Posted originally on Jan 7, 2026 by Martin Armstrong |
Britain is not becoming a nation of part-time workers by accident, nor is this some benign lifestyle evolution as the press would like to portray it. It is a symptom of a collapsing incentive structure, and once incentives break down, the economy follows. Britons today work, on average, 2.3 fewer hours per week than they did twenty years ago.
Economists keep missing the point because they obsess over employment levels rather than productivity and motivation. Adam Smith understood this centuries ago. The wealth of a nation depends on the productive use of its population, and labor itself is capital. When you penalize labor through taxation and regulation, you destroy the capital base of the economy. Britain has done precisely that. The expansion of the welfare state requires ever-higher taxes, and those taxes do not fall evenly. They fall disproportionately on those who actually work, produce, and take risk. Britain has created a system in which the marginal benefit of working harder is weak or outright negative, once taxes, lost benefits, compliance costs, and inflation are taken into account. Under those conditions, rational people become unproductive.
What is especially telling is that this is no longer confined to low-income workers. Highly skilled professionals are opting to reduce hours, shift into part-time roles, or deliberately cap income to avoid punitive tax thresholds. When doctors, engineers, accountants, and executives start making lifestyle decisions based on avoiding taxation rather than maximizing productivity, the system is already broken.
Governments always pretend this is about “work-life balance.” That is propaganda. People have always valued their time. What has changed is confidence. When people believe that extra effort will improve their future, they work harder. When they believe the state will confiscate the reward while increasing the risk, they stop. Productivity collapses not because people cannot work, but because they no longer believe it is worth it. People no longer believe the system is fair, and once that belief is gone, productivity never recovers without a crisis.
Posted originally on Jan 6, 2026 by Martin Armstrong |
I was invited to a briefing this morning on Term Limits and Congressional Insider Trading. Florida Governor Ron DeSantis and Rep. Anna Paulina Luna presented the agenda. I mentioned at the WEC in November that these two actions would be forthcoming. Anna Paulina Luna is behind the prohibition of Congressional Insider Trading with bypartisan support. In addition to throwing his support behind Luna’s bill to end Congressional Insider Trading, Governor DeSantis also said he is leading the effort across the country to have states certify a Constitutional Amendment for term limits for members of Congress.
I was invited to this briefing this morning. I certainly endorse these efforts. I don’t believe the press is fairly reporting what is going on. So far, I believe 28 states have agreed to propose a Constitutional Amendment for Term Limits. To PROPOSE an amendment via state application:34 states (two-thirds). To RATIFY an amendment and add it to the Constitution:38 states (three-fourths). This is the effort and with 2026 being the 250th year anniversary and political change lies on the horizon, we have have a shot at at getting to the formal proposal stage.
If this were solely up to Congress, it would be a real uphill battle. The only way to do that would be to say those who are there now are grandfathered in, but any replacement would then be confined to one term and out.
Congress passes a law saying “the FDA must make rules to ensure safe food” (the statute). The FDA (like the SEC) then creates a specific rule that “eggs must be refrigerated at 40°F” (the rule). The insider trading ban works the same way. Congress NEVER created an insider trading statute. This is all done under the rules of the SEC. The real problem is that the bureaucracy has become so outrageous and vast that we are NOT represented by Congress and this is, in my opinion, UNCONSTITUTIONAL, because we the people have no right to vote for anyone on the bureaucracy.
In 1986, I had written the Greatest Bill Market in History where I did the full account of the formation of the SEC. Insider Trading was that a Director of a Company knew they were going to file bankruptcy so he sold all his stock the day before. When they charged Michael Milken with Insider Trading, I was contacted by the lawyers and explained that the interpretation they were using was exactly opposite of the 1930s. Here they claimed you and I are going to takeover Facebook. The Facebook shareholders do not know. The fraud is supposed to be that they LOST the opportunity to make money. They did not lose money as in the 1930s. One guy went to trial and he won against the SEC.
The SEC will NEVER prosecute a politicians for what they have completely distorted. They can argue that the information is coming from lawyers, not directors. But essentially, the entire “Inside Trading” is completely vague at best and is selectively applied if they want your ass. Most assume there is a LAW and Congress exempted themselves. This is an abomination created by the SEC. Because other countries did not understand the reality of the SEC “rule” in the slightest, various countries passed laws that were not really about privileged “insider” info, but it was just ant-rich Marxism.
