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August 19, 2021

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Hey Everyone,

Once again, the Federal Reserve has set a new record, as they continue their blatant manipulation of financial markets.

Here we can see the amount of cash left in what's known as the overnight reverse repo facility, which just reached $1.12 trillion for the first time on Wednesday.

If you're not entirely sure how reverse repo works, as I imagine most of us are, there's an excellent explanation at this link.

Ridiculous proportions

In short, it's how the Fed attempts to keep some of the excess money they've been printing from overflooding the markets.

To put it simply, they offer the best rates in the market (currently 3.35%) on ultra-short-term loans. So any bank who has a balance that they're temporarily not using is most likely to take advantage of the Fed's overnight rate.

By doing this, the Fed is able to kill two birds with one stone. The first is that it is able to sop up all the excess liquidity in the markets to keep it from further inflating asset prices.

Second, they can push up interest rates at the front end of the yield curve (read: short-term debt), while leaving the benchmark rate unchanged.

Not that there's anything particularly wrong with this strategy. It seems to achieve the Fed's goals just fine.

It's just that when you think about market manipulation calmly exceeding a trillion dollars daily, it kind of puts the entire economy in question.

Like, is this a joke? No, it's really happening. Ok, let's move on. ...

Crypto light

"What does all this mean for bitcoin?" you may be asking. ...

Well, I'll tell you. Not really anything directly. The 80 or so financial institutions who are parking their money with the Fed every night aren't really the type who would be investing those sums in crypto. So the central bank's attractive offer isn't taking any light from the crypto market, as it seems to be for stocks.

Of course, the main purpose of Bitcoin was to provide a form of money that is completely independent of all this silly banking monkey business, so the crypto community is keenly watching these figures from the side.

Praying for the best, but knowing that this probably won't end well for them.

It's recently been pointed out by analyst Jason Deane that fiat currency has just turned 50. Happy birthday to money backed by nothing!!

As always, thanks for reading. All comments, questions, and feedback are very highly appreciated.

Have a wonderful evening.

Mati Greenspan

Analysis, Advisory, Money Management