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“The $700 Billion Gorilla In The Room”

"The $700 Billion Gorilla In The Room"



"The $700 Billion Gorilla In The Room" Tyler Durden Fri, 06/12/2020 - 13:25

Earlier this week, we observed that as a direct result of a flood of Bill issuance in the past two months, the Treasury's cash balance which it will use to fund various stimulus programs and other fiscal initiatives, has exploded since the onset of the coronavirus crisis, hitting a record $1.5 trillion last Friday. This, we said, "is notable because in the Treasury's latest quarterly borrowing needs forecast which projected a funding need of $3 trillion for the current quarter, the Treasury also projected that the cash balance at the end of the quarter would be $800 billion."

This also means that if indeed the Treasury's forecast is accurate, then over the next two weeks, the Treasury's cash balance has to drop by a record $700 billion to hit the $800 billion target!

Picking up on this quandary facing both the Treasury and the financial system, today Bloomberg writes that what the Treasury will do with its record $1.5 trillion pile of cash "has become the biggest wild card for funding markets as quarter-end approaches."

That’s because, as we explained first last year when the Treasury's cash balance spiked in September, triggering the first repo crisis as system reserves were quickly drained, swings in the government’s cash on deposit at the Fed "effectively drain bank reserves as the amount climbs."

As a quick aside, the Treasury General Account which is published daily by the Treasury, operates like the government’s checking account at the Fed. When Treasury increases its cash balance, that’s on the liability side of the Fed’s balance sheet, so as that goes up, it drains reserves from the system  In 2015, the Treasury instituted a policy of keeping at least five days’ worth of expenditures, or about $150 billion, in the account in case unexpected disruptions locked it out of debt markets. Before that, Treasury kept enough cash for just two days. But as the US budget deficit has begun to soar, the size of that buffer has grown.

* * *

Echoing these our observations from Monday, today Bloomberg cautions that this dynamic "is taking on added meaning before quarter-end, with strains in the banking system already appearing to build in the lead-up to June 30. The big question now is whether the Treasury will stick to its end-of-June cash-balance target of $800 billion - about $700 billion below its current level."

To be sure, unlike last September, and the massive cash build observed since March when the Treasury pre-funded much of the upcoming stimulus payments, the concern is now in reverse as shrinking the balance would help ease any quarter-end stress by adding liquidity to the banking system, however "uncertainty is complicating decisions for participants in this key segment of financial markets - from managers of money-market funds, to hedge funds using it to generate liquidity through repurchase agreements."

Indeed, as BMO's rates strategist Jon Hill says, "It’s like the $700 billion gorilla in the room" adding that "the Treasury has created a multi-hundred billion dollar level of uncertainty for the Fed’s balance sheet going into quarter-end. This is one of, if not the biggest, question over the next three weeks on how the front end plays out with regard to liquidity conditions."

In other words, the question on everyone's mind, as we put it on Monday, is whether "The Treasury Is About To Flood The US With $700 Billion Over The Next Three Weeks?"

While some have speculated that it will very difficult for the Treasury to allocate all those funds over the next two weeks, especially since there is virtually no demand for the remaining $140BN in unused PPP funds, on Thursday Steven Mnuchin sought to ease concerns, saying that more money is about to flow out of the government’s coffers. Of the roughly $3 trillion of pandemic relief, about $1.6 trillion has been used, and “we’re busy working on disbursing the rest of the money,” he told reporters in a video conference.

"There’s a lot of money that hasn’t been allocated” yet, and over the next month $1 trillion will be pumped into the economy, he said. It was, however, not clear just how this money would be "pumped into the economy."

The problem, as Bloomberg notes, is that while investors have been able to absorb the record barrage of new debt, which has seen US Federal Debt increase by $1 trillion in the past month, rising above $26 trillion for the first time ever this week...

... with relative ease, signs of funding dysfunction are starting to emerge.

