Monstrous dollar debasement seen in recent reserve figures

More evidence that Jerome Powell’s $7.8 trillion QE Infinity train to nowhere is going nowhere fast and destroying your wealth.

The chart below shows that the equivalent of ~50% of the $7.8 trillion liquidity manufactured by the Fed since the GFC, has been redeposited with the Fed.

And the Fed is paying interest on it.

In March, banks stashed an additional $400 billion back with the Fed as that was a better proposition than lending it out.

And the month before they stashed $200 billion with the Fed.

Regardless of this $600 billion in monopoly money that was parked up, the Fed continued to buy back further treasuries and mortgage backed securities to the tune of $240 billion, over the same period.

Aside from this bizarre outcome, it means that exigent (emergency) money is still not being lent out to businesses and households.

So what’s the emergency?

Why continue with the charade?

Because it has to – the whole debt stack is now feeding on itself and needs to be serviced, rolled, and made affordable with low interest rates and ‘ample liquidity’.

And the worst part is that the balance sheet has grown at around 18% per annum since sub-prime in September 2008, and as per the above, half of it is not doing anything.

It all spells massive monetary creation/dollar debasement of well over 20% per annum.

Put another way, imagine you have a 99.9% purity gold bar.

Imagine I take it, melt it, mix it with an equal volume of molten scrap metal, and cast it into a bar that’s twice it’s original length.

Imagine I then snap it in half, keep one half and give you the other.

You get back a bar of the same dimensions and colour, but I just stole 75% of your gold content.

Not such a great deal, right?

Debasement: Someone (um,……the Fed) overprinted the valuable stuff and will only pay you a yield of 0.10% before costs on the 25% that’s left, because it’s in abundant supply.

But that doesn’t happen with gold and precious metals, commodities and finite supply assets like bitcoin, Munster collectibles, land and other similar non-fiat assets - but you have to first convert your fiat into those assets, and hold them.

So remember that in these times of currency debasement, returns on dollar assets are monstrously negative before you even start.

Now that might explain a lot.

Mike.

Next Level Corporate Advisory is a leading M&A, capital markets and strategy advisor with a multi-decade track record of delivering high quality independent corporate advice and strategic transactions. We design, find and arrange transformative mergers, acquisitions, divestments, IPOs, growth financings and other corporate events that help our clients take their operational and corporate strategies to the next level, in and out of Australia.

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