The unannounced meeting between the Fed and Trump was a briefing on the Repo Crisis BECAUSEthe real crisis cannot be discussed publicly. I have not been getting much sleep lately. This is a very serious crisis and all the BS on TV of these pretend analysts giving their two cents is really amazing. They are making up stuff and speculating because they have no idea how the global economy truly functions and they do not advise institutions. They do not understand the risks for year-end and calling this QE proves they do not understand what is taking place.

There are too many people trying to sound authoritative when they are clueless. Yet they seem to have to say something to pretend they know what is going on when all they are doing is creating confusion. We have more institutional clients around the globe on every side than anyone would imagine. We are in the front row with real live clients in the middle of this issue.

I appreciate the severity of this crisis. Requests to attend board meetings I have only been available by phone. I simply cannot fly all over the place. I really wish I could just come out and spill the beans, but this situation is too critical at this point and I fear that if someone does not blink here, we are headed into a global political contagion.

This is why a deal had to be tentatively arranged with China on trade. There are politicians out of the loop and this whole thing which is way too far above their heads to even grasp an understanding.

QUESTION #1: Would you comment on Zoltan Pozsar of Credit Suisse calling this QE4 for year-end.

QUESTION #2: Martin,

You said that the Fed didn’t raise rates a few days ago because the Repo crisis won’t let them. Interestingly, Trump hasn’t blasted Fed chairman Powell for not lowering rates more over the past few weeks. Do you think Trump is aware that the Fed can’t lower and that’s why he’s hasn’t attacked Powell lately on Twitter? Perhaps Powell told Trump the Repo situation in their Nov. 18th unannounced meeting.

Jack

ANSWER: I do not know if Pozsar is being too caviler with his comments or if he’s deliberately trying to spread disinformation. This is by no means a “fourth version of quantitative easing” when the US economy remains strong and the Fed has acknowledged that fact. It does seem to me that he is trying to deflect people from looking at Europe and pointing his finger at the Fed. The Fed is compelled to be the man in the middle because banks have withdrawn from lending to banks because they do not know who has the risk with Europe. The US Treasury stated it is investigating the over-regulation by the BIS, which has impacted the repo market. The Fed is trying to control short-term rates and this has NOTHING to do with “stimulating” the economy. The BIS has impacted the regulation with Basel III, which the BIS will not accept responsibility.

Calling this Repo Crisis QE is up there with calling Trump a racist because of his wall. Yet, Mexican is not a “race” any more than being American, German, Greek, Italian, Spanish, or British. The term is ethnicity, not race. This is not Quantitative Easing, which is lowering interest rates and stimulating the economy. The Fed is trying to prevent short-term rates from rising because there is a liquidity crisis created by banks refusing to participate in the repo market.

The suggestion that the Fed will have to move to long-term bonds fails to understand what is taking place. I cannot imagine that any banker would make such a statement. They either do not know what the repo market is or they are trying to create disinformation to protect Europe. This is very curious.

I believe the White House has been briefed on the crisis and it has also impacted the China trade negotiations.

The Repo Crisis is only Part II of this Mother of All Financial Crises. Where Quantitative Easing was buying in long-term debt to try to lower long-term interest rates and stimulate the economy, the Repo Crisis is entirely different for its objective is to prevent short-term rates from rising. The Fed did not lower rates today and hinted that rates would remain unchanged into 2020 BECAUSE the pressure is rising for short-term rates to rise. This is confirming that all central banks have LOST control of short-term rates.

We face something that has NEVER before been witnessed in economic history. I have written this report which will include an update next year because this is a critical issue that will dictate the fate of everything else. This is the Index to the Report

The US border guards have been illegally searching laptops and phones for anything that might lead to hidden money. A Federal Court in Boston has ruled warrantless searches of the phones and laptops of international travelers violates the Fourth Amendment. It is amazing that you would even have to take them to court to force them to honor the Fourth Amendment. The ruling came in a lawsuit filed by the American Civil Liberties Union and the Electronic Frontier Foundation on behalf of 11 travelers whose smartphones and laptops were searched without individualized suspicion of any wrong-doing. The ACLU described the searches as “fishing expeditions” where border guards must now demonstrate individualized suspicion of contraband before they can search a traveler’s electronic device.

COMMENT #1: Hi, Marty if you can, let the readers know if the “mother of all financial crisis” is the big bang.

