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LINKS FOR ADDITIONAL READING FOR THIS VIDEO & ALL INFO IN TEXT DOWN BELOW:
What is a Repurchase Agreement (aka Repo): https://www.investopedia.com/terms/r/repurchaseagreement.asp
Why the Fed’s recent repo is a big deal: https://www.reuters.com/article/us-usa-fed-repo-tools-explainer-idUSKBN1W30EJ
Nik Bhatia Tweet thread: https://twitter.com/timevalueofbtc/status/1174335720242077699
Zerohedge update 1: https://www.zerohedge.com/markets/fed-has-lost-control-rates-again
ZH Update 2: https://www.zerohedge.com/markets/fed-funds-prints-230-breaching-target-range-libor-replacement-soars-remarkable-525
ZH Update 3: https://www.zerohedge.com/health/fed-begins-repo-operation-funding-rates-ominously-elevated-across-board
ZH Update 4: https://www.zerohedge.com/economics/watch-live-fed-chair-powell-defend-dovish-bias-stocks-jobs-inflation-economy-soar
ZH Update 5: https://www.zerohedge.com/markets/powell-confirms-qe4-coming-just-not-today
A repurchase agreement or repo as a form of short-term borrowing for dealers in government securities.
Repurchase agreements can take place between a variety of parties. The Federal Reserve enters into repurchase agreements to regulate the money supply and bank reserves.
Because repos occur quite frequently between banks and the US Treasury, it is the base layer for much of the U.S. financial system, they provide banks with the liquidity needed to meet their daily operational needs and maintain sufficient reserves.
As was explained earlier, the Fed only enters into a repo in order to regulate the money supply and bank reserves. Basically, when the Fed has to get involved, it’s because cash reserves in banks are running low. When this happens, we often can see increased borrowing costs means less people can afford to take out loans, less credit issued can lead to a credit freeze and the U.S. financial system relies heavily on the flow of credit. To put it plainly, a credit freeze is a big problem.
Let me remind you that the last time a credit crisis occurred over 10 years ago, there weren’t a whole lot of options for people to run to in an effort to find monetary sanctuary. In fact, the last time we experienced a world wide financial crisis, it sparked the creation of cryptocurrencies. Digital currencies that are not subjected to the arbitrary whims of a particular government or central bank. Some of which were designed specifically to address the issue of dealing with debt, with an inflating money supply, with the always opaque and questionable motives behind certain economic policies. Bitcoin and cryptocurrencies have benefitted from global economic turmoil in the past, but those past situations can certainly pale in comparison to what might transpire in the future.
I think investments like precious metals and cryptocurrencies will see a surge if these red flags aren’t quelled very soon. Perhaps finally those who have been skeptical of the world of cryptocurrencies will be forced to have an open mind for their potential of serving as an oasis in unstable times. Perhaps the tables will finally be turned and the transparency, immutability and decentralized nature of things like Bitcoin will shine compared to the dark times that the greedy central bankers have caused.