Fed as being involved as a last resort. Well, they are now the market smoother of first resort,

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