Here Are the 12 Financial-Market Metrics Mnuchin Listed as Reasons for Letting the Fed’s Bondholder-Bailout SPVs Expire on Dec 31

Jawboning alone whipped the markets into froth. So maybe enough is enough, and let taxpayers have their money back as planned?

By Wolf Richter for WOLF STREET.

The Special Purpose Vehicles (SPVs) that the Fed set up earlier this year, and that were authorized by Congress and funded initially with equity contributions from the US Treasury, and that form part of the alphabet soup of bailout programs for investors in corporate bonds, corporate bond ETFs, municipal bonds, commercial paper, money market instruments, etc., have expiration dates written into their term sheets. In July, the initial expiration date of the SPVs – September 30 – was extended to December 31.

On Thursday, Treasury Secretary Steven Mnuchin said in a letter to the Fed that he would request an additional extension of the expiration dates for only four SPVs but let the others five  — the PMCCF, SMCCF, MLF, MSLP, and TALF – expire as planned on December 31.

And he asked the Fed to send the $455 billion in taxpayer money that the Treasury had provided to fund the equity portion of those SPVs back to the Treasury so that it can be re-allocated by Congress for Covid-related fiscal relief.

Mnuchin cited a slew of financial-market metrics as reasons for not extending the expiration dates. These reasons can be summarized this way: The hype and jawboning worked wonderfully in whipping the financial markets into frenzy and bail everyone out that we wanted to bail out, and we didn’t actually have to spend much of this money since jawboning and hype alone did the job.

So here are the financial-market metrics he cited, and they all document that credit markets are frothing at the mouth, as if it were the Best of Times and not in the middle of a Pandemic and crisis:

  1. “The spread on investment-grade bonds has fallen from a peak of 4.06% above U.S. Treasury bonds to 1.40% today.”
  2. High-yield [corporate junk-rated] borrowers “have seen their spread reduced from 10.78% to 4.94%.”
  3. For AAA-rated municipal general obligation bonds, the spread “has fallen from 2.09% above to 0.07% below Treasury bonds.”
  4. For A-rated municipal bonds, the spread has fallen “from 2.37% to 0.26%.”
  5. “In the asset-backed securities market, AAA-rated credit-card secured notes now trade at a spread of 0.30% over the swap rate compared to their crisis level of 2.50%, while the spread on the A-rated tranche has fallen from 4.50% to 1.20%.”
  6. “Market spreads on bonds secured by prime auto loans rated AAA and A that reached peaks of 3.25% and 5.50% respectively are now only 0.05% above their pre-crisis values of 0.2% and 0.7%.”
  7. “During September and October 2020, states and cities were able to borrow $111 billion (38% more than over the same period last year), while total asset-backed bond issuance of $789 billion exceeded its 2019 same-period level by 63%.”
  8. Over the last two months, corporate asset-backed securities issuance totaled $1.08 trillion, similar to last year’s $1.13 trillion.
  9. Over the last two months, non-government-agency asset-backed securities issuance totaled $155 billion, similar to last year’s $157 billion.
  10. “October 2020 saw the highest monthly volumes of new bonds in both the municipal market ($64 billion) and the asset-backed markets ($421 billion) in more than a year.
  11. “The corporate bond market continued its monthly new issue pace of $500-$600 billion.”
  12. “The liquidity and capital position of U.S. banks ensures that they can fulfill the financing requirements of their customers. In the most recent survey by the National Federation of Independent Business, only 2% of small and medium-size firms reported that all their borrowing needs were not satisfied.”

So “in an abundance of caution,” Mnuchin requested that the Fed Board of Governors approve the extension of the expiration dates by an additional 90 days of only four SPVs – two that required funding from the Treasury (the CPFF and MMLF) and two that did not require funding from the Treasury (PDCF and PPPLF).

He will let the remaining five SPVs – the PMCCF, SMCCF, MLF, MSLP, and TALF – expire as per their term sheets on December 31.

And he requested that the Fed return the unused $455 billion of taxpayer funds to the Treasury so that it can be used for Covid-related fiscal relief.

None of these expiring SPVs were utilized much. For example, the PMCCF and the SMCCF, which the Fed combined into the CCF, purchased only $13 billion of corporate bonds and bond ETFs. The Fed stopped buying ETFs in July and has been buying only a smattering of corporate bonds since then.

But the Fed – and very eagerly, the financial media – had originally hyped and promoted the CCF as “$750 billion” in Fed purchases of corporate bonds, bond ETFs, including junk bonds. This jawboning of the markets led to the most blistering credit-market boom and bubble, including in junk bonds, that the US has ever seen, just on the announcement of the SPVs, and long before the Fed ever bought the first ETF, as everyone and their dog was trying to front-run the Fed.

This is the glorious effect of jawboning. Mnuchin, in his letter, explicitly acknowledged that this jawboning had performed the miracles he listed and had ignited this chase for yield. And so maybe enough is enough, and let taxpayers have their money back as planned?

Someone always has to buy the ballooning US national debt – and it’s not just the Fed. But the share of foreign holders is waning. Read… Who Bought the Monstrous $4.2 Trillion Added to the Incredibly Spiking US National Debt in 12 Months? Everyone but China

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  158 comments for “Here Are the 12 Financial-Market Metrics Mnuchin Listed as Reasons for Letting the Fed’s Bondholder-Bailout SPVs Expire on Dec 31

  1. 2banana says:

    Not only is the Fed not buying any commercial paper stuff…

    They are giving money back to the Treasury.

    So, not to “fight the fed” would mean stocks head down?

    “And he asked the Fed to send the $455 billion in taxpayer money that the Treasury had provided to fund the equity portion of those SPVs back to the Treasury”

    • Chris Herbert says:

      Is ‘equity portion’ a euphemism for direct injection of new currency as opposed to borrowing?

      • NARmageddon says:

        No, equity portion is a euphemism for “first in line to take any losses”. That is, the taxpayer, and not the Fed itself, was first in line to take a loss on the lending if any of the loans went bad.

  2. MonkeyBusiness says:

    It’s a very odd day indeed when Mnuchin appears like a sensible adult.

    But the next Treasury Secretary, Yellen will no doubt create an official Plunge Protection Team with unlimited authority reporting only to her.

    Among its mandates:
    1. Shorting is disallowed and is punishable by jail.
    2. Circuit Breaker at 1%
    3. SS Trust Fund will now invest in the stock market.
    4. etc, etc.

    • The Rage says:

      Yellen nope

      • M says:

        With their beloved Yellen in charge, I predict that the banksters will get more, juicier, and more generous handouts from the government, “Federal” bankster Reserve, etc. Pity the bottom 99% of Americans. We just got the

    • MCH says:

      You realize what this is, right?

      Trump has decided he lost. So, he is going to take it all down with him, and salt the earth. Whether it’s true or not, he decided if the last admin can screw with him in the way they did, he is going to do the same to his successor.

      This is just nuts.

      • Cas127 says:

        “salt the earth”

        Literal Dem talking point of the day.

        • MCH says:

          Jackasses, Dumbos… seriously, what difference does it make these days. There was the get Barry out at any cost phase, then the RESISTANCE, and who knows what we’ll get come January 20th. But the bottom line is, it’s just insanely stupid how the sheeple are being lined up by the guys in power to be suckered and turned into mindless pawns to fight each other like its some entertaining gladiatorial game.

          It really is time to have transition rather than one side actively trying to screw over the other whenever its time to give up power. Again, the perception is that they hosed Trump on the way out, now Trump decides it’s time for payback… seriously, the bozos ought to just grow up. Either that, or may be a large chunk of rock can land on DC on January 20th, and we all have a fresh start.

        • Wolf Richter says:


          Please use “Trump” not “Orange.” This just creates more work for me because I have to go in and fix it before I can let the comment out of moderation.