Because I had offices around the world, trying to comply as an advisor and an investor became impossible. In some jurisdictions, if you asked me about IBM, and I owned one share of IBM, I had to disclosed my entire investment portfolio. With a team of law firms from every financial center, the conclusion was I could not have a stock account anywhere. It has morphed into me advising of a share I happened to have with no inside information can be a crime. When they tried to investigate me, the US Attorney Richard Owens could find anything and just said “You are one smart SOB.”
Even Ron DeSantis said clearly that when he was in Congress decades ago, they knew about the fraud in Minnesota. They would even talk about it back then but do nothing.
I have informed them that the best way to disguise a bribe is to set up two futures accounts. They enter a buy and sell trade on whatever and at the end of the day, they they allocate the win to the politician and the loss to the payee. This will NEVER show up as “insider trading” just that they were a fantastic trader one time in some commodity.
Like my dogs who will patiently wait for my return, we will have to be very patient on these two actions. They are step in the right direction. Let’s see!
The people of Venezuela are celebrating Maduro’s departure. Those who have lived under socialism understand the depths of its destruction. Hugo Chávez is celebrated as a social justice warrior for eliminating capitalism in the 2000s. Socialism does not work because the system eventually runs out of other people’s money, as Margaret Thatcher once proclaimed. We only need to look at recent history to see the severe consequences of switching to this system. Venezuela first reported that it had a “nutritional emergency” in February 2016. President Nicolás Maduro also declared an “economic emergency” in January of the same year, providing him the power to rule by decree. Inflation was running at 141.5%, according to Venezuelan authorities, but the IMF believed the figure reached 270% in 2015 and had the potential to reach 500% by the end of 2016.
There were rumors going around that people under socialism faced such severe food shortages that they were forced to break into zoos and eat the animals. Unfortunately, this is a fact. Reports were circulating in Venezuela of people consuming zoo animals around 2016 and 2017. The animals that remained in these zoos starved to death or ate one another. The people were in such dire conditions that they were forced to consume dogs, cats, decaying meat, and anything else they could find.
The socialists claimed that acknowledging the food shortages could lead to American intervention, and Maduro consistently blamed US sanctions for his nation’s failure. As reported by a Spanish newspaper, this is how the average person waiting for their food rations: “Five hours in line to buy a chicken; kicks, pushes, and blows of all kinds to be one of the fortunate ones to enter the supermarket and get away with a bag of flour or rice, basic goods that Venezuela does not have available to everyone, unfortunately.”
Maduro told the people to grow their own food and gloated that he, too, was producing his own eggs and produce. The government owned the grocers and food production companies and intervened numerous times to prevent private-sector intervention. Politicians take no responsibility for the suffering caused by their policies, and this is precisely what a portion of the West is seeking to implement today.
Over 7.7 million people have fled Venezuela due to one of the worst economic collapses in modern history not attributed to war. GDP contracted 80% from 2013, according to the IMF. Inflation reached an astounding 130,060% by 2018, the bolivar collapsed, prices doubled daily, and people were forced to carry carts of worthless cash for basic purchases. Around 30% of the population lived in poverty in 2013. Fast forward to 2025, roughly 87% to 90% of the population lives in extreme poverty and despair.
People wonder why Venezuelans are cheering Maduro’s downfall from the safety of their first-world suburbs. Older generations remember a time when Venezuela was a thriving economic powerhouse before it rapidly fell under socialism. Oil was insufficient to sustain a system that rendered innovation and productivity worthless.
Now, Venezuela’s problems did not begin with Maduro. Maduro inherited a flawed socialist system and continued its mismanagement. Under Chávez, Venezuela was already in decline, but Maduro assumed power precisely as the country entered a major ECM down wave. Instead of reforming, he doubled down on the same policies that were already destroying confidence and refused to take ownership in typical bureaucratic fashion. The destruction was locked in long before sanctions became meaningful because the government destroyed confidence, property rights, and capital formation. Socialism wages war on capital, and capital is a pacifist that will willingly flee. Once you nationalize industry, confiscate private property, impose price controls, and criminalize profit, capital will flee and not return. Every war waged against capital results in a lost battle for the aggressor as it cannot be captured and the business cycle cannot be defeated.
