Update on the Fed’s QE

No Wonder the Cry Babies on Wall Street are clamoring for more. Five SPVs, already on ice, will expire on December 31.

By Wolf Richter for WOLF STREET.

The Fed released details today of its corporate-bond purchases in November ($215 minuscule millions) and corporate-bond ETF purchases in November (zilch). Last time it bought any ETFs had been on July 23. It released details about its other activities in its Special Purpose Vehicles (SPVs), which are essentially on ice. Five of them will expire on December 31, including the SPV that handles the corporate bond purchases.

The Fed unwound its “repo” positions in early July down to zero, and more recently most its “central bank liquidity swaps.” Its purchases of residential mortgage-backed securities (MBS) have been in a holding pattern since mid-September. What it is still buying at a steady clip are Treasury securities, thereby monetizing part of the debt the government is adding monthly to its gigantic pile.

The net effect is that its total assets have edged up just 1.0% since June 24, with a dip in the middle, after exploding higher in the prior three months. This is the Fed’s tool to bail out asset holders during each crisis, and enrich them when there is no crisis:

There is now clamoring among the crybabies on Wall Street that the Fed should increase its asset purchases, and they’re pressuring the Fed to announce a big increase at the next meeting, because, I mean, how else are markets going to keep on going up?

In terms of 2020: Total assets on the Fed’s balance sheet for the week ended December 9 rose by $20 billion from the prior week to $7.243 trillion, but were down a smidgen from the peak on November 18, having gone essentially nowhere over the past five months:

Repurchase Agreements (Repos) remained at near-zero:

The Fed is still offering to buy repos but at a higher interest rate that is unattractive to the market. Since early July, there have been essentially no takers, except for a few tiny transactions every now and then.

Repurchase agreements, as the name implies, are in-and-out transactions. The Fed buys Treasury securities or MBS from a counterparty with an agreement to reverse the transaction on a specific date. The most common repos are “overnight repos” that mature the next day, which is when the Fed gets its money back, and the counter party gets its securities back. Repos are not cumulative; they’re in-and-out transactions as part of the agreement.

The repo market is huge, with $2 trillion to $4 trillion in repos traded each day, and the Fed, even back when it was in it with both feet, was dwarfed by the rest of the daily volume.

Central-bank liquidity-swaps fade, but look at the Swiss National Bank.

The Fed’s “central bank liquidity swaps” by which it provided dollars to a select group of other central banks, fell out of use and are down to just $9.6 billion, a tiny sliver of the Fed’s $7.2 trillion balance sheet, and down from a peak of $448 billion in early May. These swaps mature on a given date at which the Fed gets its dollars back, and the other central bank gets its local currency back at predetermined exchange rates.

But the Swiss National Bank is the exception: Its swaps with the Fed have been increasing since October, and in the latest week reached $5.8 billion, which is strange given that it has a habit of selling swiss francs for USD to buy US stocks with. Whatever its shenanigans may be, it now holds over 60% of the Fed’s tiny amount of remaining dollar swaps:

SPVs on ice, 5 of them will expire on Dec 31.

The Fed loans to the Special Purpose Vehicles (SPVs) that it set up. The Treasury Department provides the equity capital. The amounts in each of those SPVs on the Fed’s balance sheet is the sum of the Fed’s loans to the SPV, the equity capital from the Treasury Department, and interest earnings from the securities that the SPV acquired. But the Fed has barely lent to them, and the entities have been in decline for months.

Five of the SPVs are set to expire on December 31 – PMCCF, SMCCF, MLF, MSLP, and TALF – after Treasury Secretary Steven Mnuchin sent the infamous “Dear Chair Powell” letter to the Fed on November 20, where he explained that these five SPVs were no longer needed for numerous reasons that boiled down to markets are frothing at the mouth, and that those funds could be better used for fiscal support of the economy. Fed Chair Jerome Powell responded with his own “Dear Mr. Secretary” letter.

Even the SPV that holds corporate bonds and bond ETFs, the CCF (combined PMCCF and SMCCF), has been put on ice. The Fed stopped buying bond ETFs in July and added only minuscule and declining amounts of bonds since then, with the total of holdings now amounting to $13.6 billion. The rest of the $46.1 billion in the SPV is unused equity capital from the Treasury Department that Mnuchin now wants back, and interest earned from the bonds. Here are the SPVs:

MBS in a holding pattern since mid-September.

The balance of mortgage-backed securities on December 9, at $2.0 trillion, was down a smidgen from September 16. MBS, as the chart below shows, are peculiar bonds.

All holders of MBS, including the Fed, receive pass-through principal payments when the underlying mortgages are paid off, such as during the current refinance boom. So the Fed needs to buy large amounts of MBS just in order to maintain its balance.

The Fed buys MBS in the “To Be Announced” (TBA) market, which take two to three months to settle, which is when the Fed books the trades. In addition, the Fed sells some MBS outright from time to time. And the timing between pass-through principal payments and settlements of trades is always off, creating this erratic line:

Treasury securities do the lifting.

This is where the Fed is steadily adding to its balance sheet, at a clip of about $80 billion a month, after the huge binge of purchases in March and April.

Over the past five months, the Treasury Department, in order to fund the budget deficits, has added $900 billion to the US national debt. And the Fed has bought $400 billion of it – monetizing 44% of this new debt.

But during the binge in March and April, the Fed bought $1.5 trillion in Treasuries, monetizing nearly 100% of the debt the Treasury Department was adding to the pile at the time:


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  120 comments for “Update on the Fed’s QE

  1. 2banana says:

    So why even collect taxes or have budgets?

    “But during the binge in March and April, the Fed bought $1.5 billion in Treasuries, monetizing nearly 100% of the debt the Treasury Department was adding to the pile at the time”

    • MonkeyBusiness says:

      It’s called a kabuki.