        • MCH says:

          Duly noted Wolf.

          Won’t have to use his name or moniker in another couple of months at this rate.

          Although the score settling is beginning, some of it aimed at making life tough for certain industries. For example, the new rules around medicare drug pricing.

      • Old School says:

        I don’t think so. Some of these were controversial programs to handle a shutdown of the economy. Letting them sunset and the money returned to treasury is kind of a cleaning up stuff before you leave office. Might even be window dressing government accounts before you leave office. Fed is not very accountable to citizens, so I am all for removing some funds from them.

    • M says:

      Amen. I fear that Yellen, whose Santa Claus’s mom, cuddly-like appearance was formerly used to diffuse the growing calls to investigate and punish the “Federal” Reserve bankster cartel, will be used again to enable the funneling of more US national wealth to the banksters.

      The other cronies must need to be bailed out desperately if the “Fed” SPV funds are now being raided for additional billions. It is also a very bad sign when any “Fed” crony, even Yellen, might get into any US Cabinet. God save us from another Geithner or Eric Holder.

    • Old School says:

      Something seems wrong with having a central banker be the treasury secretary only four years later.

      I thought central bankers were academic economists and treasury secretaries were from Wall Street.

      Kidding aside. I thought money printing was a separate skill set from the treasury secretary

      • Dan Romig says:

        Old School: It may seem wrong, but it is rooted in the USA’s history to have the Secretary of Treasury come from ‘a central banker’.

        The first Sec. of Treasury began on September 11, 1789; two years before Congress established the First Bank of the United States – which he was instrumental in formenting. Congress set up the central bank with one provision, and that was a with a 20 year charter, just like the Fed was given when it was established in 1913.

        The first Sec. of Treasury co-founded, with Isaac Roosevelt (same lineage as two subsequent Presidents), the Bank of New York in 1784. This was the first publicly traded stock on the New York Stock Exchange in 1792.

        See the triangle, which is still strong today, of the banking establishment (Federal Reserve), Treasury and Wall Street?

        Oh yeah, the system Alexander Hamilton set up is still calling the shots. Mnuchin is just the latest.

        I do applaud his recent actions with SPVs & the Fed. Thank you Wolf for the report.

    • M says:

      The “Federal” Reserve’s Yellen is to be the next Treasury secretary?! Was a better, more qualified person who has benefited the majority of Americans more, like Bernie Maddoff or Felix Sater or Viktor Khrapunov, not available? :-)

      Could we not just select Treasury secretaries by lottery tickets distributed in prisons? Given the last ones we got, we are bound to get better people. An ancient curse of the Chinese used to be, “may you live in interesting times” — clearly someone cast that on all Americans or else, we broke lots of mirrors.

    • MarMar says:

      Mnuchin, despite his background and his trophy wife, was easily the most qualified member of this administration. Not that that is saying much, but still.

      • M says:

        That may be true. However, as I once wrote President Obama’s White House should be done about all former Latin American presidents/dictators (to help eliminate corruption), all should be presumed guilty, investigated, arrested, and required to prove their innocence before they are released, their position gives them unique power.

        Power corrupts. Insider trading is so easy and so profitable.

        If I could, I would investigate every treasury secretary since Reagan still alive, with wiretaps and every other artifice used against Gotti or Capone. Maybe, even the dead ones, :-)

        I would routinely and automatically do the same to every future treasury secretary, SEC chairperson, “Fed” director or open market committee member, and bank presidents/officers or any owner of the major bank’s control groups.

        Did you hear the old joke:
        As he exited the door of his beautiful, corporate-provided jet holding the bare arm of his young, gorgeous personal assistant provided to him by his bank, into his luxurious, corporate-paid limo, an owner of the majority of a bank’s shares was asked how much his stock was worth. He said billions and billions with a smile.

        He was then asked how much a particular individual, who was a small shareholder who owned the minority of the shares of the bank was worth. He said, “that poor son of a __[gun], he and his shares ain’t worth nothing.”

  3. Martha Careful says:

    Once again, plug into FRED:

    Left axis: (a) Treasury Deposits with Federal Reserve Banks, Billions of Dollars, Not Seasonally Adjusted (TREASURY)

    Right axis: (a) Real Disposable Personal Income: Per Capita, Chained 2012 Dollars, Seasonally Adjusted Annual Rate (A229RX0)

    Beautiful story there that shows the collision of the pandemic. Look at that from about 2012 to now

    • Cas127 says:


      Please keep it up, there are hidden treasures among the thousands and thousands of chartable metrics that FRED makes available (in fact, the challenge is finding the gems bc the FRED structural layout leaves a bit to be desired)

    • cb says:

      @ Martha Careful –

      Why not copy and paste the graph, or at least use a link to it?

      • Wolf Richter says:


        After letting the first few pass, I blocked about 30 of Martha’s links to FRED charts she created on FRED where she juxtaposes, adds, subtracts, and multiplies unrelated data sets to come up with absurd charts. Martha needs to start her own blog to post these charts/links. Twitter works too. Her comments are very welcome though.

  4. YuShan says:

    All this froth in the markets ought to scare the sh!t out of the Fed and make them tighten their policies, given the fact that such episodes always end up in tears. We live in strange times. It’s truly scary, because there is nowhere to hide from this madness.

    • Cas127 says:

      ZIRP-created everything bubble means it becomes harder and harder to diversify risk, since everything becomes correlated via their correlation to ZIRP.

      ZIRP poisons the Net Present Value calculation because artificially zero’ed interest rates impact the NPV much more so than valued assets’ own individual cash flows.

      And it is all Fantasyland, since unbacked money printing is the only real reason for ZIRP’d rates.

      The Fed has been murdering the US economy in the name of saving it.

      • Old School says:

        This is a big deal to me. Fed policy has encouraged the average person to shift to a higher percentage of risky assets. Some of the best thinkers are now at very low equity exposure. Even Buffet is at only about 50% in stocks.

        My 74 year old female friend runs a 100% stock portfolio. She has more than adequate pension income without the stock portfolio so kind of has a why not attitude about it.

        • YuShan says:

          Makes you wonder at what point boomers are finally going to get scared and move their money out of the stockmarket to the relative safety of a bank deposit or Treasury bills. Why would old people even take the risk at these valuations? They don’t have the time anymore to sit out a potential crash. That was the whole logic of the old rule to have your age in Treasuries (i.e. 75% Treasuries if you are 75 years old).

          And if things start going south again and they want to move to safety, who is going to buy their stocks, with younger generations even struggling to buy a house and laden with student debt and little job security?

        • Cas127 says:


          “Why would old people even take the risk at these valuations?”

          It isn’t particularly complicated, but the vast majority of seniors (juniors too) have little financial education…so the concept of financial metric evaluation is unknown to them (PEs, etc.)

          All they know is that any bank account pays absolute sh*t and has for 20 years (again, people need a dollop of financial education to know how abnormal that is).

          So they are herded by government policy (trying to “fix” *other* failed gvt policy) in to the kill box of excessively high equity investment at advanced ages.

          And financial advisors have little incentive to advise conservative investments (near zero yielding in these days) since they cannot justify their asset mgt fees.

          And so the economy goes over the cliff.

          Only internet dissemination of such info has any hope of stopping the madness.

      • YuShan says:

        Stockmarket returns over the next 10 year are likely to be negative, or at least very low, even if the economy does well. That is the consequence of high valuations: returns have been pulled forward and low returns are now baked in the cake.

        And you are very right about NPV: even if expected returns are slightly positive, one has to weigh them against massive risk to principal. Low implied returns means that there is now massive ‘duration’ risk if rates were to rise bit, which could easily happen if inflation picks up.