Posted originally on Jan 6, 2026 by Martin Armstrong |
The minimum wage increased significantly in 19 U.S. states on New Year’s Day. Minimum wages are often portrayed in the mainstream press as a straightforward way to raise incomes for the lowest-paid workers, but this portrayal ignores the underlying economic mechanisms.
When the cost of labor exceeds the value the labor actually produces, companies begin to reduce labor costs. This has led to a massive shift to automation and outsourcing. Employers are often forced to reduce their workforce, and those who remain face reduced hours or increased responsibilities without commensurate pay increases.
Wages rise with productivity in a healthy economy. Currently, employers’ costs are growing faster than the value added by workers in numerous instances. Yes, the federal minimum wage has been stuck at $7.25 per hour for nearly a decade, and nowhere in the US is that salary sustainable. Washington state now mandates roughly $17.13 per hour; California’s state minimum is nearly $17; New York’s major cities approach $17; and other states set their minimums above $15. The market or demand does not determine these set wages.
California routinely selects groups of minimum-wage workers and determines that their skill set is now worth 10 times as much. The state in general increased the minimum wage to $16.50 per hour on January 1, 2026, while certain cities have raised the minimum to $19 per hour. Yet, hotel and airline workers in Los Angeles are to receive a minimum wage of $38 per hour within the next two years. Hotels are already struggling, with only 79% of the traffic they once experienced prior to the pandemic. The city shed 11,000 hotel jobs last year, and this proposal nearly ensures more jobs will be cut. The state saw the same phenomenon when minimum wage was raised for fast food workers—employers reduced staff and raised prices for consumers.
Should a hotel maid earn more than a teacher in Los Angeles? Do the people constructing the hotel deserve less than those paid to book rooms? Does replacing towels and bed sheets, or checking a boarding pass, warrant an $80K salary? Pay grades are no longer based on skill and experience but on industry pandering. Yet another reason for companies to relocate when possible, as we saw throughout 2025 and will continue to see in 2026.
Rest assured that the government will continue to raise taxes on the lowest-paid workers. Wages rise naturally in a real economic expansion when businesses compete for workers. That is how a free market functions. But when governments artificially raise wages, businesses respond logically—by cutting jobs, reducing hours, or passing the costs onto consumers through inflation. The very people politicians claim to be helping end up worse off, as their cost of living rises and entry-level jobs disappear.
Disgraced Governor Tim Walz announced that he will not seek re-election after the Somali socialism scandal imploded.
“As I reflected on this moment with my family and my team over the holidays, I came to the conclusion that I can’t give a political campaign my all,” Walz said in the statement. “Every minute I spend defending my own political interests would be a minute I can’t spend defending the people of Minnesota against the criminals who prey on our generosity and the cynics who prey on our differences,” he said.
The truth of the matter is that Tim Walz will soon be facing a litany of legal investigations into his role in the Somali scandal that is perhaps the largest drain on America’s social system in recent history. Investigators still cannot determine how much taxpayers sent to Somali fraudsters from Minnesota, but they have begun to uncover a direct link to these criminal organizations and the Democrats whose campaigns they’ve repeatedly supported with stolen funds. Walz personally received $10,000 in campaign donations from Somali-operated day care centers, which is likely only one drop in the bucket.
The top journalist uncovering this story does not work for a major news outlet. There have been countless reports of fraud surpassing $1 billion, but no one has dared to show the public how unconcealed and blatant these sham practices have been permitted to run in broad daylight.
Nick Shirley is an independent journalist who took to the streets of Minnesota to see for himself how these government-funded programs are operating. Shirley showed up at the doors of numerous day care centers to take his questions directly to the sources. The people operating the centers refuse to let him in the doors, nor could they answer basic questions about the day care. Strangely, there were no signs of children at any of these childcare facilities. In a few videos, Shirley asks the people on site if they can enroll a child in these day care centers. After all, these childcare facilities run by Somalian migrants have been receiving millions in funding for YEARS. Every center turned him away. Shirley is now receiving death threats as the nation has become so divided that the left would prefer to see their taxpayers robbed than to admit the Democrats passively permitted open-air fraud markets in Minnesota.
Tim Walz, Ilhan Omar, and everyone else connected to this crime ring must face their day in court. These far-left socialist diehards masquerading as modern American politicians always use social programs as their personal piggy banks. There is no feasible way that these crime rings could have operated openly without support from the inside.
Posted originally on Jan 6, 2026 by Martin Armstrong |
QUESTION: You said this invasion of Venezuela set s precedent. Would you please elaborate.
