Fed’s QE Unwind Accelerates Sharply

Fed’s QE Unwind Accelerates Sharply:

These are getting to be serious amounts.

The QE Unwind is ramping up toward cruising speed. The Fed’s balance sheet for the week ending May 2, released this afternoon, shows a total drop of $104 billion since the beginning of the QE Unwind in October – to the lowest level since June 11, 2014.

During the years and iterations of QE, the Fed acquired $3.4 trillion in Treasury securities and mortgage-backed securities. The mortgages underlying those MBS are guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The “balance sheet normalization,” as the Fed calls it, was nudged into motion last October. But the pace accelerates every quarter until it reaches up to $50 billion a month in Q4 this year.

This would trim the balance sheet by up to $420 billion this year, and by up to $600 billion in 2019 and every year going forward, until the Fed considers the balance sheet to be adequately “normalized” — or until something big breaks, whichever comes first.

Read moreFed’s QE Unwind Accelerates Sharply

“We Understand The Chinese Government Has Halted Purchases Of US Treasuries”: SGH

“We Understand The Chinese Government Has Halted Purchases Of US Treasuries”: SGH:

On Friday, we reported that among the five “nuclear” options available to Beijing to retaliate against Trump’s latest $100BN in proposed import tariffs, was the choice whether to sell US Treasuries. But what if Beijing did not want to unleash a full-blown market nuke, and instead was hoping for a targeted, EMP hit?

Then it would simply stop buying US paper, instead of dumping it outright; in the process it wouldn’t hurt the US too much – avoiding a furious tit-for-tat response – but would still send a clear signal to the White House, whose fiscal spending plan will more than double net Treasury issuance this year from under $500BN to over $1 trillion, and which needs every possible marginal buyer of US paper, both domestic and foreign. 

Read more“We Understand The Chinese Government Has Halted Purchases Of US Treasuries”: SGH

Russia Is Hoarding Gold At The Fastest Pace In 12 Years

Russia Is Hoarding Gold At The Fastest Pace In 12 Years:

Russia is adding gold to its reserves at the fastest pace in 12 years …and dumping US Treasuries at the fastest pace since 2011.

The Central Bank of Russia (CBR) has been increasing its holdings of gold every month since March 2015. The country is currently the sixth-largest gold owner after the United States, Germany, Italy, France and China.

According to the CBR, gold reserves spiked to $455.2 billion between March 2 and 9 hitting a historic high not seen since September 2014.

“Our international reserves increased by $2.9 billion or 0.6 percent in a single week, mainly on the strength of positive re-evaluation,” said the regulator.

According to World Gold Council data, last year the CBR became a world leader in stockpiling gold.

The bank has more than doubled the pace of its gold purchases, statistics showed. It has been increasing Russia’s gold reserves to meet the goal set by President Vladimir Putin to make it less vulnerable to geopolitical risks. The Russian gold cache has increased by more than 500 percent since 2000.

And while the Russian central bank is buying gold with both hands and feet, it is dumping US Treasuries at the fastest pace for a January since 2011…

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US Treasury Posts Gigantic $1.16 Trillion Shortfall in Fiscal 2017, Hilariously Points out “Where We Are Headed” — So Budget Deficits Will REALLY Go Vertical – Mnuchin’s Wife Says: Don’t Worry

US Treasury Posts Gigantic $1.16 Trillion Shortfall in Fiscal 2017, Hilariously Points out “Where We Are Headed”:

Just add tax cuts and ballooning expenditures. The media chose to silence the report to death.  

“If a tree fell in a forest and nobody heard it, did it really make a sound?” asks our favorite fiscal gadfly and Director of Research at Truth in Accounting, Bill Bergman, referring to the media coverage that the Treasury Department’s “Fiscal Year 2017 Financial Report of the U.S. Government” has received, which was, at the time he wrote it 24 hours after the February 15 release of the report: “Nothing. Zip. Scratch.”

“Where We Are Headed”

That $1.156 trillion in Net Operating Cost occurred in fiscal 2017. But these are the good times, the boom years, if you will, when shortfalls should shrink into oblivion. So what will happen to the shortfall when the economy slows down or goes into a recession? That was a rhetorical question.

For fiscal 2018 and going forward, the tax cuts will lower revenues by about $150 billion per year on average over the next ten years. And for fiscal 2018 and 2019, Congress passed the two-year budget resolution that will add about $150 billion on average per year to the outlays. Both combined will drive up the deficit by about $300 billion a year on average.

“Where We Are Headed” a chapter heading (pages 9 and 14) says. I can supply my own chart, based US Treasury data, to show exactly “where we are headed” in terms of the US gross national debt:

*****

Budget Deficits Will Really Go Vertical – Mnuchin’s Wife Says: Don’t Worry:

Authored by MN Gordon via EconomicPrism.com,

United States Secretary of Treasury Steven Mnuchin has a sweet gig.  He writes rubber checks to pay the nation’s bills.  Yet, somehow, the rubber checks don’t bounce.  Instead, like magic, they clear.