        There is really nowhere to hide. Stocks, bonds, gold, crypto etc are all correlated now and likely to crash all at the same time. Cash, even at a few percent negative real rate, could be the ‘safest’ option now that all speculation is so massively against it.

    • Lisa_Hooker says:

      @YuShan – hide? Moved to cash several years ago, way too old to risk principal, or covid-19. (OK, a tiny amount of commodities.) Don’t go out of home much. Non-collectable cars rusting in the driveway. Learning to cook well is amazing and fun. Read books, internet, vary large DVD collection. Not making paper equities profit doesn’t bother me. Watching shenanigans of FRB and Congress/Treasury more than simply depressing; rational paranoia. Advice to younger readers based on experience: save more than you think you should and don’t grow old.

  5. Carl Wilson says:

    Part of current administration’s plan to turn over a crashing economy to incoming administration?

    • MonkeyBusiness says:

      Thinking one step ahead, a “crashing” economy will allow the incoming administration to print even more. When will people stop thinking that there’s such a thing as Team Dem vs Team Rep? They are all out for their own pockets. Full stop.

      • Anthony A. says:

        ^^^^ MB, the older and wiser I get, the more this picture becomes clearer. It’s really not about *us* down here, but more about their greed and power trips.

        • Cas127 says:

          Basically just two mafias competing for the protection racket/printing press money.

          Traditional MSM sphincters brought us to this place and the (uncensored) internet is the only hope of getting out.

        • BuySome says:

          A long time ago in a galaxy far, far away…I worked my bones to get out the local area vote for one of those sitting Presidents. I was told that I had a very high success rate. To cut the story short, I did not take up the dinner invite but came to realize that these characters have no interest in earning our support. They are all about being a frontman for a money machine and filling their fat rear with one more steak-on-the-take. We are simply casting in the entirely wrong fishing holes to hook the kind of people who should be running our government. Any of you remember when many candidates used to walk door to door to introduce themselves and let you know what they stood for? Guess they just don’t make good shoe soles anymore.

        • Winston says:

          “Basically just two mafias competing for the protection racket/printing press money.”

          Yup! A perfectly applicable term for a Congressional bill or the THREAT of passing a particular bill is “extortion.” This is also the underlying reason for placing time limits on bills as that allows the extortion to take place multiple times! And, of course, this is completely non-partisan. Watch exactly how this works in the interview of the best-selling author Peter Schweizer in this excellent YouTube video:

          Exposing Corruption in Washington Politics at the Highest Level
          Valuetainment – Nov 20, 2020

      • You mean like 2008?

    • Wolf Richter says:

      Carl Wilson,

      No. Those SPVs should NEVER have been established in the first place, and they didn’t do much if anything for the economy, but they inflated asset prices.

      • Ralph Hiesey says:

        Wolf, you mean you’re against socialism for the rich???
        You’re a brave guy.

      • Earl says:

        First, this is not taxpayer money. It’s credits and debits at the federal reserve as Greenspan and Bernanke have stated before.
        Yes, agree with you. Waste of money but the banksters want to make their money living off the rents! Gotta keep them and wall street happy and afloat. These debits and credits should have been put towards investing! The congress should tell the treasury with Fed assistance to invest in BioTech, HIV Parkinson’s, etc. for medical cures, A.I. and deep learning, space research, 5G, educating our populace, infrastructure, and the many tech industries of the future we need to do. With globalization, and unions dead we aren’t inflating. As long as we have globalization where people will work for 5 dollars per day we wouldn’t inflate (Friedman, and the rest of them were wrong as usual). So, INVEST in these technologies we need badly. The government runs these different venture funds thru the debits and credits system we are doing now. 60-40 split. Government, us the people get 60 to the companies who were supported by us get 40. If we start to inflate we raise taxes and Fed does their interest rate thing to slow the economy down.
        Gents, we are not in the gold standard era anymore, that’s been gone for 50 years. Time to open our minds and think this through better than we have been doing. I know the banksters, wall street, and hedge fund/ private equity guys don’t want to see this because it would take their cash cows away and we the people would be making the profits instead. Please don’t dare say this is socialism. If you do look up what socialism is and what the soviets did.

      • Carl Wilson says:

        “didn’t do much if anything for the economy, but they inflated asset prices”
        So inflation of asset prices was some novelty the Fed just now stumbled upon? Not doing much for the economy? How about keeping the mirage going? It’s gonna crash, but I have a personal preference that “they” get reasonable vaccines underway before the SHTF.

        • MonkeyBusiness says:

          You put too much hope into the vaccines. I suggest you read about Trovan, Bextra, Vioxx, and … more. They were all drugs approved by the FDA and had to be WITHDRAWN after serious side effects later on. First two were developed by Pfizer, so yeah the same Pfizer whose CEO sold a ton of stock the day his company came out with that 90%+ efficacy report.

          Look I am not saying Pfizer ALWAYS produces bad stuff, because that’s not true, but it’s very likely we have to live with this thing for years.

        • MonkeyBusiness says:

          Also to clarify myself. I am not an anti vaxxer. Took plenty when I was a child. I also take flu shots every year.

        • Carl Wilson says:

          Hi Monkey
          Notice that I used the plural. I’m not that well acquainted with Pfizer but there are some candidates that look better.

        • MonkeyBusiness says:

          Carl, I also used the plurals … vaccines. The leading candidates (with 95% efficacy) pretty much use the same tech e.g. mRNA. This is the FIRST TIME they’ve been deployed on human beings which is not something that’s very reassuring.

          Someone suggested that the first 100 people to take it should include members of the Senate, Congress, Jeff Bezos, Bill Gates and our billionaires. I agree. If they take it and survive the following six months, I promise I’ll be number 10000001.

        • Old School says:

          A good way to look at assets is that they can pay you two ways. You can sell and get the cash today or keep the asset and get the cash over time. The Fed change the asset value with Zirp and we but probably can’t demonstrate they can change the long term real cash flows.

          Anyone buying assets today are paying a high price for the coming real cash flows. Time to buy was a decade ago.

        • Winston says:

          “You put too much hope into the vaccines.”

          They may very well be as effective as claimed, but it is unknown for how long.

          Also, if you REALLY dig for it, there is some authoritative (i.e., from MDs) cautionary talk about the COVID-19 vaccines currently in the news. They are mRNA vaccines which use an entirely new mechanism never previously used for a vaccine used on humans. One of the cautions is about the chance for an autoimmune reaction which is where the body attacks its own healthy cells. The normal vaccine testing time for vaccines using the old mechanism is around 10 years to check for any long term negative effects.

          There is also some buried news starting in early November about tens of thousands of mink deaths due to a COVID-19 mutation which infected them and then spread back to humans in Denmark and worry that such mutations might reduce the effectiveness of any vaccine. As a result, Denmark is in the process of culling all 17 million minks there. Search for “COVID-19 outbreaks at US mink farms raise alarm after mutant strain spreads to humans in Denmark.”

      • MCH says:

        You realize, this is just taking tools away from the tool box.

        Now, Trump is gong to do his level best to make sure the asset prices deflate. Basically, he is paying forward to his successor what he thought was done to him.

        • Wolf Richter says:

          Those tools have hardly been used at all. The big equipment — buying Treasury securities and MBS — is still in full use.

          And he is not taking anything away. He’s just letting them expire, as planned. He just didn’t ask for an extension. That’s it.

          And the expiration date has been known since it was first set.

        • MCH says:

          Hmm, I see, well, now I know.

          But there should be some degree of psychology at play here, right? After all, having the tools available should provide more of a comfort than having fewer capabilities to keep the asset bubble inflated.

        • BuySome says:

          Don’t fool yourself…we’ve got more than enough “tools” available in this country. Many of them wear suits. I just such a shame they give a bad name to a fine cut of cloth.