Mikki
ANSWER: Russia could then kidnap Zelensky and point to Venezuela. China is already demanding Manduro be returned to Venezuela immediately. The computer is showing that this is by no means over. The computer has been showing this would begin the first week of January and this goes into the 1st week of Feb and then look out for April. We are entering geopolitical chaos in 2026.
Posted originally on Jan 5, 2026 by Martin Armstrong |
QUESTION:
Dear Mr.Armstrong,
Do you think of cycles and time as the same thing and interchangeable? Is it time that defines the architecture of a cycle or a cycle that characterises what we know as time?
A
ANSWER: This is an interesting and profound question. A few years ago, a group of scientists announced that they had recorded the sound of two black holes colliding a billion light-years away, thereby fulfilling the final prediction of Einstein’s general theory of relativity. This is the first direct evidence of gravitational waves, which are the ripples in the fabric of space-time that Einstein predicted a century ago.
I have approached this also from a physics perspective. However, I assumed that time functions like everything else in the universe and thus moves in a cyclical manner. Sound moves in waves, as does light. Light (electric) is bound by magnetism, so the fact that magnetism provides the outer boundary limits that create the structural form to a light wave. Given this evidence, it was logical to assume that gravity also must have a wave structure. Consequently, what I have discovered is that absolutely everything moves in a cyclical manner without exception, from brain waves, the beat of your heart, a woman’s menstrual cycle, your mood cycle (good/bad days), to the world outside our bodies. There has been a significant disagreement with that statement in the field of political economics because people WANT to believe they can rule the world and force society to do what they want. Such people have postulated this theory, begun by Karl Marx, that the government is capable of managing the economy when in fact they are incompetent and always come back for more taxes. How many times has the ECB had to increase QE and lower rates because it was not working as expected?
I have shown that Larry Summers, the father of negative interest rates and one of the architects of the killing of Glass-Steagall, freely admits that he is not capable of forecasting the business cycle and claims that it is like weather and too complex. This has profound implications because it means the promises to vote for “change” are illusory, as government cannot forecast the business cycle. Politics has been based upon voting to rob someone else to make your life easier. This general result has emerged from the fact that people do not comprehend the business cycle and, rather than moving with it, fight it over time.
So cycles are the way ENERGY moves through everything, just as your brain functions in wave formations. ENERGY can neither be created nor destroyed; it can only change form. There are Phase Transitions that are bursts of ENERGY changing form like a boiling pot of water being converted to gas, which does not take place in a nice, straight, linear progression. There is always a nonlinear cycle. Comprehending how ENERGY within a system moves is the key to everything, including cyclical knowledge. Perhaps one day we will embark upon a new understanding of the world we live in and go with the flow rather than fighting against the winds of time, chance, and circumstance.
Posted originally on Jan 5, 2026 by Martin Armstrong |
Children born in 2026 will be known as Generation Beta. They represent a structural shift in human development itself as they will be the first to enter the world where artificial intelligence is not a novelty or a tool, but an omnipresent force woven into daily life from birth. Unlike Gen Alpha, who watched technology evolve around them, Beta will never experience a world without it.
Generation Beta, spanning births from 2025 through 2039, will not “learn” AI but they will assume it as a part of life. For Gen Alpha, digital technology enhanced education and communication. Gen Z cannot recall a time without smartphones, and few Millennials remember the days before the internet and cell phones. For Beta, learning, reasoning, social interaction, and even creativity will be mediated by algorithms from infancy. Virtual assistants will answer questions before parents do. AI tutors will adapt education in real time. Devices will observe, guide, and respond constantly.
This will profoundly alter cognitive development. These children will grow up outsourcing memory, pattern recognition, and problem-solving to machines. Society has never tested what happens when judgment is shaped by predictive systems rather than experience. Play itself may be structured, optimized, and subtly controlled. Socialization will increasingly take place inside digital frameworks rather than organic human interaction.
The real danger is dependency. History shows that every time humanity outsources critical thinking to an authority, whether government, religion, or now algorithms, resilience declines. Parents and educators are already sensing this intuitively. Emotional intelligence, skepticism, adaptability, and independence will become more important than rote knowledge, because information will be abundant but wisdom will not.
Generation Beta marks a turning point comparable to the Industrial Revolution, except this time the machinery is cognitive.