      There’s a budget for the masses.

      MMT for the rich.

    • Dan Romig says:

      Billion or trillion? Did Wolf make a typo?

    • Rcohn says:

      Your questions gets to the heart of MMT. If the markets are not concerned about the budget and are actually pushing for more spending,than why not eliminate taxes ?
      And let’s go a step further let’s increase the budget by having the federal government assume all state and local deficits and spend money on some of the more exotic programs pushed by Congress.
      Among the problems with the concept of running large deficits is that it will destroy the dollar relative both to a standard of value like gold and relative to other countries that are not depreciating their currency

      • Kunal says:

        No it’ll not devalue dollar as long as USA has the biggest guns.

        All this rampant spending in 2020 should have devalued any other currency into half but not much impact on USD. Guns work, always!

      • historicus says:

        and this is why governments should never be allowed to borrow at zero. All they are doing now is emptying out future generations to fluff the present.
        Bail out the irresponsible states with their exorbitant unfunded pensions…..Reparations….why not? All is FREE!!!

      • w says:

        Two things:like everyone’s thoughts on the Swiss Bank focus of the article and the reason for taxes would be twofold,at least.The currency accepted by whatever govetnment and military would nevessarily be the required official currency for the masses and the entire country.If,in addition to this normal currency there are much smaller unofficial exchanges in hyperlocal currency such as has been introduced in Utah,then that is fine as long as it is Not a threat to official currency.Also,there is the leverage and tracking issue of an official currency to be used for mandatory taxes.Many of the taxes themselves obviously reward or dissuade certain behaviors and act as capital controls and People controls.Digicurrency will do this to the nth degree much like the recent HSBC trend of Freezing the accounts of HongKong dissidents.A nice cover story of $laundering/corruption usually suffices. Regarding the Swiss issue,I am Not a financial/bank expert or holder of an MBA,but I am Interested in the history,patterns,motives,real life consequences and so I learn as I go.Would the recent change in Swiss Bank behavior be a move to safety and a signal that it knows the Fed is pulling the rug out from under the fake market?I think that next year will be quite horrible on many fronts for Multitudes.This seems like a prelude to even worse!

    • timbers says:

      It’s only called MMT when it’s for us non elites, so folks like you & Wolf Street folk can attack it. It’s works brilliantly for the elites & rich.

    • timbers says:

      “So why even collect taxes or have budgets?” The response is, to reduce excessive wealth through progressive taxation and eliminate poverty and suffering through expenditures. In other words to promote equality.

      • Wolf Richter says:


        I think 2banana was being sarcastic with this question.

        • Yancey Ward says:

          But, at some point, sarcasm has morphed into the actual reality.

          I think answer to 2ndBanana’s sarcastic question is that taxes and theoretical fiscal rectitude is the necessary fig leaf that keeps the illusion believable. In other words, if MMT became the explicit policy rather than just the de facto one, the jig would be up and inflation would destroy the currency in short order as people try to exchange out their dollar holdings for physical assets like land and precious metals, and, maybe, crypto currencies.

      • RightNYer says:

        The stated purpose for taxes is to raise revenue, not to reduce inequality.

        • josap says:

          The revenue is used, in part, to pay for SNAP, pay farmers to grow or not grow crops, Sec 8 housing, Vet health care and nursing homes. It also pays for MIC which keeps many people in the labor force. Then there are Fed retirements, security for past presidents.

    • bubblejidai says:

      Why collect taxes? to reabsorb purchasing power that gets into commoners’ hands. Taxes are the secret to sustaining ongoing inflationary finance.

    • Shiloh1 says:

      That’s a “T” there, partner!

    • cas127 says:

      “So why even collect taxes or have budgets?”

      Because if they don’t then the G’s arbitrary, capricious, and lawless control over everyone’s personally earned wealth would stand fully revealed.

      And the rigged monopoly fiat game only works if people can be duped in to using the game master’s “money”.

      The “best” level of totalitarian control is that which is not recognized as either totalitarian…or control.

      • historicus says:

        And thus the reason for the creation of Cryptos…
        in direct response to the Central Banking antics….

        • Winston says:

          The pump and dump speculative scam manipulated by whales with 80% of coins created in Communist China. Yeah, much better.

      • Yancey Ward says:

        I should have read further into the thread before writing my superfluous comment.

    • mark keller says:

      The two headed uni-party isn’t called “The War Party Of The Rich” for no reason.

      Pull either lever ……..

    • Chrislongs says:


      Are the Swiss locking in a fixed exchange rate with their currency swaps for future unwinding ie paying back devalued dollars for their currency or recycling their dollar earnings?

      • Wolf Richter says:

        The exchange rate is fixed from the outset of those swaps. Also the maturities of those swaps are relatively short… 30 days, 90 days… I don’t remember the exact maturities and I’m too lazy to dig up the term sheet, but it’s in that range, meaning that it’s not a long-term play on the dollar.

    • Old School says:

      I think the real reason is for political expediency. A simple tax such as a flat tax or sales tax would be completely unacceptable as it would be too high for the public to accept and so government power and size would have to be reduced.

      The current system uses soft accounting and soft valuation of money that makes it nearly impossible for the ‘tax take’ to be calculated and for wealth to be shifted to where politicians need it to go.

      There is a concept that GDP would by definition be fixed if money supply was fixed with some temporary small overshoots and undershoots as people save or borrow. Gives new meaning to expanded money printing. One thing we all should have learned by now money printing is the solution to every problem unless the Fed gets inflation above 2% as they measure it.

    • JW says:

      Find a way to calculate what interest rates would be without fed purchases = real rate.

  2. Yort says:

    Fed seems to be waiting for a multi-trillion stimulus before increasing Treasury purchases. Looks like they may have to wait a few more weeks.