      • Cas127 says:

        And every single asset crash from any high (no matter how artificially inflated by government policy) is used to justify the subsequent round of inflationary gvt policy.

        It is like tweeking meth heads have been running the Fed.

        And at this point, the US economy is starting to look like those “Faces of Meth” photo galleries.

        • MarkinSF says:

          Every single asset crash results from Government policy? The US has had asset (especially land) bubbles since it’s inception. Long before the FED was even created. The bubbles are driven by the credit cycles. The availability of credit lends itself to market speculation which in turns leads to lower and lower interest rates. The goal of the main players is to get everyone in the pool. FOMO & dreams of getting rich by doing nothing permeates society and the race to the top picks up more and more steam. The plug is pulled and the suckers cash goes down the drain and the nets of the bankers and big players are ready and waiting. I realize this is elementary but how to express as succinctly as possible. These real estate cycles have been studied and defined. Basically it’s the 18 year real estate cycle. 14 years up and 4 down. Since 1800 it has been remarkably consistent. Except for? The period of 1945 through the early 70s. I’ll leave it to you to figure out why. I think the Harvard press printed something about this cycle a few years back but the realization has been in existence since the 1930s.

        • Cas127 says:


          “Every single asset crash results from Government policy? ”

          I never said that.

          But the accelerated and amplified boom Bust cycle of the last 20 yrs deeply, deeply implicates gvt policies (see unprecedented decades of ZIRP).

          Did the gvt do this alone?

          Of course not…they just provided the primary motive force (ZIRP…”necessitated” by a 20 yr refusal to reform China policy failures)

        • MarkinSF says:

          “And every single asset crash from any high (no matter how artificially inflated by government policy) is used to justify the subsequent round of inflationary gvt policy”

          When you imply that each bubble is inflated by government policy then yes I take that to mean government policy is the culprit. The reality is that open market forces are allowed to bid. speculate, and manipulate land values. When everything collapses then it’s blame the government for failing to properly clean up after the gigantic mess this creates. And even worse, due specifically to the complete undermining of government by market forces (i.e. , the billionaires who run this planet and their manipulation of it) that very same body is now completely captive by these “free market” forces.
          I pointed out the period of 1945-1971 because land values as well as other asset values were stable. They moved with inflation. Why? We had a responsible, competent government that had a tax system in place that ensured wealth inequality would be held in check, had motivated professionals who actually worked on behalf on the departments which they were charged (Betty DeVos as Secretary of Education?!) and actually had a vested interest in ensuring the success of the United States).
          So instead of constantly ragging and harping on how Government is the cause of all of our problems we should looking at the true culprits of our dire predicament and figuring out how to hold them to account.

        • Lisa_Hooker says:

          @Markin – “We have met the enemy and they is us.”

      • RightNYer says:

        I think there’s an argument that some of the SPVs should have been established, but only to lend to small businesses that truly couldn’t raise other money.

        For example, loans that kept small pizzerias or barber shops alive until COVID lockdowns ended may have been sensible.

        The way they were implemented in practice was a disaster, as you said.

        • Wolf Richter says:

          A restaurant that is shut down doesn’t need a loan. It will never be able to deal with that loan. It needs to default on its rent and other debts and just walk out on the landlord. A restaurant is as good as its people (chef, managers, cooks, wait staff, etc.), and it can set up next door a year later with the same people and thrive going forward. But it cannot survive when it’s shut down and accumulating debt. Powell said so too. Loans are the wrong solution here.

        • RightNYer says:

          Wolf, I was thinking of one of the “forgiveable” loans, but I do see your point.

        • Wolf Richter says:

          I see. The forgivable PPP loans were handed out without the Fed. That was the SBA that was doing it, in conjunction with banks. And that program expired in early August, I believe.

          What the Fed is doing under the Main Street Lending program is supporting banks in making regular loans to small businesses. The bank makes the loan, and underwrites it according to its rules, and the Fed buys the loan from the bank. This program has not been used much at all. Banks are lending just fine to businesses that are open. But no one wants to lend to a closed small business. Even the small business owners don’t want more debt. That’s the last thing they want. They want rent relief and they want to shed other obligations.

        • cb says:

          @ Wolf –

          Rent is a root of evil. It allows freeloaders to live off the production of others. It subjugates and makes slaves of one class to another freeloader class.

  6. Martha Careful says:

    Whatever recovery there has been during the pandemic, is entirely because of stimulus efforts. While it’s likely that a great deal of corruption and graft was connected to that process, taking it away now, as the virus explodes is not only criminal, but more akin to efforts like premeditated genocide. How can any American accept the actions of the trump gangsters, how can anyone knowingly support the destruction of this country, by a handful of insane maniacs?

    • Absur Ditty says:

      We need to get past thinking of it as stimulus, monetarism is the ultimate solution. Don’t stop with a little stimulus, keep it going past that into full solution mode! Take it up a notch!

      Imagine govt employees with stacks of Benjamin’s driving around our cities, and anytime they see a homeless person, just handing over a stack of cash! Boom! no more homelessness! And we all know that ink and paper are cheap! Let’s do this!

      • Cas127 says:

        “Imagine govt employees with stacks of Benjamin’s driving around our cities”

        Full stop (the handing out bit is a small afterthought in practice).

        Maryland has the highest number of millionaires per capita in the US and it isn’t because of the f*cking crab cake industry.. It is because of the proximity to the DC money spigot.

        Lobbyists are the worst, but there is a huge ancillary army of consultants, vendors, and Fed employees that make up that VA/MD Political Class Army, who talk like hippies (“servants of the people”) but act like gangsters (“cut my doubled budget, Congressman, and you are out on your ass”)

      • Chris Herbert says:

        A national job guarantee makes sense. You have an obligation to work and Congress has an obligation to provide you a job. Employer of last resort.

        • Lisa_Hooker says:

          My only “obligation” is to not harm “you”, directly or indirectly.

    • Lisa_Hooker says:

      Yup, More Money Today. It’ll all work out just fine. Where is Dr. Pangloss when you need him?

    • p coyle says:

      administration changes have had the same tired good cop/bad cop routine as long as i can remember. the end result is always more of the same. and no need to panic, the new boss has already promised that nothing will fundamentally change.

  7. Martha Careful says:


    left axis: (a) Real Disposable Personal Income: Per Capita, Chained 2012 Dollars, Seasonally Adjusted Annual Rate (A229RX0)

    Right axis: (a) Consumer Loans: Credit Cards and Other Revolving Plans, All Commercial Banks, Billions of U.S. Dollars, Seasonally Adjusted (CCLACBW027SBOG)

    Taking away stimulus will explode credit card debt, crash businesses and stall any economic growth. The load of crap projections about higher GDP growth are foolish. It’s likely more stimulus will be offered by next admin, but as we all can see, Republicans will stall any effort to help America.

    • KGC says:

      The financial issues pre-date the Covid pandemic. Blaming the Trump administration ignores the fact that it is Congress which is the financial branch of the Federal gov’t. Congress is, and has been for over 40 years, run by the Democrats.

      Credit card debt would be considerably lower if there was a penalty (ie. interest) to be paid for borrowing. Fiscally responsible individuals, companies, and governments do not use credit except in emergencies. Unfortunately this is a lesson that most of the USA, from Congress down, has failed to learn. For a government to actually encourage the idea that living on credit is good, and without penalty, boarders on the criminally insane. The current belief that Congress (those guys again) will forgive student loan debts, provide “free” stimulus checks, etc. needs to be refuted in very broad terms. That would be political suicide, so it probably won’t happen.

