Fed Starting the Big Squeeze

Timothy Birdnow

And so it begins.
 
From Yahoo News:

The reasons behind borrowers' sudden demand for cash were attributed to a host of technical conditions that converged to drain money out of the system.

There were major cash withdrawals as quarterly corporate taxes came due, at the same time as a surge of US Treasury debt came into the market to finance deficit spending by the federal government.

More generally, more government securities have built up on the balance sheets of private firms these days as the Fed has begun to wind down the massive holdings of Treasury paper it amassed during the global financial crisis -- which has also sucked cash out of the market.

"It looks like a lot of cash left the system in recent days and that demand for dollars was greater than the number of dollars in circulation," said Gregori Volokhine of Meeshaert Financial Services.

So there is now a demand for cash liquidity after a decade of tepid growth. Why? Well, for one thing, that signals a STRONG economy insofar as it means banks and other institutions are needing more on hand; they are moving more of it. The hallmark of any good economy is fast turnover of money.

That's the good news. The bad is that the Fed is starting the squeeze play, pushing banks and other financial institutions to pay them back and they are taking cash OUT of the system. This is exactly what the Fed did to cause the Great Depression, cut the money supply at a time when everyone needed more money in the economy.

This is exactly what I suspected they would do about a year out from the next election. They are true to form.

The intent is to cause an economic downturn and spike a market panic just before the next election. To do that they have to start squeezing now. But they don't want it to come to a head now, so they are going to reduce interest rates temporarily and have an easy money policy for six months or so, then do a "belt tightening" and watch the markets crash. This will guarantee Big Smelly Squaw or Captain Peachfuzz Biden win the election.

It is all falling into place as I have foreseen...

See here and here. also here and here.

Posted by: Timothy Birdnow at 08:55 AM | No Comments | Add Comment
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