As one example consider that the spread between yields on three-month Treasury bills and overnight index swaps, which measures the health of a key part of the government debt market, is near the widest level since April. Persistent outflows from government money-market funds - which have shed cash in the past month - could reduce investment in T-bills and repurchase agreements, forcing rates even higher. This is the top reasons why many, including repo "guru" Zoltan Pozsar, have speculated that the Fed will have to roll out a form of Yield Curve Control in the coming months to contain a possible spike in short-term yields.

DB strategist Steven Zeng, disagrees with Mnuchin and considers it unlikely that government outlays will prove large enough by month-end to drive the cash balance below about $1 trillion, meaning that the Treasury cash balance on June 30 will be far higher than what the government projected at the start of May, potentially reducing the need for more debt issuance.

Keeping the extra cash on hand will also allow Treasury to capitalize on having tapped the money already at very low rates. However, sooner or later that money will have to hit the broader economy: "It’s not that the money won’t be spent, it’s just a matter of the timing."

Of course, it the Terasury is right, and "if the $700bn actually leave the account at Fed and flow into the real economy before quarter-end, then it is likely a massive boost for risk assets" Nordea's Andreas Steno-Larsen wrote last weekend.

In any case, as we concluded on Monday, it is still not immediately clear just how the Treasury could deal with this "$700 billion gorilla in the room" and ram this cash into the real economy: as a reminder, roughly $140BN of the latest iteration of the Paycheck Protection Program remains unused as business demand for what is effectively free money in the form of grants, appears to have peaked. Will the Treasury then proceed with literally paradopping tens of billions in cash on Americans? To be sure, that would be one way to make the protests across America a far more festive event.

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License Plates Could Be Printed On McDonald’s Bags To Stop Littering

License Plates Could Be Printed On McDonald’s Bags To Stop Littering

There’s been talk about McDonald’s in southwest Great Britain could print…



License Plates Could Be Printed On McDonald's Bags To Stop Littering

There's been talk about McDonald's in southwest Great Britain could print car license plates on drive-thru bags to prevent customers from littering. 

"It's not clear exactly how the number plate would be printed on packaging, but it could be scanned onto the brown bags that contain the food," Daily Mail noted. 

Chris Howell, Swansea Council's head of waste, parks and cleansing, told a climate change corporate delivery committee meeting: 

"The Welsh Government has explored with McDonald's, or their franchises, whether or not they could print number plates of cars collecting takeaways from their drive-throughs with a view that that would discourage people from discarding their materials (litter)."

Howell said one of the biggest hurdles with fast-food companies is that if one chain adopts the climate initiative, customers will go to competitors that don't print license plates on bags. 

"If McDonald's do it, then people will just go to Burger King instead of McDonald's, because nobody wants to have their private details printed on that packaging." He added: "I think it's a really good idea but at the minute it's fraught with some difficulties." 

The nationalist political party in Wales, Plaid Cymru, first proposed the idea more than two years ago during the pandemic lockdown when party leaders noticed a spike in fast-food trash along city streets and highways. 

Welsh Government spokesperson told MailOnline:

"There are no current plans to introduce a requirement for drive-through restaurants to add vehicle registration details to fast food drive-through packaging.

"We are continuing to support Keep Wales Tidy with other initiatives to tackle roadside litter including their No Regrets campaign and their Adopt a Highway initiative."

Now 'the cat is out of the bag'. It's only a matter of time before governments start forcing fast-food companies to print license plate numbers on drive-thru bags. The dangers of this could be more surveillance, and who knows what corporations would do with license plate data if such a system were implemented. 

Tyler Durden Sat, 11/26/2022 - 18:00

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COVID Lockdown Protests Erupt In Beijing, Xinjiang After Deadly Fire

COVID Lockdown Protests Erupt In Beijing, Xinjiang After Deadly Fire

Protests have erupted in Beijing and the far western Xinjiang region…



COVID Lockdown Protests Erupt In Beijing, Xinjiang After Deadly Fire

Protests have erupted in Beijing and the far western Xinjiang region over COVID-19 lockdowns and a deadly fire on Thursday in a high-rise building in Urumqi that killed 10 people (with some reports putting the number as high as 40).