      Companies that cannot be run profitably should go bankrupt and be forced out of business. It should not be the job of Governments to prop them up. This policy, as much as anything, is one of the reasons the international economy is in such poor shape. Growth comes with profit, and by supporting non-profitable business growth is inhibited. Doing this on credit makes the situation even worse, because instead of spending money to make money you’re spending money to lose money and paying interest on it at the same time.

      • Memento mori says:

        It sounds insane but if you tlook at how banks give out loans, you will understand why we are here.
        Forget about fractional reserve, banks make loans out of thin air, the consumer has to pay back the loan with interest. The loaned amount is extinguished when it’s paid back, the bank gets interest on money they created out of thin air, or they will repo your asset if you don’t perform. They have every incentive to load up people with debt otherwise they don’t make money. This is truly extraordinary, the banks will own everything in the long term.
        Hence this credit boom and bust we get every decade , it’s not about the economy or business cycle, it’s the credit cycle that drives everything. How banks get away with such exorbitant privilege is astounding.

        • jm says:

          Read David Graeber’s “Debt: The First 5,000 Years”.
          Money is, in the main, just a way of making debt tradable and divisible.
          An economy cannot function without debt.
          Before there was “money”, people had to represent debt in much less practical ways.

      • MCH says:

        Not to be too fine on the point, but it is not true that “Congress is, and has been for over 40 years, run by the Democrats.”

        The first two years of Trump admin, and the last six of Barry’s admin, parts or all of Congress has been run by the Dumbos. The annoying thing is that the Dumbos are all about fiscal restraint and prudence when they aren’t in charge of the executive branch, and they spend like drunk sailors when they are.

        A bit of history, the last time the government was running a surplus and paying down it’s debt was when a sensible Southern Jackass was in the oval. Bush Jr started to get the deficit under control even with the war when the financial crisis blew it up. But no one can deny that Jr spent a whole bunch of money on wars.

        • Cas127 says:

          You are are right about Congressional control in more recent history.


          In the 40 to 50 years prior to the mid 90’s, the time period when the mindless infrastructure of the fiscally unsustainable state was being built, Democrats had almost complete, uninterrupted control of the House and usually the Senate too.

          As the fiscal wheels have come off the government and the G careens the economy towards the abyss, the public has gradually (too gradually) awakened to the danger and political power has been handed out more evenly.

          (Even as the Reublicans in control found their own inner fiscal degenerate).

    • DawnsEarlyLight says:

      Reminds me of the overinflated beach ball being deflected from a mass of people to another mass of people, never being allowed to settle to the ground. For several decades, this has been America’s Game. I guess, ‘for every action, there is an equal and opposite reaction’ doesn’t apply to this game?

    • Martha, just like the Dems have stonewalled Free Juice #2 since the first volley was sent out in the Spring. Premeditated Genocide, really? The doo-doo is coming to a town or city near you and me no matter how much money is printed on this second round. Many people will have been without income, possibly enough food, and possibly adequate shelter for months now by the time Jan. 20th comes around. Welcome to the world thou hast wrought.

      • Zantetsu says:

        “zero though” should be “zero thought”.

        Still waiting for an edit button, although seems pretty impossible without login credentials, which Wolf seems to want to avoid.

        Also waiting for both my comments to be removed in moderation. C’est la vie!

    • The Rage says:

      Nope, debt will simply rise first. Your making the classic blunder when in analysis. First comes the boom, then the bust. This was not a typical business cycle end. It was forced forward and debt was renegotiated.

    • Anthony A. says:

      Hey Martha, what did we do “before stimulus”? I mean really?

      In my 77 years as an American who came from a dirt poor immigrant family, who then served in Vietnam, worked his way through college (no loans), then found a job/career, raised a respectable family, etc…..I never got a STIMULUS along the way.

      I think we have too many freeloaders in this country and the politicians views them as paid voters. We need to get back to basics in this country.

      • Martha Careful says:

        Although facts are debatable, around 282,000 US and allied military deaths happened in Vietnam between about 1965–1974, versus the current U.S. death toll attributed to Covid at about 252,000 ( in about 8 months). An ugly 8 year war versus an ugly 8 month pandemic.

        With all due respect, the pandemic stimulus was/is intended to help a wide range of Americans that need economic support. I’m not sure there is a valid argument between a war and what’s going on today

      • Zantetsu says:

        I agree. I support common sense “socialist” policies like universal health care, along side common sense “capitalist” policies like expecting people to earn everything beyond basic survival.

        Throw in some practical acceptance of the fact that markets need some regulation to prevent cheating, but no more than is necessary to prevent cheating.

        Finally, add a dash of realization that we cannot allow companies or individuals to utilize scarce resources like “the environment” or “oil” or “carbon” or whatever without additional regulation and/or mechanisms to build the true costs into the costs of products, otherwise we end up with a “wild west” scenario where the buffalo are all killed to enrich a few people willing to destroy anything if it will gain them some profit.

        I feel like if we just start with some obvious common sense and let it dictate policy we can do really well as a race.

        Unfortunately, what we get is identity politics and wilful, spiteful ignorance.

        • MCH says:

          Get it through your head.

          Socialism is a dirty word. It needs to be replaced with Equality. Didn’t you get the memo? Equality policy.

          Just like how the term Illegal immigrants were transformed into undocumented immigrants into immigrants in the media over the last decade.

          Geez, pay attention, you need to get the talking point straight. Otherwise, it’s going to be hard to convince Archie Sixpack of the BBB plan.

        • jm says:

          Universal health care is not a “socialist” policy. “Socialism” is government ownership of all industry. Essentially, the ultimate in monopoly capitalism, except that control is in the hands not of “capitalists”, but of people who have gotten control by other means.
          It works very poorly for the same reason monopoly capitalism works poorly: No competition.

        • California Bob says:

          Well said, Zan.

        • Zantetsu says:

          jm, that’s why I put the word in quotes. A lot of people think of it as being a “socialist” policy even if it is not technically one.

      • Old School says:

        I agree with you. A country only really prospers if the majority of the population believe that hard work and delayed gratification is rewarded.

        Easy dishonest money has created incentives that destroy the family. If a person isn’t rewarded for taking care of his family he probably isn’t going to work very hard to feed the state.

      • Chris Herbert says:

        Thanks for your service. Did you get any veteran financial assistance to go to college? I hope you did. Anyway, in my view a citizen has an obligation to work productively in order to help maintain the nation’s health. That said, in my opinion Congress has a corresponding obligation to insure every able citizen who wants to work should have a job that pays a socially responsible wage. Our unemployment system is inefficient and expensive. Especially when the free market does it’s regularly scheduled ‘face plant’ and there’s one job available for every 7 people seeking employment.

        • Lisa_Hooker says:

          I agree. Everyone that is out of work should be assigned a job in the government (the only sector where Congress can actually create jobs, any other jobs claims are political pork) at a socially responsible wage. Oh, and raise taxes to pay for it. Perhaps they could be assigned to watch other people and write reports.

    • Old School says:

      When government runs a deficit that is stimulus. When the Fed adds QE that’s stimulus. When interest rates are pegged to zero that is stimulus. Government is has been nearly flat out stimulus for 20 years. At some point you are over stimulated.

  8. Sir Eduard R. Dingleberry III says:

    I don’t get any of this! When we print money, we actually have MORE MONEY than we had before! We are richer! How can that be bad?! Last time I played Monopoly, I went to the kitchen and secretly xeroxed a bunch of bills. Then I went back to the table and bought every property, put up hotels, and crushed the table! I WON! You people are all crazy!

    • DawnsEarlyLight says:

      Silly Dingleberry, while you were gone, I tripled the price of the properties, and reduced the amount of the rents, and loaded the dice.

      • WSKJ says:

        Can’t top these. Wonderful to get a laugh for the day.