Posted originally on Jan 5, 2026 by Martin Armstrong |
Birthrates are rapidly declining across the West primarily due to economic factors. Over 163 million new lives emerged in 2025, far surpassing the 63 million deaths. The countries with the least tend to produce the most children. Over the past year, Angola, the Democratic Republic of Congo, Chad, and Somalia all experienced population growths around 2.5% to 3%.
In poor African nations, children are not a “lifestyle choice” or option for young parents. They are an economic necessity. There is no pension system you can rely on, no government safety net, and no guarantee of survival into old age. Children become labor, protection, and future security. When infant mortality is high, families have more children because statistically many will not survive.
This is why nations like Niger have a birth rate roughly five times that of any major European nation. Half of the population is under 15 and unable to work. The government is run by a military junta operating under a transnational charter, and the blatant corruption has caused Niger to be one of the poorest nations in the world by GDP per capita.
We see the same phenomenon out of many African nations that are then exploited by other nations. The same Western institutions that lecture about climate change and carbon footprints are simultaneously blocking industrialization, energy development, and infrastructure. You cannot tell a continent to stay poor for the sake of Net Zero and then act shocked when birth rates explode. Poverty plus insecurity always produces population growth.
There is a happy medium here. Spiking the population of Western nations through migration is not advantageous economically. Low birth rates in the West will contribute to future economic problems, but these nations with extremely high birth rates are face generational poverty in an environment where there is no option for economic freedom since these nations lack the basic infrastructure for a healthy, prosperous nation. These systems cannot be repaired through charity; a total overhaul and reconnection to the global economy would be a crucial first step.
Posted originally on Jan 5, 2026 by Martin Armstrong |
QUESTION: Marty, you have been silent on the rumors that the Fed is bailing out JP Morgan who they claim was short silver. If there is anyone who has been behind the curtain and confronted the banks, that is you. Would you please comment on this topic.
EL
ANSWER: JP Morgan is on our site. It is due for new highs in 2026. We do have a Panic Cycle in 2027. The real crisis appears to be 2027 into 2028. I am aware that everyone seems to be freaking out about the injections into the REPO market. The global recession will spread starting here in 2026 but accelerate in 2027 int0 2028.
The implication is that something is wrong. However, this is a complex issue and as always the linear analysis always seeks to reduce this to a single cause and effect – i.e. silver short. However, what I rarely ever hear anyone mention is the real Shadow Dollar System: Repo and FX Swaps, both form the True Pillars of Global Liquidity. The global financial system operates on two largely invisible markets that dwarf traditional banking in scale and systemic importance: the repurchase agreement (repo) market and the foreign exchange swap market. Together, these markets circulate tens of trillions of dollars daily, providing the essential liquidity that keeps the modern financial system functioning.
Yet they remain poorly understood by the public as well as pretend analysts who focus on just one, and these are inadequately regulated by authorities who also fail to grasp their significance until crisis conditions revealed their centrality. The distinction between these markets matters profoundly because each serves different functions, involves different counterparties, and poses distinct systemic risks.
We carry the foreign holding of US Treasuries by various countries. I have written about how Antony Blinken transformed the dollar into a weapon by removing Russia from the SWIFT System and even threatened China. The led to the formation of BRICS, which most also seem to think this has something to do with the dollar being fiat as if it is the only such currency. China would be brain debt to back its currency with gold for that will create DEFALTION and ultimately collapse like Bretton Woods. You cannot fix a currency to anything because you have a business cycle that is also influenced by nature in addition to everything else including war.
Just look at this chart and perhaps you might connect the dots that there is a second market of tremendous importance in the world economy – the FX Swap Market. I have been warning that Blinken has no idea what he was doing. He was only interested in hurting Russia. What he did is profoundly destroyed the world economy. Look at the steady decline of China’s holding of US debt. They are not trying to crash the market deliberately, but they have been dumping US Treasuries because you DO NOT OWN the debt of an adversary.
The Repo Market: Collateralized Short-Term Funding
The repurchase agreement market represents the primary funding mechanism for financial institutions requiring overnight or short-term cash. In a repo transaction, one party sells securities to another with an agreement to repurchase them at a specified price on a future date, typically the next day. The difference between the sale and repurchase price represents the interest rate, known as the repo rate.
