When the GAO report came out on the Quantitative Easing by the Federal Reserve, it uncovered a secret $16 trillion feeding tube from the Fed structured as revolving, low-cost loans to any bank (foreign or domestic) teetering on the edge. Amazingly, the audit showed the Fed started the loans in December 2007 – long before the public knew there was a dangerous financial crisis – and it lasted until at least July 2010.

In addition to the publicly known support to Bear Stearns from the New York Fed, the GAO audit revealed that the Federal Reserve provided another $853 billion in secret loans to Bear Stearns; $851 billion from its Primary Dealer Credit Facility and $2 billion from its Term Securities Lending Facility. It wasn’t until May 31, 2008, when JPMorgan Chase closed its deal with Bear Stearns. However, the GAO reported that Bear Stearns “was consistently the largest PDCF borrower until June 2008.” The Fed shows that Bear Stearns continued to receive funds until June 23, 2008.

Then by April 2010, that is when Greece had to ask the IMF for a bailout. What is amazing is how no banker was ever charged for the toxic financial waste they created while trading against their own clients.

COMMENT: You are quite correct Mr. Armstrong. Prime minister Boris Johnson spoke that “no deal” Brexit looks like a surety and the FTSE 100 skyrocketed and the pound took a beating against ALL mostly traded pairs. Indices (excepting for a few) are going to the moon!!

J.F

REPLY: There are actually suggestions in Brussels I have received a few calls from reliable sources that a hard BREXIT means that Brussels wants to build their version of the Berlin Wall to separate Ireland all for taxes to prevent the free flow of commerce between the Irish people. All of this because of the insanity of their demands on trade. Britain will be so much better off with a hard BREXIT.

In 2018, UK exports to the EU were £289 billion (46% of all UK exports). UK imports from the EU were £345 billion (54% of all UK imports). The share of UK exports accounted for by the EU has generally fallen over time from 55% in 2006 to 43% in 2016, though this increased slightly to 44% in 2017 and 46% in 2018. The numbers are very clear. The UK buys more from the EU than the EU buys from the UK.

A hard BREXIT will allow Britain to enter free trade deals with Asia and the USA which are the more than 50% of its trade balance sheet. The decline in the pound will make British exports even more salable overseas.

The collapse in property values in London has created a crisis in property funds. M&G Investments blocked withdrawals from its UK property fund as it seeks to distance itself from the troubled manager. Back on June 3, 2019, the asset manager wrote to clients of the M&G UK Property fund to inform them it had placed a temporary restriction on customers from taking out their money for up to six months. Restrictions were also placed on certain withdrawals from the Prudential UK Property fund, which feeds into the M&G fund affected about 65% of customers in the fund. Both funds were only available for long-term institutional investors such as pension funds and the total under management was around £636m in assets while the Prudential Fund had about £50m.

The real estate funds are going to be the worst since they tend to be illiquid.