    Fed better buy everything sooner than later as it seems main street folks are starting to understand that the Fed’s main purpose is to enrich the elites. CNBC article today titled “Americans increasingly see the stock market as a barometer just for the rich, not the whole economy” had som shocking stats.

    What shocked me most was that “Team Red” voters went from 17% in 2018 to 36% in 2020 when agreeing with the statement “higher stocks helped the wealthy and corporations”. I grew up in “Poor Red country”, now live in “Expensive Blue city”, and can tell you that when you see a shift in Red country of 20% that believe the stock markets are rigged (most of which do not invest in said stock markets), that is a paradigm shift of epic consequences for “Trickle down Fed” policies. The bottom 90% are losing faith in the Fed lies of helping main street. The bottom 90% have more votes than the top 10%. Fed is at risk politically…so better “Make billionaires Rich Again” ASAP as regular common fly-over folks are getting wiser to the Fed as a wolf in sheep clothing…

    • DawnsEarlyLight says:

      Wolf in sheep clothing…. Never!

      Wolf and Fleece just don’t go together. I can see Wolf and Cashmere….as he is the GOAT!

    • Joe Saba says:

      Last stock I owned I sold in 2003 and never looked back

      took the warrens advice — if you can’t control it then don’t own it

      so that is what I do now – go see my investments on regular basis

    • WES says:


      You are forgetting that the rich count the votes!

    • Kunal says:

      “ The bottom 90% are losing faith in the Fed lies of helping main street.”

      WRONG. Bottom 90% are sheep and Sheep always get slaughtered. That’s their primary purpose. They’ll never realize. It’s going on since eternity and will go on till eternity.

    • historicus says:

      Wait until the manufactured inflation starts to impact the working families of this nation….
      the gap between those who have enough stock to make a difference in their lives…and those who do not, will widen. And this is not a healthy situation for the country.
      The central banking game is truly a Socialist endeavor. It finances the things Margret Thatcher said would soon run out of “other people’s money”. It hides the cost of war by purchasing the debt created to fund those wars. It is operated by the unelected who make economic decisions behind closed doors, and they themselves insulated from any ill effects (like inflation) for they have inflation protected pensions, courtesy of us….but what of us?

  3. cb says:

    Wolf said: “The amounts in each of those SPVs on the Fed’s balance sheet is the sum of the Fed’s loans to the SPV, the equity capital from the Treasury Department, and interest earnings from the securities that the SPV acquired. ”

    Seems misleading that equity from the Treasury would show on the FED’s balance sheet.

    • Wolf Richter says:


      It’s “equity” in the SPV. The SPV is a legal entity (LLC) that is an “asset” on the Fed’s balance sheet. The amount that the Treasury Dept. contributed is an amount that the Fed owes the Treasury (and that’s why Mnuchin can demand to get it paid back). Therefore, the Fed also books that amount from the Treasury as a “liability” on the other side of its balance sheet.

      The Fed calls this liability “Treasury contributions to credit facilities.” It’s a line item on its balance sheet under “liabilities.” You can go to the Fed’s balance sheet and search for it (use ctrl f in your browser).

      That liability that the Fed owes the Treasury is now $114 billion and consists of:

      • Commercial Paper Funding Facility II LLC: $10 billion
      • Corporate Credit Facilities LLC: $37.5 billion,
      • MS Facilities LLC: of $37.5 billion
      • Municipal Liquidity Facility LLC: of $17.5 billion
      • TALF II LLC: $10 billion
      • Money Market Mutual Fund Liquidity Facility: $1.5 billion.

      • historicus says:

        “is an amount that the Fed owes the Treasury”

        as the Fed buys $60 Billion a month in Treasuries. This truly is smoke and mirror accounting games. Peter to Paul back to Peter.

        • Wolf Richter says:

          The purpose of the “equity” — paid for by the Treasury dept., and therefore by the taxpayer — is to absorb potential losses from the securities that the SPVs buy. The Fed doesn’t need that money, but it doesn’t want to have to book a loss on those deals. So if the bonds in that SPV blow up, the “equity” (taxpayer) absorbs the first loss.

  4. Yort says:

    Someone buy the Fed a subscription to Bloomberg:

    Fed ‘Manipulation’ Crushes Can’t-Miss Trade in U.S. Bond Market (December 11, 2020, 6:00 AM CST)

    …the latest example of how the Fed’s outsized presence in markets, which began with the 2008 financial crisis and shows no signs of ending, is distorting traditional trading strategies: It’s squelching volatility, adding fuel to a record-setting advance in stocks, leaving credit markets priced to perfection, and curbing Treasury yields at levels that no longer fully reflect market sentiment or investors’ belief in the economy.

    • WES says:


      It is called financial repression.

      • Rumpled Bemused says:

        Financial repression is theft. It should be a criminal act. It is quite simply, robbing Peter to pay Paul, so that Paul can continue to gamble without fear of consequence. I am sick with contempt for our bankers.

        • Cas127 says:

          “I am sick with contempt for our bankers.”

          Bankers never had the power to create this insanity.

          Only government did.

        • Rumpled Bemused says:

          Cas127, our corrupt government is not exempt from criticism, but neither are the bankers who have nurtured the corruption of our government. Fascism or corporatism, whatever one chooses to call it, requires two to tango.

        • Cas127 says:

          Not exempting the banks from criticism, but unless the indispensable party (the G) is identified, any “fix” is likely to go astray.

          This is particularly true since our politicians/government have a history of acting through/vilifying others as a means of obscuring their own key role in toxic policies/outcomes.

        • James Charles says:

          The US government is ‘bought and paid for’?