This mechanism serves multiple functions simultaneously. Banks and broker-dealers use repos to finance their securities inventories without selling assets outright. Money market funds and other cash-rich entities deploy excess funds overnight, earning returns slightly above zero while maintaining liquidity. The structure provides secured lending, with the securities serving as collateral, theoretically reducing credit risk compared to unsecured interbank lending.
The repo market’s scale exceeds $4 trillion daily in the United States alone. Treasury securities dominate as collateral, though mortgage-backed securities and corporate bonds also circulate through these channels. The Federal Reserve itself conducts repo operations to implement monetary policy, adding or draining reserves from the banking system through these temporary transactions.
The critical feature distinguishing repos from traditional loans is the collateral mechanism and overnight tenor. Repos represent secured financing with minimal counterparty risk, at least in theory. The short duration means positions must be continuously rolled over, creating refinancing risk if market conditions deteriorate. This vulnerability manifested dramatically during the 2008 financial crisis when repo markets froze, leaving institutions unable to fund their positions despite holding securities as collateral.
The FX Swap Market: Currency Management Without Spot Exposure
Foreign exchange swaps operate on different principles serving distinct purposes. In an FX swap, two parties exchange currencies at the spot rate and simultaneously agree to reverse the transaction at a future date using a predetermined forward rate. This mechanism allows entities to obtain foreign currency for specific periods without incurring spot exchange rate risk on the principal amounts.
The scale dwarfs even the repo market. The Bank for International Settlements estimates daily FX swap turnover exceeds $5 trillion globally, making it the largest financial market by transaction volume. This market operates continuously across time zones, with London, New York, Tokyo, and Singapore serving as primary centers.
Corporations use FX swaps to hedge currency risk on foreign operations or transactions. A U.S. company expecting euro-denominated revenue in three months can swap dollars for euros today and reverse the transaction when the revenue arrives, locking in the exchange rate. Banks use FX swaps to manage their currency positions and provide dollar funding to foreign operations without maintaining massive dollar deposits.
The crucial distinction from repos lies in the currency dimension. FX swaps solve timing mismatches in currency flows rather than funding needs for securities positions. A Japanese bank holding dollar-denominated assets but with yen liabilities uses FX swaps to obtain dollars temporarily without selling the underlying assets. The forward leg of the transaction eliminates exchange rate uncertainty, making this a liquidity management tool rather than a speculative position.
The Hidden Dollar Shortage
The FX swap market reveals a profound structural reality: chronic dollar shortage among non-U.S. financial institutions. Foreign banks hold substantial dollar-denominated assets, from U.S. Treasury securities to corporate loans, but lack natural dollar deposit bases. They cannot simply create dollars the way they create their domestic currencies. When a domestic bank market a loan, they are actually creating dollar outside the FED that all the ranting and finger pointing seem to never understand. A Bank lends you $100 and even assuming that was back by a $100 deposite from someone else, the money supply is doubled without the Federal Reserve. What the dollar haters never understand is that foreign banks lack the dollar deposits to lend out. This creates constant demand for dollar funding through FX swaps.
European and Asian banks extensively use FX swaps to finance their dollar asset holdings. They swap euros or yen for dollars short-term, invest those dollars in longer-term assets, and continuously roll over the swaps. This maturity transformation generates profit but creates refinancing risk if swap markets become stressed. The arrangement also makes non-U.S. banks dependent on dollar liquidity conditions they cannot directly control.
This hidden dollar demand helps explain why the Federal Reserve’s monetary policy reverberates globally with amplified effect. When the Fed tightens policy and dollar liquidity contracts, the FX swap market transmits stress worldwide as foreign banks struggle to roll over dollar funding. The swap spreads, the difference between the implied interest rate in FX swaps and actual dollar interest rates, widen dramatically during stress periods, revealing the premium paid for dollar access.
A shortage of bank reserves in the US financial system caused the secured overnight funding rate (SOFR) to spike in September 2019. It was fixed by the Fed restarting repo operations and expanding its balance sheet. During the European Debt Crisis after Greece got into trouble needing an IMF bailout in 2010, Chancellor Merkel had implied that Deutsche Bank would not receive state aid if it got into trouble. The narrative was that Germany, having criticized other countries for bank bailouts, wanted to appear tough and avoid the political fallout of bailing out its largest bank. This sent a red flare warning to US banks. The year 2019 did not see a full-blown, acute systemic crisis on the scale of 2010-2012 or March 2020, but it was a period of significant and worrying stress, often described as a “simmering” or “slow-burning” crisis that raised serious concerns about a potential resurgence. US banks were reluctant to accept European counter-party risk unleashing a REPO CRISIS that compelled the Fed to step in.