Crowds took to the street in Urumqi, the capitol of Xinjiang, with protesters chanting "End the lockdown!" while pumping their fists in the air, following the circulation of videos of the fire on Chinese social media on Friday night.

Protest videos show people in a plaza singing China's national anthem - particularly the line: "Rise up, those who refuse to be slaves!" Others shouted that they did not want lockdowns. In the northern Beijing district of Tiantongyuan, residents tore down signs and took to the streets.

Reuters verified that the footage was published from Urumqi, where many of its 4 million residents have been under some of the country's longest lockdowns, barred from leaving their homes for as long as 100 days.

In the capital of Beijing 2,700 km (1,678 miles) away, some residents under lockdown staged small-scale protests or confronted their local officials over movement restrictions placed on them, with some successfully pressuring them into lifting them ahead of a schedule. -Reuters

According to an early Saturday news conference by Urumqi officials, COVID measures did not hamper escape and rescue during the fire, but Chinese social media wasn't buying it.

"The Urumqi fire got everyone in the country upset," said Beijing resident Sean Li.

According to Reuters

A planned lockdown for his compound "Berlin Aiyue" was called off on Friday after residents protested to their local leader and convinced him to cancel it, negotiations that were captured by a video posted on social media.

The residents had caught wind of the plan after seeing workers putting barriers on their gates. "That tragedy could have happened to any of us," he said.

By Saturday evening, at least ten other compounds lifted lockdown before the announced end-date after residents complained, according to a Reuters tally of social media posts by residents.

Tyler Durden Sat, 11/26/2022 - 12:00

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The Doctor Who Can Rebuild Trust: Joseph Ladapo

The Doctor Who Can Rebuild Trust: Joseph Ladapo

Authored by Jeffrey Tucker via The Brownstone Institute,

If you are like me, you are exhausted…



The Doctor Who Can Rebuild Trust: Joseph Ladapo

Authored by Jeffrey Tucker via The Brownstone Institute,

If you are like me, you are exhausted of the lies. Every day seems to bring new revelations about how our lives came to be upended. The connections are becoming clearer between the pandemic response and the growing economic crisis, the ballooning debt, the growth of the surveillance state, the corruption and scams, chilling absence of integrity in public life, and, with the failure of FTX, the way in which an outright financial scam was integral to the calamity. 

While we await new revelations, depositions, coverups, pleas for amnesty, and bad economic news, whom can we trust? Is anyone telling the truth? 

Today was Anthony Fauci’s last White House press conference, and he spoke as if life is all normal and everything is fine. It’s as if the whole disaster never happened. He never locked anyone down, he says. He has happy for any investigations, he says, because he has nothing to hide. And then he ended with a final push for everyone to get booster #5 or whatever number we are on. 

It’s like we live in two universes: our own lives in which we read true things in some places, and official life, in which shills and publicists keep repeating the same nonsense over and over without flinching or providing anything like an honest account of these last three years. 

Perhaps for this reason – and also because by any historical standard this is a tremendous autobiography – reading Dr. Joseph Ladapo’s Transcend Fear is a welcome relief from the nonsense of our times. It is brutally honest. It is emotionally affecting. It is careful and precise but also deeply radical in its observations. If what’s called the “public health world” has lost touch with both the public and health, this book provides a path to restoring it. In short, it is a beautiful and inspiring experience. 

Dr. Ladapo is the Surgeon General of the State of Florida, picked by Governor Ron DeSantis to forge and explain the state’s health decisions and priorities to the public in the midst of a grave crisis. He has faced down the national press time and time again with Zen-like wisdom. He seems emotionally unflappable while also sticking to the science as he understands it. He is the only public health official in the country who has been upfront about the limits of the vaccines and warned healthy young people that they don’t need them. 

