Post by blackfeather on Jul 14, 2021 13:18:59 GMT
I found this long article, and the summary is here.....
Now what will a credit crunch do?
I saw this example a few years ago so I'll repeat it here...
A farmer borrows money from the bank for seed, fertilizer and fuel. He plants his wheat crop. When the crop is harvested and sold he pays the bank back. The grain elevator borrows money on short term and buys the wheat, he stores it and sells it to a flour mill. He pays back the bank. The flour mill borrows money to buy the wheat, grinds it into flour and sells it to places like King Arthur or Gold Medal, then he pays the bank back. Gold medal borrows money from the bank and buys the flour from this mill as well as others, mixes the flours into bread flour, pastry flour, or general purpose flour. They sell to grocery warehouses and pay the bank back. The warehouse borrows money on short term and buys Gold Medal flour and sells to the grocery store who upon receiving pays the warehouse out of past sales or the sale of the current flour batch. Now if any one in that chain can't get short term credit the whole supply chain breaks down. This is just one example of one supply chain. Some supply chains are more dependent on short term credit than others but you can see what would happen if there was a credit crisis and if just one link can't borrow money. In a crisis it would be more than one link that would be in trouble.
Thinking always of themselves first and clients second, Wells Fargo just announced that they are permanently suspending/closing all personal lines of credit (from $3k to $300K) in the coming weeks.
.....
Because Wells Fargo is worried about a crisis ahead—namely a liquidity crisis.
....
Meanwhile, as Wells Fargo hunkers down for the pain ahead, JP Morgan, one of the smartest insiders in the entire (rigged) banking system, is beginning to carefully hoard and stockpile cash ($500B) and moving more to the safety of short-term bonds.
.......
But more to the point, JP Morgan (like Wells Fargo) sees a liquidity crisis on the horizon…
But what suddenly tipped them off?
the repo market have been making neon-flashing warning signs.
Traditionally, the reverse repo market is where banks went to borrow from banks, typically offering collateral (US Treasuries) for some short-term liquidity—i.e., money at low rates.
But in September of 2019, those rates spiked dramatically for the simple reason that banks began distrusting each other’s credit risk and collateral. That’s a bad sign.
......
the Fed has lifted the interest (IER) they pay to banks (no shocker there) as banks are parking more money at the Fed where they are exchanging cash for Treasuries in a now unignorable flight to safety.
As a result, the repo market has skyrocketed as banks are parking nearly $1T per day at the Fed, which is 3X the normal operational amount.
This is a screaming sign of counter-party risk among the banks themselves, whose last hope is the Fed, not each other.
.......
As more banks are swapping T-bills as collateral from the Fed rather than each other for cash, this means massive amounts of money (“liquidity”) is coming out of the system.
The money markets are moving massive amounts of dollars to the Fed, which means bank reserve accounts are moving from the banks to the Fed itself; this, in turn, means less bank reserves and hence less bank lending—i.e., a credit tightening rather than credit binging.
.....
As for gold, when markets tank, gold can follow, but with far less depth and speed. Many tapped out investors are forced to sell safer precious metals to cover risk asset losses, and the pinch to gold is temporary yet real when markets tank.
But as deflation hits the exchange prices, inflation in the price of everything else continues its slow climb north, which gold eventually and consistently follows.
,,,,,,,
In short: The markets are handing investors a clear warning signal of a liquidity crisis and hence market crisis.
kingworldnews.com/wells-fargo-and-repo-markets-screaming-liquidity-crisis-about-to-unfold/
.....
Because Wells Fargo is worried about a crisis ahead—namely a liquidity crisis.
....
Meanwhile, as Wells Fargo hunkers down for the pain ahead, JP Morgan, one of the smartest insiders in the entire (rigged) banking system, is beginning to carefully hoard and stockpile cash ($500B) and moving more to the safety of short-term bonds.
.......
But more to the point, JP Morgan (like Wells Fargo) sees a liquidity crisis on the horizon…
But what suddenly tipped them off?
the repo market have been making neon-flashing warning signs.
Traditionally, the reverse repo market is where banks went to borrow from banks, typically offering collateral (US Treasuries) for some short-term liquidity—i.e., money at low rates.
But in September of 2019, those rates spiked dramatically for the simple reason that banks began distrusting each other’s credit risk and collateral. That’s a bad sign.
......
the Fed has lifted the interest (IER) they pay to banks (no shocker there) as banks are parking more money at the Fed where they are exchanging cash for Treasuries in a now unignorable flight to safety.
As a result, the repo market has skyrocketed as banks are parking nearly $1T per day at the Fed, which is 3X the normal operational amount.
This is a screaming sign of counter-party risk among the banks themselves, whose last hope is the Fed, not each other.
.......
As more banks are swapping T-bills as collateral from the Fed rather than each other for cash, this means massive amounts of money (“liquidity”) is coming out of the system.
The money markets are moving massive amounts of dollars to the Fed, which means bank reserve accounts are moving from the banks to the Fed itself; this, in turn, means less bank reserves and hence less bank lending—i.e., a credit tightening rather than credit binging.
.....
As for gold, when markets tank, gold can follow, but with far less depth and speed. Many tapped out investors are forced to sell safer precious metals to cover risk asset losses, and the pinch to gold is temporary yet real when markets tank.
But as deflation hits the exchange prices, inflation in the price of everything else continues its slow climb north, which gold eventually and consistently follows.
,,,,,,,
In short: The markets are handing investors a clear warning signal of a liquidity crisis and hence market crisis.
kingworldnews.com/wells-fargo-and-repo-markets-screaming-liquidity-crisis-about-to-unfold/
I saw this example a few years ago so I'll repeat it here...
A farmer borrows money from the bank for seed, fertilizer and fuel. He plants his wheat crop. When the crop is harvested and sold he pays the bank back. The grain elevator borrows money on short term and buys the wheat, he stores it and sells it to a flour mill. He pays back the bank. The flour mill borrows money to buy the wheat, grinds it into flour and sells it to places like King Arthur or Gold Medal, then he pays the bank back. Gold medal borrows money from the bank and buys the flour from this mill as well as others, mixes the flours into bread flour, pastry flour, or general purpose flour. They sell to grocery warehouses and pay the bank back. The warehouse borrows money on short term and buys Gold Medal flour and sells to the grocery store who upon receiving pays the warehouse out of past sales or the sale of the current flour batch. Now if any one in that chain can't get short term credit the whole supply chain breaks down. This is just one example of one supply chain. Some supply chains are more dependent on short term credit than others but you can see what would happen if there was a credit crisis and if just one link can't borrow money. In a crisis it would be more than one link that would be in trouble.