BOND BUYING WITHOUT BUYING BONDS


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On 23 March, right at the point when U.S. equity markets tanked in bear market territory and were heading lower, the U.S. Federal Reserve announced it would buy corporate bonds, first through exchange-traded bond funds and then individually.
The Fed’s assurance that they would shore up the bond market set off a rally in which investors snapped up new offerings from Boeing, Ford Motor, and other major corporations already toting hefty debt loads.
On 9 April, the Fed added junk-bond funds to its plan, bringing down yields as investors gained confidence that the high-interest bonds suddenly were less risky. The plan includes purchase of so-called “fallen angels,” companies whose bonds recently descended into junk status, such as Ford Motor Co.
The Fed has chosen BlackRock Inc., the largest issuer of exchange-traded bond funds, to run the bank’s program, at least for the first 90 days.
In a statement, the Fed’s board of governors said they had selected BlackRock for its expertise in the funds. Fed chair Jerome Powell has as much as $11 million of his personal fortune invested with BlackRock.
BlackRock has pledged to waive management fees on the Fed’s accounts. Still, its own funds already have benefited from the Fed-inspired bond market revival.
TRENDPOST: In full view, and with little or no pushback, the money bailout policies are Socialism for the Rich & Bigs and Capitalism for We the Little People.
The bond buying schemes, injecting trillions into repo markets so “trading houses” can gamble, and billions of dollars of “loans” to multinationals by the Federal Reserve, with the backing of Washington, is unprecedented in American history.
With no blowback from the media and certainly not from the corrupt political parties, it has become the “New ABnormal.”
Wall Street Before Main Street
The $1.8-trillion CARES Act, which Congress passed in March to bail out the U.S. economy, allots $454 billion to the U.S. Federal Reserve to offset losses the Fed might incur in the bailout loans it makes to corporations.
Treasury secretary Steve Mnuchin said the Fed would use the funds as a secure foundation from which to generate as much as $10 in corporate loans for every $1 Congress gave to the program.
That would gin up as much as $4.54 trillion in bailouts for businesses big enough to enter the bond market but leave nowhere near as much money available to independent businesses, as reported by Wall Street on Parade.
Do the math: that’s $4.54 billion for Wall Street and $1.35 trillion – less than a third as much – for Main Street of what remains from the original $1.8-trillion rescue package.
PUBLISHER’S NOTE: The $454 billion is earmarked as “loss absorbing capital.” That means it will be used to make good any bad investments the Fed makes.
In other words, if the Fed loses money in any of its investments in junk bonds or other risky corporate debt, taxpayers will eat the loss and bail out Wall Street – again.
Federal Deficit to Reach $3.7 Trillion this Year
The U.S. federal budget deficit rocketed up to $1.94 trillion from 1 May 2019 through 30 April 2020, according to the U.S. treasury department.
Through March, the gap was $1.04 trillion before Congress approved the CARES Act relief package and the treasury began transferring money to businesses and individuals.
Spending during the 12-month period totaled $5.2 trillion while revenue was $3.27 trillion. Some of the lost revenue is due to taxpayers taking advantage of the new 15 July filing date and will be made up later, treasury officials believe.
Federal spending in April alone reached $980 billion, compared to average April spending of $384 billion in years past.
The Congressional Budget Office forecasts a total deficit of $3.7 trillion by 30 September, the end of the federal fiscal year.
TREND FORECAST: At the beginning of the year, the word from Washington and Wall Street was the concern that the U.S. would be running $1 trillion deficits for the next several years. Now, with the deficit soaring far beyond what could have been imagined, there is virtually no concern about what the deep-in-debt future will bring.
At some point, and we do not know when at this stage of the money printing madness, the U.S. dollar will dramatically dive. The only reason it is staying strong is because most other major currencies around the world continue to weaken.
When the dollar begins its collapse, gold prices will soar.

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