          “Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens
          Martin Gilens and Benjamin I. Page
          Each of four theoretical traditions in the study of American politics—which can be characterized as theories of Majoritarian Electoral Democracy, Economic-Elite Domination, and two types of interest-group pluralism, Majoritarian Pluralism and Biased Pluralism—offers different predictions about which sets of actors have how much influence over public policy: average citizens; economic elites; and organized interest groups, mass-based or business-oriented. A great deal of empirical research speaks to the policy influence of one or another set of actors, but until recently it has not been possible to test these contrasting theoretical predictions against each other within a single statistical model. We report on an effort to do so, using a unique data set that includes measures of the key variables for 1,779 policy issues. Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic-Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism. “

          By ‘the bankers’ {and others} and their enabling economists?

    • historicus says:

      “… is distorting traditional trading strategies: It’s squelching volatility, adding fuel to a record-setting advance in stocks, leaving credit markets priced to perfection, and curbing Treasury yields at levels that no longer fully reflect market sentiment or investors’ belief in the economy.”

      The central banks have suspended the fundamental of a free market…..supply/demand price discovery. In so doing, they have made asset evaluation a folly, and misallocation of assets a game of no consequence.
      The history of this nation until 2008 is that Fed Funds equal or exceed inflation. Since 2008, this has been suspended, for good times and bad…for the benefit of whom and at a cost to whom? Hayek said central bankers decide, and intentionally aid one group to the detriment of another…and the one group has been harmed since 2008. That group that had nothing to do with the systemic threats created by over leveraging and irresponsible speculations.

    • The Fed’s March balance sheet response was done in the open market, not the Treasury. Drunkemiller was adamant about where the next several trillion was going to come from? That it might push the Fed to 10T because they have yet to monetize anything. This is in part explanation of the 1 plus trillion in cash at Treasury. The logical thing would be to transfer that money to Fed and grant lawmakers access, (or try and deal directly with Congress themselves) which is the political endgame of keepaway.

    • Fat Chewer. says:

      Bloomberg and Murdoch are billionaires. Do you really believe that they are not manipulating the market with their pronouncements from on high? If you trust them you’re an idiot.

      • w says:

        Exactly!Gee,I wonder why Bloomberg has a media empire,maybe to gain further advantages?Regarding the fancy economic study which took who knows how long and how much wasted $,the findings are and have been obvious and old news.It is about Power.It has Always been about power.The money,credit,propaganda,interconnected web of industries/marriages/board memberships/political donations and appointments,donations to universities,scientific research institutes all for power,nothing else.If Yellen is installed,then the takeover/merger of the U.S. Treasury and Fed will be complete.No veneer or separation.

    • Fat Chewer. says:

      I notice that these publishing billionaires never seem to mention how all this manipulation and distortion are being done on their behalf. That’s not manipulation at all…

  5. Trinacria says:

    Indeed, we just go from mountain peak to mountain peak…no valleys in this landscape of the absurd.

  6. Cas127 says:


    I wonder if a post laying out the relationship between Fed “asset” purchases and consumer inflation (current or latent) might tweak many more people as to the importance/dangers of Fed policy.

    Here’s the process as I see it,

    1) Overvalued asset classes start falling as holders finally notice that income streams don’t match overheated valuations.

    2) The Fed, worried that panic selling of asset class will, a) hurt “wealth effect” propping up spending and b) increase interest rates, hurting invt, hurries to print trillions in unbacked money to buy those falling, overvalued asset classes.

    3) As a result, the selling banks/holders of those cratering asset classes get overpaid for their overvalued assets, in Fed “high powered” money (which the banks can turn around and use to make *new* leveraged loans, at a multiple *higher* than what they got from the Fed).

    The Fed gets the “falling knife” asset classes in exchange.

    4) The newly flush banks start making their leveraged up loans (or sit on a chunk of the Fed QE, for which they get paid a small profit margin on “idle reserve balances” by…the Fed).

    5) Those new bank loans bid up the prices of financial invts or real assets…creating consumer inflation (later or now).

    I may have some of the details wrong but I think the overall gist is right.

    I wonder if a clear graphic would help the public understand just how dangerous this self-licking ice cream cone the Fed has created is.

    Basically it is a machine for converting going bad gvt and corporate debt into consumer inflation.

    That doesn’t seem to be fully registerIng with the public and I wonder if that is because no one is laying out the basically simple 4 or 5 steps involved.

    • Anthony A. says:

      Cas127, this process would be better visualized in a flow chart. And with respect to #1, asset classes would be stocks, bonds, RE (commercial and owned/rented), etc? Correct?

      How would the Fed buy this failing asset stuff? Through the SPVs? Banks?

      It’s difficult for me to see the process steps and connections in detail.


      • Cas127 says:


        1) The “asset classes” are anything the Fed chooses to buy (with its unlimited, unbacked money). In practice, this does mean stocks, bonds, real estate, etc. Anything whose “panic” decline (no matter from how high an overvaluation) the Fed would view as “destabilizing”.

        But since Fed money printing has gutted interest rates (ZIRP), essentially *all* asset classes have been inflated (per DCF calculation) based on nothing more than the Fed’s money printing policy.

        2) The Fed can buy such teetering asset classes by more direct (SPV) and less direct means (banks).

        SPVs seem more designed to hoover up crap assets in exchange for new minted Fed cash at par. The Fed can provide the leverage to the Treasury’s equity in funding the SPV.

        Contrarily, the Fed can funnel money directly to the banks as the banks make *new* loans (vs. crap old loans). If a bank is short of money to make a new loan, it can go to a Fed window to borrow .or borrow in the interbank mkt of idle reserves (which the Fed also controls).

        I agree that a flow chart would help.

        It really isn’t complicated (everything turns upon the Fed ability to print money from the thin air) but multi step arguments don’t read clearly in narrative fashion.

