The recession caused by the financial crisis in 2008 revealed many things about our economy. The plan by our government to address the many issues showed their lack of leadership, poor vision and courage to address the loss of manufacturing due to trade policies. Their resolution was to increase debt and use tactics employed by socialist nations whose corporations are really government sponsored entities. The list is like songs on an oldies radio station. Do you recall...?
*TARP: Troubled Asset Relief Program which provided (gave) $700 billion to banks and another $100 billion in pork.
*TAF: Term Auction Facility or TAF-fly. This made toxic mortgages an asset and could be used as collateral.
*TALF: Term Asset-Backed Lending Facility or son of TAF-fly. This was for student and auto loans.
*CPFF: Commercial Paper Funding Facility. Corporations piggy-bank.
*AMLF: Asset-Backed Money Lending Facility. Used to cover problems in money market funds.
*TSLF: Term Securities Lending Facility. Used for bank swaps and bad mortgages for Treasury.
*SLF: Special Lending Facilities. Bailout for firms like AIG, J.P. Morgan, etc.
*PDCF: Primary Dealer Credit Facility. Help for broker/dealers, non-bank categories piggy-bank.
If you look closely at the various programs, it has the Federal Reserve written all over it. The unwritten law that the market knows is this: The Federal Reserve is socialism for the banking industry. It allows banks to "bank" the profits and socialize the losses. The first modern proof of this was the Long-Term Capital Management crisis back in 1998. The firm used math programs to trade. They had over $127 billion in house. They were moments away from collapse. The Fed stepped in and provided (gave) enough dough to bailout the firm and further damage to the market. In state sponsored nations, this provision is a given by the government. This is not suppose to happen in a free capitalist economy. We no longer have a true free market. This is why the disconnect with the recent market rally to the main street economy with faces multiple bankruptcies and job losses is happening. The Fed will back corporations who spend recklessly and borrow foolishly. The real internal problem is the excessive printing by the Federal Reserve. The only reason that the value of the dollar has not declined severely is due to all nations doing the same thing with their currency. However, in the US the economy is mostly service orientated. This is code for low-wage. When money circulates within a region, the word to describe this action is the velocity of money. Low wages curtails the velocity of money. This is evident in stimulus. The effect wears off like a drug dose to an addict. It takes more and more with a higher dosage to provide relief. Our economy is at that point.
Meanwhile, the distinctions between government and the Federal Reserve is becoming less and less. If you noticed, government appointees like Janet Yellen in the new Biden administration or those in the Trump service, the line is blurred. Then, there are these Federal Reserve emergency programs in 2020 to keep the game going for the status quo. They do nothing for main street except lip service. You can compare these to those of 2008. Keep in mind that the following are only classified as emergency programs. They have so many and so much power, to which I say again before its too late, End the Fed!
*Repurchase Agreement. Buy your junk.
*Money Market and Mutual Fund Liquidity. Provide money for market stability.
*Main Street Lending Program. Funds went to big firms. All spent (used) at the moment.
*Discount Window Borrowing. Cheap money for banks.
*Central Bank FX. Used for liquidity swaps.
*Payroll Protection Liquidity Facility. This program just expired...for the time being.
*Primary Dealer Credit Facility. Continuation of 2008 program.
*Commercial Paper Funding Facility. Continuation of 2008 program for corporations, a.k.a. piggy-bank.
*Corporate Credit Facility. Buy your junk loans.
As you can readily see, our economy is totally bogus. The real issue is taxes as tariffs should be put in place to drive corporations back into the US. We need to stop the shrinkage of the middle-class by returning to a producing economy. Service jobs are for high school kids to earn enough to go to college and not to exist or raise a family. This concept is classified as protectionism. All nations employ it, but whenever the US attempts it, it receives backlash. It will take real courage and leadership to which at present, our government lacks. Hope your holiday was enjoyable. Peace.