        And Wolf, your one-liner above, ….”inflated asset prices”, tells me that there’s been no change in biz as usual: the house of cards is still standing. Careful, though: one careless exhale can blow it all down….and leave us all asking again, how has it stayed up this long ???

        Thanks for reminder to support the website; must send holiday goodwill soon.

    • MonkeyBusiness says:

      You are way behind the curve. Our VCs don’t even need new money printed. They update their spreadsheet(s), and voila new valuation number(s) that show that they are even richer than before.

      Same with our bankers and derivatives.

    • Old School says:

      Money doesn’t equal wealth as Zimbabwe demonstrates. Money printing allows the government to fund itself in a dishonest way as Zimbabwe demonstrates. Money printing is outsourced to the Fed by congress so they can spend your savings without asking permission.

      • Chris Herbert says:

        Maybe the Fed balance sheet should be merged with the
        Treasury one. Hyper inflations are caused by supply collapses. Incompetent politicians respond by printing more money.

        • Wolf Richter says:

          Chris Herbert,

          That’s the program Argentina has been on for decades: Its central bank is a department of the ministry of finance. No hyperinflation. Just regular inflation of 40%-50% a year and total destruction of the currency over the years. In Sep 2013, 1 peso was worth 17 US cents. Now it takes 161 ARS to buy 1 USD on the black market (blue dollar rate). Meaning that 1 peso is worth 0.6 US cents. Meaning that over those 7 years, the peso has lost 96% of its value. That’s what you’re advocating: the destruction of the US dollar.

        • cb says:

          @ Wolf-

          The dollar has been steadily destructing, aside from Chris Herbert’s suggestions. The FED and our Government can be thanked for that.

        • Wolf Richter says:

          The difference is losing 2%-4% a year (USD) and losing 40%-50% a year (ARS). Huge difference.

        • cb says:

          Wolf said: “The difference is losing 2%-4% a year (USD) and losing 40%-50% a year (ARS). Huge difference.”

          Agreed, but both cases are corrupt and should called out as such.
          The thieves are the same. Only the rate of theft is changed.

          It’s ruinous to the spirit, cohesion and moral fabric of a country. It does keep the FED/WallStreet quite happy.
          Large asset holders are probably fine with it, as are bought off people with secure high salaries, benefits and pensions with inflation escalation clauses.

        • Lisa_Hooker says:

          Benefit inflation escalation clauses don’t help much when the amount of benefit escalation is set by the Government that’s inflating.

  9. Doubting Thomas says:

    Wolf – You are spot on, as usual. Speaking of jawboning, the major investment advisors are also pumping the market mightily as if this were the Best of Times with an undervalued market rather than the Worst of Times with an overvalued market. Following is a quote from an email I received today from the private wealth group at one of the premier U.S. banks. It was a mass email sent to all clients. I withhold the name of the bank for fear of angering my account manager there:

    “The encouraging vaccine news from Pfizer/BioNTech and Moderna seems to have investors seeing the light at the end of the tunnel. Markets around the world are beginning to make a broad recovery, as many indices are making new highs even though this latest wave of COVID-19 is being met with more restrictions in Europe and the United States.

    Just add it to the many reasons not to invest in 2020—the age of the economic cycle, an unprecedented pandemic-induced recession, uncertainty around the U.S. elections, and now, perhaps, the distraction of the holiday season. To us, the best time to get invested (of course, in a way that aligns with your goals) was yesterday. We believe the second best time is today.”

    Good grief.

    • sunny129 says:

      “The encouraging vaccine news from Pfizer/BioNTech and Moderna seems to have investors seeing the light at the end of the tunnel.,,”

      Really!? HOLY grail has been found!

      In the Pfizer trial, half of the 44,000 volunteers received the vaccine and the other half got a placebo shot. Then the researchers waited around to see how many of the volunteers randomly came down with Covid. Pfizer reported that out of 170 cases of Covid, 162 were in the placebo group and eight were in the vaccine group.

      ‘…So a total of 0.386% of the 44,000 volunteers came down with Covid by means unknown, and this tiny sample is the foundation of grandiose claims of 95% effectiveness? Note the incredibly small sample size. If even 3% of the test group had contracted Covid, the sample size would be 1,320 people–still a small number but considerably more persuasive than 1/3rd of 1% (170).

      These results tell us very little about what we really need to know….”

      Vaccines–Too Little, Too Late?
      h/t Charles H Smith(Twominds)

      • WSKJ says:

        but….but….there’s good news: allegedly the control group in the Pfizer/BioNTech trial received saline solution injection “placebos” rather than the usual mercury, thimerasol etc. solution injections.

        Has anyone come across studies which thoughtfully analyze the effect of the usual vaccines (FDA-approved, widely injected in the population at large) as placebos?? The numbers from the Pfizer COVID vaccine trial beg this question.

        I am currently most hopeful about the use of Ivermectin, re-purposed to serve as both prophylactic and treatment for the COVID. That’s right, it has a long rather safe track record as an anti-parasitic for both veterinary and human use.

        A little OT ?? Well, almost any economic/financial topic these days, leads back to the COVID.

      • jm says:

        As a rule of thumb, 95% of the time the range of random variation of an event is within twice the square root of whatever us the true average rate of occurrence, 99.7% of the time within three times the square root.
        So if the number of unvaccinated subjects contracting Covid was randomly at the 99.7% probability maximum of the range the true rate would be about 128 Covid cases.
        And if the 8 vaccinated subject cases were randomly at the minimum of the range, the true rate would be about 22 cases. So even if random variation were giving the worst conceivable result, the sample size is sufficient to prove the vaccine quite effective.
        Square root of 128 is about 11.3; 128 + 3 × 11.3 = 162.
        Square root of 22 is about 4.7; 22 – 3 × 4.7 = 8.

        • Lisa_Hooker says:

          Of course we are all symmetric Gaussian distribution people here. Never any fat or thin tails in real life.

  10. I have more faith in Mnuchin than Powell. At this point all it comes down to. He will not torch the economy. Brainard may be promoted over Powell’s head. Powell is a good bureaucrat, he wants all the tools and blanket immunity. China bond yields rising, the US better not sit on their ZIRP too long.

    • sunny129 says:

      Mnuchin is part of network of GS ( the ‘Great Squid with tentacles – wrapped around the face of humanity- reaching out for profit any where in the World – Matt Tabbi) just like Paul Hanks, Neil Kishkari ++- looking after themselves!

    • Cas127 says:


      “China Yields Rising”

      You should chime in more often about the long term capital flight risk from America that ZIRP Forever creates.

      Americans have been bred (after 20 yrs of ZIRP) to think money printing is harmless/a positive good.

      • Old School says:

        I was reading an article with writings from the 1700 -1800’s. Smart people back then knew that governments are all going to play with the value of money as it allows for deceptive funding vs. painful funding of tax hike. It is what it is and we have to figure out how to play the game to the best of our ability.

  11. Cyrano says:

    And the chaos builds..The ugliness between the parties is mind numbing. Burn the town, shoot the livestock and spoil the crops before the enemy arrives. And no one can put lipstick on a pig better that the old Trumpster.

    • BuySome says:

      Maybe it’s just a mental image of his broadcast persona, but I’d swear you just classified him as a cross-dresser. Now do the shoes.

  12. BuySome says:

    Get our card. For every next buck spent, we’ll kick back another nickel, and it won’t cost you an additional penny. Easy terms. Extended re-payments. Put your bearded Uncle on access as a secondary. He can buy pizza, beer, flowers and jewelry for all his friends meeting down by the big long pond. You’ll be rolling in dough when we send a check. [Maybe we do need Cancel Culture….Cancel Credit Culture that is.]

  13. Central planning of the U.S. financial system and markets. Bid rigging by any definition as a consequence of POTENTIAL FED BAIL-OUT BUYING that puts a floor under some very, very shaky debt instruments issued by entities that are about as solvent as molasses in January.

