posted ago by 0xUnified ago by 0xUnified +38 / -1

2007 - 2008 Subprime mortgage crisis.

2009 - 2010 In response to the SMC, Fed floods the market with dollars and slashes interest rates. Dollar loses value to inflation during this time.

2010 - 2011 "Great Recession" ends (but QE does not). Eurozone crisis sees dollar demand increase due to it being considered a safe haven. Dollar Index begins rising. https://en.m.wikipedia.org/wiki/European_debt_crisis

2011 - 2016 Abundance of dollars from QE (which finally ends in 2014) and trade imbalances with China and Japan lead to further appreciation of the dollar. (Large USD holdings allow China to artificially devalue the yuan, which increases their exports. Later, this will be the impetus for Trump's "trade war".) https://www.thebalance.com/value-of-us-dollar-3306268

2016 The Chinese economy slows considerably. https://www.forbes.com/sites/sarahsu/2016/12/13/three-things-that-weakened-chinas-economy-in-2016/?sh=872f3a2512f6

2016 Fearing the possiblity of a Chinese economic collapse, Janet Yellen (then chair of the Fed) and Jacob Lee (Obama's Treasury Secretary) make plans to devalue the dollar in order to bolster Chinese exports and hide yuan devaluation. https://www.businessinsider.com/secret-meeting-at-g20-to-take-down-dollar-2016-3

*A similar tactic was employed successfully in the 1980's under Reagan: https://en.m.wikipedia.org/wiki/Plaza_Accord

2017 Trump takes office. His policies are in stark opposition to the previous administration.

2018 Trump tariffs take effect. The result is that many markets - most notably China - no longer benefit from trade imbalances with the US. Decline in imports leads to an improved domestic jobs market, which further strengthens the dollar. https://www.cnn.com/2018/11/06/investing/trump-strong-dollar/index.html

2019 A strong dollar combined with reduced import expenditures leads to the reverse repo liquidity crisis. QE has, ironically, increased the amount of dollar denominated debt globally, since, following the end of the Great Recession, the dollar is considered safe and abundant. The rising value of the dollar means it's costly for foreign debtors to pay their interest, tariffs have reduced the amount of dollars they're bringing in through trade, which increases demand further. US banks profit from this situation by converting large portions of their reserves into Treasury securities and selling their dollars to foreign countries. The result is a liquidity crunch in September of 2019 in the interbank lending market (also called the reverse repo market) which the Fed immediately tries to ameliorate via a $75B capital injection. https://www.federalreserve.gov/econres/notes/feds-notes/what-happened-in-money-markets-in-september-2019-20200227.htm

It didn't work.

By December of 2019, the Fed had thrown more than $4.5T at the problem, and planned to continue the strategy into 2020. https://tokenist.com/fed-finally-identifies-banks-received-4-5t-q4-2019-repo-program/

That same month, the first case of COVID-19 was reported in China.

*To understand the severity of this crisis, you need to understand how repurchase agreements (repos/reverse repos) work. At this time, banks still had reserve requirements - they needed a minimum amount of assets on hand in order to extend credit to borrowers - so when banks in one timezone closed for the day, they'd lend assets to banks in different timezones that we're opening for the day. This money would move from timezone to timezone each day so that the banks could lend more money. This is called interbank lending. When they ran out cash to lend each other, they began passing Treasury securities around instead. At close, a bank would sell a Treasury security to another (repo), with an agreement that it would buy it back when it reopened again for a small premium (reverse repo).

A lack of liquidity in the reverse repo market means that demand for dollars was so high, and banks were lending so much money that they couldn't pay the premium on the overnight loan. https://www.investopedia.com/terms/r/repurchaseagreement.asp

The 2008 crash was caused by a lack of liquidity in the interbank lending market. When it became apparent that Lehman Brothers was holding worthless subprime mortgage-backed securities, banks froze all lines of credit. The subprime mortgage crisis was a repo market crisis. https://www.nber.org/digest/dec09/repo-market-and-start-financial-crisis

The COVID-19 lockdowns were used to cover up a global liquidity freeze - the same type that crashed markets in 2008 - and the pandemic was used to deflect the blame away from from the banks.

Biden is a patsy. The election was stolen to clear a path for the Treasury department (with Janet Yellen now at the helm) to systematically devalue of the dollar using a plan similar to the one laid out in the Shanghai accord. Banks would ease up credit restrictions to increase monetary velocity, and the Fed would keep inflation in check by adjusting rates. The government would temporarily reduce expenditures, and pull excess money out of the system by increasing taxes. Halting construction of the Keystone Pipeline, withdrawing troops from Afghanistan, Blackrock buying up real estate - all this was done in anticipation of the coming dollar devaluation - the negative effects of which would be pinned on the "moron" Biden and his "idiotic" policies. By the end of Biden's term, they'd have let enough air out of the balloon to ensure it wouldn't pop.

And had it not been for Putin, their plan might have worked - the dollar would've devalued faster than the euro, and at roughly the same rate as the yuan and yen. They'd have all lost value, but it would have just looked on a chart like a euro rally. The media would claim that the European economy was rebounding due to the effectiveness of the vaccine, that the dollar had lost some value due to inflation but would recover in time, and that the Chinese economy was continuing to grow, albeit at a somewhat slower rate than it had been before the pandemic.

Instead, the increase in energy and food prices has throttled consumer spending, crushed the euro, hurt Chinese exports at the same time that their real estate market is collapsing, and shaken banks' confidence to the point that they've once again frozen the credit markets.

I suspect that the inflation we're seeing now isn't from money printing at all - it's from a reduction in the amount of goods produced, increases in manufacturing and shipping costs, and supply chain disruptions. If WW3 is averted, and we don't all die in a nuclear holocaust, then the real inflation bomb will happen when the banks start opening up lines of credit. The sudden increase in monetary velocity will lead to domestic hyperinflation, and a total collapse of the global financial system, as all dollar denominated debt is inflated away.