        Thus the need for graphs/flowcharts.

        • Anthony A. says:

          Thank you!

        • sunny129 says:

          ‘Overvalued asset classes start falling as holders finally notice that income streams don’t match overheated valuations’

          This is evident NOW if only knows about fundamentals like Buffett’s famous Mkt indicator – Mkt cap to GDP now over 180%!

          Any thing below 70% time to invest and after 90%. less and less for the $ invested! But with price of capital almost ZERO, valuation gets distorted in the short term.

          All the future growth and income stream have been brought forward, obvious only retrospectively!
          (Been in the mkt since ’82)

    • hidflect says:

      You’ve nailed it like Nostradamus.

    • GotCollateral says:

      Probably need a step where zombie companies have no where near the amount of cash flows to roll over their debt and default on their bonds despite CB interventions (those not so hidden by executive order for “national security purposes” and those they let us know in public)… companies like SPN that defaulted on US78412FAW41 recently despite all the bending over backwards on bank rules to support commodity markets wrt derivative positions… while we deep into the “recovery”… lol

    • historicus says:

      Inflation will first be explained away, ignored.
      Then it will be welcomed as a sign of economic activity.
      Then, and only then will the Fed limp in with meager 1/4 pt raises…well behind the curve and just for show.

  7. Sparrowhawk says:

    Hi, Wolf

    Pam and Russ Martens (“Wall Street On Parade”) uncovered FROM THE FSOC’s OWN STATEMENTS that the Fed did NOT stop repo until at LEAST Sept. 30. They simply stopped REPORTING their repo outlays after June 11! Between June 11 and Sept. 30, they actually pumped out nearly $3T in repo “off the books”. In addition, the CARES money that Mnuchin bizarrely demanded back from the Fed never actually went TO the Fed in the first place. Donald Trump personally signed an order giving Mnuchin, as Treasury Secretary, sole personal responsibility for the disposition of that money (a perfectly legal maneuver, actually). Nobody, including Jay Powell, has seen it since. Might it have made its way down several dark alleys into the stock market? Why not? Half a trillion can go a fairly long way even today in keeping markets levitated in the face of bad and deteriorating fundamentals. Not trying to level criticism, here, but just to let you and your other regular readers know that repo was actually still alive and well all through the summer, and the lion’s share of the money specifically designated to help small businesses on Main Street has disappeared with no trace at the hands of two men: Donald Trump and Steve Mnuchin. We need to take account of these facts when trying to figure out what’s really going on. Thanks.

    • Wolf Richter says:


      This is such friggin’ made-up bullshit. Just bad fiction. These people are totally clueless of how repos work, they have been clueless from day one, and they’re still clueless. I already debunked their bullshit last year. These people just fabricate this crap to get clicks. They can post on their site whatever bullshit they want, but please do scrape that crap off your boots when you come from over there before you enter my living room ?

      • MarkinSF says:

        Wow. Kind of surprised at your response here. Which part of this story is made up? (I mean if you want to take the time. I’m not waiting by the phone or anything). I try to read through their posts at least once a week because their heart is definitely in the right place. Media Bias/Fact Check reports that the information they report on is “High” in factual content and I’ve noticed they’re being published on a lot of the sites I count on for content.
        I don’t know, maybe they’re making stuff or just mixed up but I would appreciate reading the piece you wrote.
        Can you post the link?

        • Wolf Richter says:

          I didn’t name Wall Street on Parade specifically since they’re just small fry. I named the big fry, the WSJ, where a young clueless reporter kept doing the same thing. But Wall Street on Parade knew what I meant because they responded to it. Here it is:


          After this, the WSJ stopped lying about repos ;-]

        • MarkinSF says:

          I see what you’re getting at and totally understand the outrage you feel. Thanks. It is pretty disingenuous to print the cumulative totals without mentioning that these are overnight or at most 14 day loans that are constantly recycled. I just assumed that everyone would know this but still be alarmed by the amount the FED had to put into the REPO market on a daily basis just to keep everything afloat.

  8. Khowdung Flunghi says:

    Wolf said: “The Fed released details today of its corporate-bond purchases in November ($215 minuscule millions) …”

    My brain exploded with the term “$215 minuscule millions”

    • Wolf Richter says:

      Yes, but the Fed’s total assets are $7.2 trillion which is $7,200,000 million ?

      • andy says:

        But even few measly millions in corporate bond purchases signify crossing the Rubicon.

    • DawnsEarlyLight says:

      What about the $4.6 Trillion in treasury securities? Just what are we getting in return for all that debt?

      • Sir Eduard R. Dingleberry III says:

        We get to live good for a few years until the collapse.

    • Yancey Ward says:

      From WolfStreet, circa 2036 as I received it from my proprietary time machine web connection:

      “The Fed released details today of its stock purchases in October ($7,200,000 minuscule millions) …”

  9. Kreditanstalt says:

    These institutional, fund and bank guys can only see the trees, not the forest.

    These big ‘players’ are focused SOLELY on dollar-denominated profits today – the ‘flow’ – and have zero interest in macroeconomic imbalances and the potential cheapening of money created by this never-ending monetization – the ‘stock’.

    Nothing will change unless there’s sufficient price inflation in everyday consumer goods and needs. Will that ever happen?

    • Cas127 says:

      Excellent screen name…a big part of the problem is that Americans are more or less intentionally kept ignorant of international economic history, so the G is given a free hand to run some very, very old scams.

      I also think the flow vs. stock model is exactly right…the Fed is entirely fixated upon using an endless series of QE based bailouts to beat interest rates into non-existence (so as to prevent a wave of incremental defaults) but apparently completely ignores the fact that that dynamic accelerates the day when all power will be taken from their hands (because habitually betrayed savers will exit the corrupted USD for some/any better store of value).