    The highly speculative nature of the U.S. bond market, in all sectors, revealed in the fact that merely words were used, not funds behind a bid or actual trades, to not only support, but skyrocket already ridiculous prices higher …… prices that do not reflect real world DEFAULT RISK, INFLATION RISK, MATURITY RISK, AND CURRENCY RISK one iota!!! You can actually hear the air starting to come out of this Bubble of All Bubbles. Tulip Mania pales in comparison.

    Smoke and mirrors are the true tools of the U.S. Federal Reserve. Investors will need an Open American Economy going into 2021, not a shell game based on alphabet soup intervention string pulling. Debt is only as valuable as the issuer’s ability to pay. No revenue or cratered revenue, and debt service goes from forbearance mode to DEFAULT MODE.


  14. YuShan says:

    Bailing out bondholders etc should not be up to a central bank anyway. These types of wealth redistribution and picking of winners and losers, if we even want that, should not be left to an unaccountable technocratic institution but has to be challenged in a proper democratic process.

    • sunny129 says:


      RISK of LOSS vs GAIN was part and parcel of our good ole genuine American Free Mkt Capitalism was ‘executed ‘ in March of 09 by Fed with the complicit of WAll ST and Congress!

      All we have now Crony (share holder) capitalism where losses are NOT tolerated and PRICE discovery NOT allowed.

  15. The Rage says:

    Lets note that debt servicing was weighing on growth in 2019 via corporations, but the pandemic was used to renegotiate debt and kick the can down the road probably to the next cycle peak in 2026-27.

    2021-22 will see a surge in private services and business investment and a flattening in consumer spending and durable growth. It won’t be until 2023 that the growth patterns stabilize most likely into a weakening dollar and inflationary boom.

  16. WES says:

    Translation into layman’s terms:

    Since you didn’t spend the money we gave you, please return the money so we can spend it!

    • Old School says:

      That’s pretty good. Used to be savings = investment = wealth creation. Now debt = spending = wealth creation. If we had only figured that out sooner life could have been one big party.

  17. Crush the Peasants! says:

    “And he requested that the Fed return the unused $455 billion of taxpayer funds to the Treasury so that it can be used for Covid-related fiscal relief.”

    Wow! That is going to take a lot of armored cars.

    • BuySome says:

      There’s your relief program…jobs for all as armored car guards. And here our Canadian friends were wondering why Americans could possibly need all those guns and ammo. It might all be tax deductible if needed for the employment.

      • WES says:


        Unfortunately, for armored car guards, congress needs to run the $455 billion through the laundry mat first!

        How much the $455 billion shrinks towards zero is anybodies guess!

        • Cas127 says:

          “through the laundry mat first”

          Ahem, that is the French Laundry mat…(hat tip, CA governor)

    • Wolf Richter says:

      Click of the mouse. That’s the good thing about debits and credits.

    • Chris Herbert says:

      It’s a fiat currency. So the $455 million was just $455 with a bunch of zeros attached. No armor needed.

  18. Yort says:

    Mnuchin omitted “Reason 13” (cauz itz bazz lucz):

    13. The current sitting pres asked me to light the fuse on the way out, plus I did not want to be blamed for the current credit bubble that is certain to end in tears.

    • MonkeyBusiness says:

      I am saving my credibility as Treasury Secretary just in case my current boss makes a return 4 years from now.

    • Wolf Richter says:

      Naw, it’s not going to do anything big since the funds hadn’t been used anyway. Everyone knows that. Look at the markets… sanguine all the way through.

      It might widen spreads a little, but that’s not going to change much.

      • Yort says:

        Mmuchin probably is hoping the freed $500 billion gets used by congress to prop up the stock markets, as he knows that $1 Trillion total stimulus is the low end needed to keep the markets inflated over the “Dark Winter” ($500B Senate “max” plus $500B Mmuchin “freed money” equals $1 Trillion beans)

        Read Mmuchin comments below, yet keep a trash can handy in case you need to vomit (Mnuchin for President 2024 – “Money for Du-Peeps”):

        “We’re not trying to hinder (Biden) anything. We’re following the law,” Mnuchin said in an interview on CNBC.

        “I am being prudent and returning the money to Congress like I’m supposed to,” he said. “This is not a political decision.”

        “The people that really need support right now are not the rich corporations, it is the small businesses,” Mnuchin said.

        • Old School says:

          In theory if the money is used by lame duck congress to target the unemployed or small business it’s better than the Fed using it to prop up asset prices.

        • With the perception the FED is out of the market it could be a couple bumpy months. Old School: the issues involved with more PPP, like “Covid Liability”, make a veto proof stimulus bill unlikely. The political breaking point comes when Sen GOP tells potus to cease and desist disenfranchising voters. The real deal is the GA runoff(s), and GA Sec St implied potus lost that state after he disenfranchised his own voters. If he pushes those two seats in the Senate blue, he becomes a pariah in the GOP. He is nothing without MM, and Graham will be censored either way. Wait till next year.

  19. Tom S. says:

    So jawboning works, I guess it’s good investors have been buying this debt instead of the taxpayers? Lucky for them states can’t declare bankruptcy…it’s hard to know if congress will bail the states (or, specifically my home state of Illinois) out. Why would states that haven’t had budget problems will bail out the states that do, at least without taking their fair share first?

    • Memento mori says:

      For the same reason that savers have been bailing out the deadbeats those last two decades, because they are worth it and ain’t a thing you can do about it.

      • Yort says:

        Negative rates convert debt into assets so someday everyone will become “super savers”! Fed economic mind yoga at its best…

        Fortunately at that point our Fed “Monetary Titanic” will be sitting at the bottom of a dark, cold, ocean abyss so nobody will need to bail out anybody anymore…yea?

        Sure we are all collectively trapped in either a glass half full, a glass half empty, or a glass completely shattered J-Pow global economic quagmire…but at least we can laugh about said quagmire, in common, on Wolf Street…=D

        • Old School says:

          Even Buffet admits what to do in a Zirp environment is tough. I think his foundation is that disasters happen from time to time so you should:

          1. Have plenty of cash
          2. Have multiple income streams from quality assets
          3. No debt or structure debt long term so monthly payments are minimal
          4. Investing is about estimating future cash flows vs. a known secure bogie. Everything else is speculation

  20. Cas127 says:


    I like your dedication to empirical data, but when is *any* “stimulus” *ever* supposed to end?

    Is *any* decline from *any* financial metric high supposed to perpetually result in an immediate money printing panic in order to pin interest rates to near zero, forever?

    I agree that the real economy is still very weak, but I disagree that allowing interest rates to reflect some small degree of true default risks is ultimately avoidable…all ZIRP does is create a wholly fictional, unsustainable fantasyland where awfully run companies are kept on life support by bleeding the more functional areas of the economy.

    I mean, it isn’t like every Fed “special program” is going away…only some of them.

    Without, at a minimum, periodic ZIRP tapers, all you end up with is a heroin addict economy that will never again be able to survive on its own.

    • RightNYer says:

      Yep. I don’t remember if it was Bernanke or Powell, but one of them claimed we need a high stock market to make people feel good about the economy and spend more. The problem is that what constitutes “high” is relative. Since a drop of 20% from an obscenely artificial high seems low, that ruins the confidence. In other words, once you create a bubble, the floor below with which the bubble is not allowed to collapse gets raised perpetually.

      It’s a sickness, and I have a hard time wrapping my head around it.

      • Cas127 says:

        The old expression was that it was the Fed’s job to take the punchbowl away once the party got good.

        For 20 yrs, the Fed rolled out an army of hookers, blow, ponies, fetish dwarves, and MSM news anchors any time any one any where showed the slightest sign of detoxing.

