Markets are broken and corrupt: In March 2020 the Dow crashed 5,676 points, so the Fed gave almost $1 trillion in newly created money to banks to move the market back up. By Pam and Russ Martens.
The majority of the stock market is owned by the wealthiest 10 percent of Americans. Thus, when the stock market is bailed out by the Fed, which we can now show overtly occurred from March 9 through March 16 of 2020, the Fed is effectively bailing out the rich.
The Fed began its emergency repo loan operations on September 17, 2019 — months before there was a reported case of COVID-19 anywhere in the world. It was the first time the Fed had intervened with emergency repo loans since the financial crisis of 2008. The Fed’s repo loans continued throughout the fall of 2019 and into 2020.
The first $280 billion:
By Monday morning, March 9, 2020, news of the coronavirus was making headlines around the world and rattling stock markets. The Dow Jones Industrial Average (Dow) plunged 2,013.76 points that day. The Fed responded with one repo loan operation that day of $112.932 billion, which it pumped into 24 trading houses on Wall Street — its so-called “primary dealers.”
The Fed had calmed the market for the time being and on Tuesday, March 10, 2020, the Dow gained 1,167.14 points. (We can assume that the gain was aided by the fact that the Fed on March 10 had conducted two repo loan operations, pumping in a total of $168.625 billion.) …
Another $132 billion the next day:
But panic set in again on Wednesday, March 11, 2020, with the Dow losing 1,464.94 points, despite the Fed conducting a one-day repo loan operation of $132.375 billion….
Four injections during the next day as the market dropped, totalling $276 billion:
By early Thursday morning, March 12, a new panic had set in. … By the time the dust settled at the closing bell, the Dow had lost 2,352.60 points.
But now that we know the details of what the Fed did on March 12, it’s fair to question if the stock market could have lost 10,000 points that day but for the actions of the Fed.
Instead of one repo loan operation on March 12, the Fed conducted four separate operations. Here’s how that played out: at 8 a.m. on March 12, the Fed provided 25-day term repo loans of $50 billion; at 8:30 a.m. the Fed provided 14-day term repo loans of $45 billion; at 9:00 a.m. (one-half hour before the stock market was set to open), the Fed conducted its third repo loan operation of the day, providing $103.1 billion in one-day repo loans; and at 1:45 p.m. the Fed crafted repo loans stretching out for 84 days and totaling $78.4 billion. The Fed’s repo loan total for just that one day of March 12 was $276.5 billion. …
And so on. Create new money and buy stocks until the market stops falling. The stocks inevitably go up, so those who bought the stocks for the Fed make big money. The stocks are then sold, the loans from the Fed are repaid, and the Fed cancels the money (literally destroys it, undoing the act of creation a week earlier).
But who gets to keep the profit made from buying stocks low and selling high, in a guaranteed trade? After all, the Fed will keep throwing money until the market goes back up, so the profit is risk-free. Which lucky people go handed that immense gift? Not the government. Not me. Was it you? Probably not…
In that 6-day trading span, it wasn’t depository banks that make loans to the American people that were getting these windfalls from the Fed. It was trading houses on Wall Street — many of them owned by giant foreign global banks.
The largest beneficiary was J.P. Morgan Securities, the trading unit of JPMorgan Chase, which over those six trading sessions borrowed $135.5 billion from the Fed in repo loans, much of it at 0.25 percent interest while its parent bank charged double-digit interest rates on its credit cards to consumers. …
Media blackout:
And the final aspect … that needs to be addressed by Congressional hearings is why the public isn’t reading about any of this, or looking at the charts on this page, at any mainstream media outlet in America, which all have reporters exclusively assigned to cover every move by the Fed but have conducted a blanket news blackout on this critical subject since the Fed released the names of the borrowers last Thursday.
You can download the time and dates of the Fed’s repo loan operations at this link. …
So there are two big classes of winners, nearly all in the ruling class:
- Stock owners generally, saved form a much larger market crash. These people owned overvalued stocks, but were saved from their ill-judgement by bureaucrats in their economic class. (Do they now have a sense of obligation?)
- The primary dealer banks, who make large risk free profits.
Money was created out of nothing temporarily, used to make great profits by the big banks. But those profits were real, and could be used to buy houses, cars, etc.
This corruption is only possible because the central bank can manufacture infinite money money at whim. If money supply was contained, as it used to be when USD could be exchanged for gold on demand, then the market would have fallen and people who could correctly value stocks would be the winners instead.
Price discovery isn’t working anymore. The link between stock value and price has been deliberately broken by over decades of events like this. Hence, the markets are corrupt and the price signals they send are distorted and wrong. This makes the economy inefficient, and makes us all poorer because society is deploying its capital badly. It also rewards rich insiders at the expense of those who can correctly judge value.
The losers are those who did not get to participate in this money creation event — most of us. And our economy is smaller and less efficient, so that make all of us losers.