    • historicus says:

      These central bankers are emptying out future generations.

  10. Nacho Libre says:

    Ah, the good times.

    Only time when Fed was able to reduce its overall holdings. We might not see that again for several decades.

  11. WES says:

    Noticed that the M1 money supply has been increasing in the last 2 weeks by about $800 billion, about twice the rate it increased in early March.

    Not sure exactly what M1 measures since there is a M2 too.

    Unfortunately I am not one of those lucky people who get this new money first. Sigh.

  12. gary says:

    Hello Wolf,

    Slightly off-topic, but you know how people are talking about certain stocks being overvalued, bubble, etc.?

    Well, I just looked at a long-term chart of CP Rail (a boring, utility-like business), and it looks just like Tesla’s chart, only it stretches out over a longer time period. I find this bizarre. Will stocks have to go up 90 degrees going forward or else collapse?

    • Wolf Richter says:

      Yes, everything has become amazing :-]

      • MonkeyBusiness says:

        Wolf should insert that song from the Lego movie: Everything Is Awesome.

    • nick kelly says:

      PE: 18.90

      ‘Looking at earnings over the last twelve months, Canadian Pacific Railway has a P/E ratio of 18.90. That is equivalent to an earnings yield of about 5.3%.Dec 3, 2019’

      Tesla has never made a profit selling cars, but has squeaked out a 1% profit selling carbon credits. Using this it has a PE of over 1000: 1

      It’s hard to imagine two companies with less in common but I don’t know the chart referred to.

      Re: rail roads. Buffett bought Burlington because of its ‘moat’, a barrier to new entries. You can buy locos, cars and rails but you will NEVER get a right- of -way like the big RRs have. To this day in Canada there is resentment of CP’s, given in the late 1800’s.

      There are hundreds of car cos entering the EV space including a dozen serious ones.

      • gary says:

        CP Rail. Enter “CP” into your stock screener, and look at a long term chart, say 5 or 10 years or longer.

      • Paulo says:

        You forgot to mention the vast private land holdings CP received for RR construction, namely the swath on Vancouver Island from CR to Victoria. (Bastards)

        Maybe the old EN line will be once again utilised.

        There is an 1100-1300 home building project at Union Bay as an end result. Many locals say it will never be built, but……



    • Robert says:


      You’re just looking at the results of financial inequality. The 1% use their wealth to buy stocks. They need never sell their shares, hence that leaves the rest of us plebes fighting for the remaining shares at higher and higher values. As more and more shares are permanently off the market, the higher values must go.

      This will continue on for decades to come. Bezos and Gates will be worth trillions each.

  13. GotCollateral says:

    I don’t know how people can take the monetary inflation argument seriously when at least 5% 30Y UST auctions issuance for dealers at are at or under 8bps when the market is a +160bps… because any dealers locking in -160bps loss now is so inflationary…

    • Cas127 says:

      Simply consider the real assets that stand behind the financial assets of stocks, bonds, etc.

      Then consider the hugely inflated valuation ratios of those investments (PEs for stocks, *gutted interest rates themselves* for bonds, etc.) and it is no mystery where all the inflation exists.

      Interest rates are the “price” of borrowed money.

      When the system has been hugely injected with trillions in unbacked new money supply, interest rates are driven to ZIRP *because* the supply of investable funds has hugely, hugely outstripped the demand from new *real asset* investment opportunities.

      The aggregate ratio between financial ownership claims and underlying real asset values is grotesquely engorged.

      Any poor bastard caught in the USD domain does not have the luxury of holding out investable funds because of laughably inadequate risk adjusted recompense in bonds markets…Fed policy of helicopter money dumps has terminally diluted *every* financial mkt denominated in USD.

      So, low interest rates are not a sign of no fear of inflation…but rather they are the evidence of the Fed’s crushing success in creating it.

      • GotCollateral says:

        > Simply consider the real assets that stand behind the financial assets of stocks, bonds, etc.

        All of which are bought on mostly leverage… and depend on cash flows from the peons flowing through to the owners… no more cash flows… and “poof” goes the inflation narrative… with all the debt still there.

        As long as gov/corp/ and muni debt is multiples more than the liabilities on frbnys books… you are not going to convince me… when there are dealers/institutions forgoing of buying more deep OTM calls on TSLA would rather buy 30 UST at 8bps… you are not gonna convince me…

        As ridiculous of the whole rotation to “Value” trade where value is even smaller zombies companies that haven’t made a profit in years and saddled with way more debt.

  14. The world surrendered democracy and long-term assets
    to protect themselves from a random pandemic,
    leaving them with naught but bread-n-circuses.

    Chaz Squatters are immune to pandemics
    because they never bathe. It’s “science”,
    we need more squatters — the more the better.

    Worldwide, governments are doomsday cults;
    they use fear to enrich themselves,
    at the expense of everyone else.

    North Koreans worship Kim JongUn like a God;
    such is the power of doomsday cults, worldwide,
    — Kool-Aid is mighty tasty.

  15. Rick says:

    SPV out by year end won’t change the market much I would assume, it was there to give optimistic illusion, and now the crowd will generate their own without the SPV. If Fed doesn’t reduce the 7T from their book, what are the chances the market dips again? I don’t think the market ever had a bad time with too much free cash around.

    • MonkeyBusiness says:

      Agreed. It’s hard to see the stock market ever dipping again for a prolonged period of time. The stock market is the nation. Without it, this country is toast.

      Like seriously, what do we have here that’s doing well? We have a first world stock market residing in a third world country.

      • RightNYer says:

        I agree, but I think the whole thing collapses, stock market and country, way earlier than people think.

        • MarkinSF says:

          +1. Events such as the pandemic reveal how quickly things can turn.