        They had their reasons (significant underemployment due to monumentally and mono-manically blind policy regarding China’s rise) but their fix has long since become a “fix” – making the US a heroin addict economy, always one tiny interest rate hike away from flatlining due to massive accumulated debt – facilitated by the Fed in the name of maintaining an illusory “normalcy” for two decades (same age as blind China policy).

    • Martha Careful says:


      This pandemic creates challenging economic dynamics.

      First off, I’m highly opposed to ZIRP and Fed mis-management and manipulation of interest rates. That process has been in play for at least 3 years with trump jawboning the stupid premise of zero rates, with Powell basically playing along. Of course it’s easy to see the collapse of treasury yields for two decades — thus, ZIRP was already underway, and related to slow, decreasing GDP and anemic future growth.

      Then, along comes the pandemic to amplify that decline in growth.

      Within that pre-existing stupid framework of ZIRP philosophy, the pandemic accelerated the rate crash to a point where future GDP growth was going to essentially become a massive full blown depression — thus, all the stops were pulled out to flood the economy with liquidity, and hence, leaving us with massive debt and ZIRP, without a depression.

      It is fantasyland with heroin and it may take 3 years to get the 10 year yield back above 1%.

      The bottomline is that ZIRP is currently a function of super weak future value and highly limited growth. I don’t think the Fed or Fed programs will bring back anything normal for many years. Stimulus is simply grease for the broken wheels, which buys time for the collective economy to wean itself from stimulus/heroin.

      • cb says:

        Martha Careful said: “Stimulus is simply grease for the broken wheels,”

        It seems to be very effective at greasing the upward ascent of asset values.

        • Martha Careful says:


          The interesting thing to ponder here, is that Japan has done pretty well overall in running its society with ZIRP.

          I was just looking at their GDP growth in relation to US for the last 10 years and it’s not like Japan has fallen apart in any way. Obviously debt to GDP burdens their future, but they seem to have accepted that and embraced higher asset values.

          It’s possible that what they have morphed into, is where we will go — and I’m not sure what that implies in technical terms. I don’t think anyone clearly understands how this plays out.

          This is interesting:

          Ashmore: Assessing the EM Policy Reaction-Function in the Context of a COVID-19 Induced Recession
          Mar 25, 2020 // 9:00PM
          We believe that, in the end, central banks will have no choice, but to follow what the Bank of Japan (BOJ) has been doing since 2016. They are going to have to exercise ‘yield curve control’ (YCC) with explicit targets not only for overnight rates but also extending out to 3-year, 5-year, or 10-year US Treasuries. If yields rise above target, the central bank will then have to step up purchases, while below the target the Fed would sell bonds.
          YCC is unavoidable, in our view, due to the substantial need for new financing by governments in the context of yields that make the bonds unattractive for the private sector. The alternative to YCC would be to purchase bonds in the market without any specific target, but that would introduce too much risk compared to credible interventions, which would enable private sector investors to profit from trading known ranges.

          Japan announced more purchases of real estate investment trusts, equity Exchange Trade Funds (ETFs), commercial paper and corporate bonds. Central banks also reduced reserve requirement ratios (RRR) and loosened up capital rules, thereby freeing up yet more capital in the banking system in a further bid to shore up liquidity for corporates. Several monetary authorities also offered temporary regulatory forbearance for companies affected by Coronavirus

        • Cas127 says:


          “Japan has done pretty well overall in running its society with ZIRP.”

          Except for, you know, not really achieving anything more than stagnation (at best) for 30 yrs.

          That is not a policy victory.

        • nick kelly says:

          Re: Japan not accomplishing anything. Have you looked in the driveways near you lately?
          Don’t forget, the F-150’s, Rams, and Siverados hide behind a 25 % tariff. Back it out and 2 of these makers are heading to BK court AGAIN.

          Oh. and in one year recently the nation of 100 million plus had ZERO gun murders. This was not typical however. Usually it’s about 10, or half a Chicago weekend.

    • Old School says:

      I remember Buffet said the Fed went “all in” after financial crash. The way I look at it is Fed is still all in and if they fail, which they might there is going to be a great depression style crash.

      One way to look at it I think is that if they are successful and politicians make correct choices we might can get back to “normal” in 20 years. Governments are going to have ease out of some promises as they have promised more than the future economy can deliver. Probably means the pain will be low and slow for a long time. Interest rate repression is one tool. Taxing social security and pensions more is another. Maybe adding carbon tax another. Probably will just be a little tougher to become or stay middle class.

  21. MonkeyBusiness says:

    Number 13: China sells negative yielding debt for the first time.


    Everything’s fixed.

  22. Sir.PiratePapirus says:

    Knowing Mnuchin and his boss and the fact that he was the one pushing for the “Fed-Treasury” merger to save the stock market so his boss can tweet about new highs in the market i doubt this move has anything to do with Mnuchin’s credibility or a sense of responsibility. Whatever his nefarious motives are it sure is more probable to be something sinister probably related to the incoming administration after January. This is not a time for Americans to celebrate fiscal responsibility from the same people who didn’t give a shit about it and the people they ruled for four years. It’s a time to worry about the degradation of the American political class and electorate.

    • Dan Romig says:

      The “Fed-Treasury” merger comprise only two points of the triangle I mentioned in an above comment.

      Here’s how Bloomberg explains the third point (Wall Street):
      “The Fed is turning to New York-based BlackRock to oversee three separate debt-buying efforts. … While the Fed’s main job is to set big-picture monetary policy by purchasing Treasury debt, a fund firm like BlackRock can be tapped for its expertise in evaluating and managing different kinds of debt, like portfolios of corporate debt – something that’s not the skill set of the central bank.”

      Any questions?

      • Sir.PiratePapirus says:

        Yes Dan because the Fed directly buying corporate debt has legal repercussions, they actually can’t buy, but even if they could they would still face legal challenges, so the Fed buys ETFs from Blackrock and let Blackrock do the distributing part it solves the legal part for the Fed, and of course Blackrock gets to make some money in the process. Nothing to do with the “expertise” of Blackrock but with the Fed trying to skirt it’s legal status.

        • Dan Romig says:

          The ‘Any questions?’ was a bit of sarcasm. You are spot on with both comments!

          “In politics, nothing happens by accident. If it happens, you can bet it was planned that way.” -another Roosevelt, FDR

  23. historicus says:

    Every Fed “stimulus” has turned to a “crutch”.
    And we know what happens when crutches are removed.
    This will soon be back in place. The market can not swim without the “water wings” of the Fed.

    • YuShan says:

      Everybody keeps assuming that the Fed can backstop everything forever, but there is a limit to that, as the many countries that are now forced to borrow in foreign currencies have already discovered a long time ago.

      The uni-polar world that we have lived in for decades is fast coming to an end. This enabled all the money printing and running massive trade deficits, but going fast forward a few years, I wouldn’t be surprised if that opportunity does not exist anymore. The emergence of alternative currencies and the eagerness of new powers to wrestle themselves away from dollar dominance, which they see as not benefiting them anymore and has actually become a strategic threat, will tie the hands of the Fed at some point. And possibly earlier if investors are starting to anticipate that future.

  24. Norma Lacy says:

    Regarding Munchkin – I believe I am correct in remembering that when Munchkin et al were “caught” in the Ally finance swindle in “fa=fornia,”
    Kamala Harris was the prosecutor who let them slide. Think that over for a sec and the fact that she, who dropped out of the primaries due to NO support, miraculously became the VP nominee begins to make more sense.

  25. Chris Herbert says:

    These are some of the best comments on the net. ‘Alternative currencies?’ What is that? “a tisket a tasket a green and yellow basket?’ Did not know cryptos were backed by gold. And I thought the dollar was not convertible.

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