How this all works, considering the nation’s technically insolvent, we don’t quite understand.  But Mnuchin gets it.  He knows exactly how full faith and credit works – and he knows plenty more.

In fact, Mnuchin’s wife, Louise Linton, says she admires him because “he understands the economy.”  And Mnuchin, no doubt, admires Linton, a Scottish actress 18 years younger, because “she loves SoulCycle Snapchat filters that make people look like puppies and piglets.”  Naturally, Mnuchin gets the importance of puppy and piglet filters and how this bizarre fad fits into the big picture of the economy.

Unlike Mnuchin, we find the economy, and its infinite and dynamic relationships, to be beyond comprehension.  But that doesn’t deter us from attempting to make some sense of it each week.  When it comes to Snapchat filters we know nothing – and we could care less.  Still, who are we to question Snap Inc.’s $24 billion market capitalization?

Read moreUS Treasury Posts Gigantic $1.16 Trillion Shortfall in Fiscal 2017, Hilariously Points out “Where We Are Headed” — So Budget Deficits Will REALLY Go Vertical – Mnuchin’s Wife Says: Don’t Worry

DANGER AHEAD FOR U.S. GOVT: Unable To Service Debt As Interest Rates Surge

DANGER AHEAD FOR U.S. GOVT: Unable To Service Debt As Interest Rates Surge:

The U.S. Government is in serious trouble when interest rates rise.  As interest rates rise, so will the amount of money the U.S. Government will have to pay out to service its rapidly rising debt.  Unfortunately, interest rates don’t have to increase all that much for the government’s interest expense to double.

According to the TreasuryDirect.gov website, which came back online after being down for nearly a month, reported that the average interest rate paid on U.S. Treasury Securities increased from 2.2% in November 2016 to 2.3% in December 2017.  While this does not seem like a significant change, every increase of 0.1% in the average interest rate, the U.S. Government has to pay an additional $20.5 billion in interest expense (based on the $20.5 trillion in total U.S. debt).

H/t reader squodgy:

“Somebody, somewhere knows the truth.
They will have prepared and have a bolthole.
Knowing when is essential.
We irrelevent serfs have no idea generally, but those who read I.U. have had enough pointers and warnings to know what’s going on.”

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Debt Bubble surpasses 300% of Global GDP

Debt Bubble surpasses 300% of Global GDP:

Both developed and developing nations collaborated to achieve a new record of debt, but developed nations are the biggest offenders with 142 billion euros while developing nations added almost 51 billion euros.

The debt of households, companies, banks, and governments worldwide added up to a total of 193 billion euros at the end of 2017.

The figure represents a new record after increasing by 13.7 billion euros in the first nine months of last year, according to data compiled by the International Finance Institute (IIF).

The increase in global debt in absolute figures, in relation to world GDP reached 318% of global GDP, three percentage points below the historical maximum of 321% registered a year before.

Read moreDebt Bubble surpasses 300% of Global GDP

David Stockman Warns “Gold Is The Only Safe Asset Left” – “We Are Heading For A Thundering Collision In The Bond Market” (Video)

– David Stockman Warns “Gold Is The Only Safe Asset Left”:

Via Greg Hunter’s USA Watchdog blog,

Record high stock and bond prices are flashing danger signs to former Reagan White House Budget Director David Stockman.

Stockman contends,

I don’t think we are going to have a liquidity crisis.  I think it’s going to be a value reset.  I think there is going to be a jarring downward price adjustment both in the stock market and in the bond market.

 This phantom or phony wealth that has been created since the last crisis is going to basically evaporate.”

So, what asset is safe? Stockman says gold and goes onto explain,

Read moreDavid Stockman Warns “Gold Is The Only Safe Asset Left” – “We Are Heading For A Thundering Collision In The Bond Market” (Video)

David Stockman: The Coming Fiscal Derailment—Why FY 2019 Will Sink The Casino

The Coming Fiscal Derailment—Why FY 2019 Will Sink The Casino:

By David Stockman

Since last November 8th the Russell 2000 has risen by 30% and the net Federal debt has expanded by an astounding $1.0 trillion dollars.

In a rational world operating with honest financial markets those two results would not be found in even remotely the same zip code; and especially not in month #102 of a tired economic expansion and at the inception of an epochal pivot by the Fed to QT (quantitative tightening) on a scale never before imagined.

And we do mean exactly those words. By next April the Fed will be shrinking its balance sheet at $360 billion annual rate and by $600 billion per year as of next October.

Altogether, the Fed’s balance is scheduled to contract by upwards $2 trillion by the end of 2020. And it’s apparently on a path that is so locked-in—-barring a recession—that Janet Yellen affirmed in her swan song that the Fed’s giant bond dumping program (euphemistically called “portfolio runoff”) would no longer even be mentioned in its post-meeting statements.

So the net of it is this: The Fed will sell more bonds in the next 3-4 years than had been accumulated by all of the central banks of the world in all of recorded history as of 1995!

Read moreDavid Stockman: The Coming Fiscal Derailment—Why FY 2019 Will Sink The Casino