        • RightNYer says:

          Markin, exactly. Venezuela went from one of the wealthiest countries in South America to a complete disaster in only 15 short years.

          Americans like to think that we’re so exceptional that it couldn’t happen to us.

          But our printing is special. We’re out-printing and out-borrowing even the worst offenders in Europe. We don’t pay our bills, our educational and medical outcomes are the worst in the developed world, and we have a massive immigration problem (meaning our system prioritizes unskilled, uneducated immigrants over doctors and engineers, as long as they’re in the same family as a current citizen or permanent resident) that is only getting worse.

          I laugh when I hear people say that the Fed/Congress extend and pretend will last another 100 years.

          I’d be shocked if it lasts another 10. Our best days are behind us.

        • GotCollateral says:

          I’d be shocked if it even lasts another year… when more companies now are still defaulting on debt.

          If companies like apple have suppliers who cant even afford to pay their employees what they are promised in contracts (india apple factories) right now… are people are assuming it will be even better no name corps? what a joke lol

  16. Sir.PiratePapirus says:

    The ECB announced they will be buying the total issuance of next year in gov bonds Wolf. To fight the virus of course and global warming don’t forget, because of MeToo…and other such as…oh happy day….
    The creature in charge of the ECB said “We are trying to do our part” to help with the fight against Covid19 because we feel it’s our duty. Then she said the fight against global warming is our mandate, then she talked about woman representation….so thank your lucky stars Americans for JP there is worse… much much worse. In other news the European bond market is dead, greek italian spanish yields have made a tentative approach towards negative, while the total of bonds yields in negative territory has reached 18Trln. Back to you at the studio….

    • Wolf Richter says:

      She said the ECB extends the bond-buying by €500 billion next year but she also said that it may not use all of it. The Fed bought more than that in two weeks in March. €500 billion = €42 billion a month… very disappointing for a lot of folks.

      • RightNYer says:

        Disappointing in that they were expecting more?

      • Sir.PiratePapirus says:

        It’s all relative to size Wolf. The ECB has already done more than half of their GDP in QE from what i know correct me if i am wrong. Of course the BOJ has set records after records, but compared to them the Fed is the Bundesbank. You don’t get negative yields and a dead bond market for nothing. The only reason there are banks buying this stuff up in Europe is just pure technicality of the law, they buy it right after issuance, and the ECB immediately buys it from them in the secondary market, swaps reserves for their bonds, turns around and charges these banks interest for keeping reserves with the ECB which the ECB itself creates on their behalf, supposedly under the pretext of pushing them to lend to businesses which of course is BS. Banks have no need for these reserves to create broad money.
        She intends to buy all issuance, in fact she was asked is she worried about not having enough bonds to buy she said she is not worried. The 500bln is on top of the 1.3T which in itself is enough to buy all the issuance of next year already according to Citi, JPM as reported by FT. She might not use all the 500bln, not because she is being cautious but because there are no bonds left to buy that the 1.3T wouldn’t buy.

  17. George W says:

    How will the Trump humbled Fed respond, post Trump?

    The Fed has a credibility issue and needs to somehow re-establish that its role is greater than that of a political pawn.

    The debt hawks will also return but they too face a credibility issue.

  18. Lance Manly says:

    Thursday’s DOL report was pretty heinous. Look to the Fed to turbo charge the presses soon.

  19. The behavior of the Swiss National Bank, and hence, the Swiss Government, is quite puzzling at this time. With their increasing use of Dollar Swaps from the Fed, they obviously have some short term use for U.S. Dollars. Have the Swiss become Day Traders in the stock, bond, and commodity markets, trading Stateside with Dollars, selling hot, and then returning the Dollars to Omnipotent Fed to get back the once sacrosanct Swiss Franc?? And maybe keeping their Dollar profits in the trade to speculate more in U.S. capital markets on the intermediate side??

    The fact that the national bank of Switzerland has followed Japan, the latter a fiscal basket case of grand proportions, and created the SNB U.S. Stock ETF to accomplish God knows what, does not speak well for this historically neutral locale as A SAFEHAVEN FOR INTERNATIONAL ASSETS. Once a country turns to speculate in large currency numbers in the financial markets, something is rotten in Geneva, it is no longer of a conservative nature.

    While the Swiss Franc has appreciated some 11% vs. the crumbling U.S. Dollar, this is more the weakness of the Greenback vs. any real strength in the Swiss Franc. I think with competition for investment funds from Hong Kong (even with the Chinese stifling of freedoms) and Singapore as investment safe havens, the Swiss have seen some investment outflows and redirection of funds. Their Japanese-style stock market speculating would not receive my vote of confidence!!

    Although some of us hard-asset crazies have precious metals stored in Zurich outside of the U.S. financial system (duly reported to Treasury each and every year so the revenue starved U.S. can tax any sales!!!), storage rates and security, to include a very conservative government in Singapore (Malca-Amit) argue for more and more assets being shifted out of Switzerland and into the East. Hong Kong assets are also shifting elsewhere such as Singapore thanks to the heavy handedness of the mainland Chinese.

    But Switzerland ain’t what it used to be, starting with the Swiss coughing up the detailed account information for every American investor once Uncle Sam threatened to do this or that to them. GUNBOAT DIPLOMACY. The big stick the U.S. has carried abroad is turning into a swiveling twig.

    • historicus says:

      “Strong countries have strong currencies.” Steven Forbes

      Even though high profile economists say “trade deficits don’t matter”, how come those with trade surpluses seem to be so much healthier, and those with perennial trade deficits must print fresh Trillions each year?

    • Bobber says:

      “But Switzerland ain’t what it used to be, starting with the Swiss coughing up the detailed account information for every American investor once Uncle Sam threatened to do this or that to them.”