Then came the March 2020 “Dash for Cash.” This was a global problem. A worldwide shortage of dollar funding that manifested in unsecured funding markets (libor-OIS spread) and the secured FX swap market (cross-currency basis). It was fixed by the Fed acting as a global lender of last resort via international swap lines. Hence, the 2020 crisis did not just “involve” a dollar shortage in the FX swap market; the dysfunction and extreme stress in that specific market were a primary symptom and transmission channel of the global US dollar funding shortage. The Fed’s response through swap lines was directly targeted at relieving that precise pressure point.
The Federal Reserve’s Implicit Global Role
This is what all of these pundits seem to ignore probably out of their DOMESTIC focus. The Fed’s currency swap lines with foreign central banks represent acknowledgment of its unavoidable role as global dollar lender of last resort – NOT simply the domestic central bank. These facilities, expanded dramatically during the 2008 crisis and reactivated during the 2020 COVID disruption, allow foreign central banks to obtain dollars from the Fed and provide them to domestic banks facing dollar funding crises.
This arrangement reveals uncomfortable truths about dollar hegemony. The global financial system operates on dollar foundations regardless of American preferences. Foreign banks and corporations hold dollar assets and liabilities because international trade and finance predominantly use dollars. This creates structural dollar funding needs that private markets cannot reliably satisfy during stress periods. This is why I say it is laughable about all of these claims that the dollar is collapsing. To accomplished that, the crisis MUST being externally FIST and then spread as a CONTAGION to the center. It does not begin in the reserve currency. That is where it ends.
The FED – Central Bank of the World
The Fed on technically serves American interests in theory and operates under Congressional mandate, yet it cannot avoid global responsibilities inherent in dollar dominance. Failing to provide dollar liquidity during crises would trigger global financial collapse with severe domestic consequences. The central bank of one nation has become, by necessity and circumstance, the central bank for the global economy.
The Unsustainable Trajectory
Both markets have grown exponentially while regulation has lagged and public understanding appears to be non-existent. The repo market’s dependence on continuous rollover creates inherent fragility – but globally. A funding disruption lasting mere days could trigger widespread failures as institutions cannot finance securities positions. The concentration of repo activity among major dealer banks creates single points of failure.
The FX swap market’s hidden dollar obligations represent claims on dollars that may not exist during crisis conditions. The Fed’s swap lines provide backstop liquidity, but political pressures could limit their use during future crises. The arrangement also embeds moral hazard, encouraging foreign banks to maintain dollar positions reliant on emergency Fed support.
The ultimate irony is that these shadow funding markets, each exceeding traditional banking in scale, developed precisely because regulations and capital requirements made conventional banking increasingly constrained. Repos allow balance sheet expansion without corresponding capital. FX swaps create dollar funding without dollar deposits. The regulations drove activity into less visible channels while authorities congratulated themselves on banking system safety.
The next crisis will likely reveal new vulnerabilities in these markets that regulators currently fail to appreciate. The mathematical certainty is that systems dependent on continuous short-term funding rollover eventually face conditions where that funding disappears during geopolitical crises. The question is not whether but when, and whether authorities respond with adequate speed and scale when private markets seize. That appears to be 2027 and beyond.
These are not peripheral financial markets but the central nervous system of global finance. Their continued growth and systemic importance guarantee that future crises will involve repo and FX swap market disruptions. Understanding the distinction between these markets and their respective fragilities matters enormously for anyone hoping to anticipate where the next financial earthquake originates. History suggests that understanding will come too late, after crisis reveals what calm periods obscured.
So is this all about silver? Come on. There is more to this complexity than a single cause and effect.
I have created this site to help people have fun in the kitchen. I write about enjoying life both in and out of my kitchen. Life is short! Make the most of it and enjoy!
This is a library of News Events not reported by the Main Stream Media documenting & connecting the dots on How the Obama Marxist Liberal agenda is destroying America
![Minimum Wage Rate by State in the U.S. [2026]](https://www.paycor.com/wp-content/uploads/2023/12/MinimumWage_StateMap_740x560-768x582.png "MinimumWage_StateMap_740x560 768x582")
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