N

COMMENT #2: Wow. I am left speechless. I think your title Repo Crisis is misleading. This is just the staging ground. It takes someone in the international arena to understand the implications of this going forward.

Thanks for making this an updating service.

Bill

REPLY: Perhaps I should have named this report “The Mother of all Financial Crises.” The Repo Crisis is just part II in the lead-up to Big Bang that nobody seems to grasp is already unfolding. This is the Sovereign Debt Crisis on steroids. Whatever they could have done wrong, they have done with absolute precision. The projected losses for institutions I have laid out will range from 40% to 60% of assets. This time, whoever is caught holding will not be bailed out this time around. This is the combination of the 1998 Liquidity Crisis and the 2007-2009 Financial Crisis. So hang on to whatever you can grab ahold of. You will need it for this one.

QUESTION: Hi Mr Armstrong,
I have been a subscriber for several years and I appreciate your work. You mentioned that when the dust settles there will be pockets in the US that are safe. Can you elaborate where they will be? Also if your child was planing on majoring in finance in college next year, would you steer them away or have them specialize in something like forensics since there will be a mess to sort out? Or would you steer them to a different major or no college at all?

Thanks again for everything you do

BV

ANSWER: It is still too early to forecast which areas will be best specifically. In general, the major regions will be split politically between left and right. There will be stark differences politically between California v Texas and Florida for example. You certainly do not want to be in any state that is out of control with respect to taxes and police abuse. Most people would never guess, but the state that abuses the law the most is Iowa. The percentage of drivers who have been given speeding tickets is 23.2%. That is a stunning percentage of the population. Indeed, Iowa wrote 148,755 tickets in 2016, which was a lot given the population compared to 712,000 tickets written by New York.  Additional states where the percentage of people who have been given speeding tickets over 20% are Wisconsin (20.2%), Ohio (20.5%), Nebraska (20.8%), Wyoming (21.3%), South Carolina (22.7%), and North Dakota (23.1%).

We have states that have been funding themselves with traffic fines for all sorts of things. A friend’s wife was ticketed for looking at Google maps on her phone while at a red light. She went to court to prove she was not texting. The judge ruled for the state, as they are instructed to do, and fined her by saying she is not even allowed to look at he phone. So if she had a paper map, that would have been OK. So this is what we call legal persecution for monetary gain.

COMMENT:

You may already know this but in case you don’t: this is a prime example of the ‘war on cash’.:

Yesterday I walked into my sisters bank (Santander) in the local town in England, a quite affluent town not somewhere deprived. I handed over and politely asked to deposit a mere £200 (that’s two hundred) and I was told: ‘You cant do that anymore because of government regulations, you cant deposit cash into someone else’s bank account no matter how small.’ I was told it has been in place since last April!.
That should be a wake up call for a lot of people but most people don’t know, it hasn’t been discussed publicly anywhere at all, only bank employees seem to know about it.

How long before they do an India and get rid of popular notes overnight without telling anyone?

HO’N

REPLY: I tried to buy a cash card to send to a friend and was told I cannot do that. They would sell me a card only in my name. Governments are hunting cash on every level right down to the smallest amount. It is also ILLEGAL to mail cash in the United States.

QUESTION: Mr Armstrong,
I have great respect for your work.
Can you explain how the Fed’s QE fits into the cycle of things. It seems to me that their interference in the markets is disrupting/altering the cycle. For example, the latest Fed purchases of T-bills every month in the amount of $60.
Who are they buying from? I assume Inv Banks, Comm Banks and hedge funds, and now these entities, instead of having low yielding bills on their books have zero coupon cash, which they then seek yield and put into the shares markets. It seems pretty clear and appears to extends the cycle. Can money printing just cause the 8.6 yr cycle for instance to extend to say a harmonic of that, 17.2 or 25. 8?

ANSWER: No. The Repo Crisis is on time. Our forecast for the start of the Liquidity Crisis was after Labor Day in September. The Fed is trying to prevent short-term rates from rising. They are not engaging in Quantitative Easing for the sake of “stimulating” the economy.

Things are getting bad and the rumor behind the curtain is that European banks will be prohibited from participating in repo for year-end. That is how bad things are getting.

So the cycle appears to be coming on time. All the implications are far too great to cover in a blog, which is why I have created a a report on the repo crisis that is around 150 pages