      I call that progress. Wealthy people putting money in unreported Swiss accounts are evading tax in their home country, which is a crime.

      • VintageVNvet says:

        Agree with you re Progress, and so much more needed, eh br,,
        Remembering walking along in Nassau in early 1960s and seeing dozens of very nice brass or bronze plaques on buildings and wondering what they were for?
        For my money, (what’s left of it’s value at least,) I would like to have some of the ”big guns” ( per other’s comments) of USA and likely most EU countries go around the world and level each and every building of that sort in each and every known, usually very well known TAX haven/heaven… and stop all the screwing of the wage slaves paying without choice, by the rich folks removing all their profits/wealth, etc.,,, no matter if those folks are actual humans, or some sort of corporate ”personhood” or whatever… Looking at you Apple et al!
        And I just hope it will not take another ”FDR moment” as a result of some similar threat to do so!!

      • w says:

        Totally agree.God forbid some poor schlub has a tiny bit of illegal drugs in their car.They get a long time to change their ways behind bars.Crime syndicate families in u.s. Politics get enriched and shielded by the media,FBI,others.Everyday American takes too much of a homeoffice deduction and they get audited,harassed,pissibly fined while moneybags create shell corp.For their shell corp. And fancy foundations/$ laundering entities,meanwhile the various taxbases get smaller and smaller and old people,like my parents get squeezed to death on their property taxes.

      • Bobber, none of us Americans can ride off on high horses regarding tax evasion and cheating at all levels. Not saying you or I do it, but it goes from Medicare billing, to Food Stamp fraud, to selling influence to foreign agents, to not paying taxes on rental income on part of your own home, understating cash income on your return, and on, and on, and on.

        We seem to want to vilify the rich in this country, and tax the pants of of them, but even if we took 100% of their annual incomes we would not be able to get out of the fiscal insolvency we as a nation are currently in. Don’t most Americans strive to be financially sound on some level of wealth? I guess we no longer want to be a Capitalistic Democracy any longer, and Great Britain was to prime example of how Socialism worked there.

        There are so many crimes of privilege and under-privilege out there that the tax evasion of SOME of the Swiss private account clients years ago is a drop in the bucket for what is going on now. We just had an election where some 71 Million Americans feel disenfranchised from the political system and Government, and I can assure your that Tax Evasion and Fraud are likely to increase markedly as a result. Not my country, not my expense thinking.

        Not justifying any of this, but it is the true reality of our country today. TWO COUNTRIES IN REALITY. Batten down the hatches, it is going to be a very bumpy ride going forward. Happy Holidays.

        • Jacob says:

          This is exactly late Soviet mentality: everyone is stealing from the State because it’s a victimless crime, and nobody cares.

  20. Lou Mannheim says:

    Hey, maybe the SNB is just gearing up for the Schmidt family’s arrival. ?

  21. Martha Careful says:

    For FRED fans, the following story about natural logs and Fed printing is sort of entertaining, especially when you update the slider to show changes since this was written.

    How much money is the Fed printing?
    Posted on September 4, 2014

    “The currency in circulation (technically called the currency component of M1) is indeed increasing, but there is no indication that it is accelerating. To see this, we have taken the natural logarithm of the series. This means that if the slope is the same for two years, the growth rate is the same. Not taking the natural logarithm would show an illusion of acceleration, as a 1% increase in 2014 would look much bigger than a 1% increase in 1960 because the stock of currency has increased over time.”

    I’d post the link, but it’s forbidden in this dojo, and I will respect the rules

  22. sunny129 says:

    ‘Five SPVs, already on ice, will expire on December 31’

    Wait for CMBS cratering, they will be back!

  23. qeforeva says:

    When Fed qe-s you lemons, make a short squeeze.

  24. breamrod says:

    Wall Street will manufacture a “pullback” of 5 to 7 % to get the fed to act with more $

  25. Martha Careful says:

    Just venting here:

    The first of nearly three million doses of the first Covid-19 vaccine were packed in dry ice and put on trucks at a Pfizer plant in Kalamazoo, Mich., on Sunday morning, destined for hundreds of distribution centers in all 50 states

    That supply will amount to less than 1% of our population, after 300,000 dead, in about 9 months. I’m a skeptic at heart, but I can’t imagine that huge new waves of deaths, will be offset by this micro-size rollout and insane political backdrop. It’s a start in the right direction, but I’d bet the farm that it’s not smooth sailing ahead …

    • Martha, being a 71-year old Senior, I can assure you that I will not be the first in line to get any rushed to market Covid vaccine. I will wait months to see what the side-effects and possible fatalities there are for each version of same. At this stage of life, I can’t afford a false move by a big pharma company whose executives will receive huge bonuses this year even before the first in-field inoculation takes place. This may be medical history in the making, but I don’t plan on being in Act I regardless of the bayonets being pointed at me.

  26. Mad Dog says:

    People are now going to be going out of their way to avoiding the tax man. Like hiring landscapers for cash. Hiring day care workers for cash. Not reporting income that can’t be traced. With nearly every large institution in this country being corrupt and serving the 1% top earners and doner class this action will be seen as a patriotic duty, There will be a run on white envelopes. No one will feel the slightest guilt about doing it either. When I lived in NY some time back people even bragged about it. They called it “Southern Income”

  27. Mad Dog says:

    Dec 12, 2020 at 12:33 pm

    “But Switzerland ain’t what it used to be, starting with the Swiss coughing up the detailed account information for every American investor once Uncle Sam threatened to do this or that to them.”

    This was a dumb move. I dumped my Swiss bank account as a result. So did a lot of other people. UBS was involved in multiple scandals and is now a criminal enterprise. I did a lot better with Real Estate. Avoiding taxes on the miniscule interest I received was the last thing on my mind.

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