What we learn from this book is that he has been a warrior against pseudoscience from the very beginning of this pandemic and the government response. After the lockdowns, most scientists and health professionals fell silent, fearing reputational and financial loss. Dr. Ladapo was different, On March 24, 2020, still within the window of “15 Days to Flatten the Curve,” he wrote in USA Today:

We are fretting and we are fuming. As a country, we have been caught miserably flat-footed after receiving warnings about what lay ahead when cases of Covid-19 began exploding in Wuhan, China. Messages from local and state leaders about how to respond to the pandemic change almost daily—a sure sign they have no idea what they are doing. Shutdowns are happening here in California and in New York, and will probably spread to the rest of the nation….

Here’s the problem: Because of the (understandable) fear and hysteria of the moment, few US leaders are seriously talking about the endgame. The epidemiologic models I’ve seen indicate that the shutdowns and school closures will temporarily slow the virus’ spread, but when they’re lifted, we will essentially emerge right back where we started. And, by the way, no matter what, our hospitals will still be overwhelmed. There has already been too much community spread to prevent this inevitability. 

We don’t have a totalitarian government like China, and we value our civil liberties too much to take the measures (i.e., total lockdown) that would be needed to rapidly decrease the infection rate to zero. This means that, even with shutdowns, the virus will still spread. Unfortunately, this also means that rates of “community immunity,” often referred to as “herd immunity,” will slow. As a result, we will always be vulnerable to the virus spreading rapidly again as soon as shutdown measures are lifted, unless they are immediately reimplemented—over and over and over again.

Was he the first post-lockdown voice from public health profoundly to object in a public forum of this magnitude? Perhaps so. Consider the bravery and presence of mind it required to write those sentences. The entire country was on a wartime footing with unprecedented horribles taking place. The media was screaming “Run for your lives” but most of us weren’t even allowed out of our homes to do that. 

These were utterly crazy times. The whole world was going bonkers. And yet this man kept his cool. 

This book explains where his cool comes from. You see, he is the son of an immigrant from Nigeria, born 1979. A math and science whiz, he attended Wake Forest and then entered Harvard Medical School. While he was involved in his studies, he noted the existence of the Kennedy School of Government and enrolled there too. On graduation day, he was granted a MD plus a PhD in public policy. So essentially: the highest credentials in two fields that this country offers. He became professor of medicine at New York University and then the University of California, Los Angeles. 

The trouble was that none of his training had prepared him to deal with medical issues closer to home, namely his wife’s unrelenting migraines that often landed her in the hospital and his own underlying psychological fears of social interaction. The details are very painful and told in this book with disarming detail. Long story short: his search for answers led him toward alternative medical paths that eventually fixed both issues, and burned a lesson in his mind. Health is individual, and the right path is not the same for everyone and not always found in expertise as codified in the textbooks and institutions. 

It was soon after these difficult times that the pandemic broke and, along with it, the claims that the experts had all the answers in lockdowns and eventual universal mandates for vaccination. 

Dr. Ladapo had meanwhile developed the self-confidence to speak about such matters truthfully and fearlessly. And he never stopped. He wrote for every venue he could, month after month, urging an end to the lockdowns, a focus on therapeutics, attention to the science we had, and genuine concern for the health of actual individuals, who are not lab rats but people with human rights and freedom. 

Even though Dr. Joseph Ladapo is obviously a hero (and one for the ages, so far as I’m concerned), the prose here is remarkably lucid, humble, and precise. That’s why I say that the humane concern in this book is an inspiration. Moreover, reading it is a form of therapy because he connects with a common sense that we all had in 2019 before the world descended into utter madness. 

What’s more, this book shows a path forward not only for public health but for all of us as individuals. He urges personal reflection as the first step in recovery, overcoming whatever hidden fears we had that caused too many among us to go along with the preposterous parade of dangerous nonsense that controlled our lives for so long. 

In my own view, this book is a classic of our times. Its value added is not only the author’s credentials, though he has them galore, or even how it speaks so directly to issues that have profoundly affected all our lives. Its real value is as a model of autobiography that offers lessons for all of us without exception. 

We at Brownstone are deeply honored that Dr. Ladapo will be our dinner speaker at our annual conference and gala in Miami, December 3, 2022. There is still time to attend. You can register here

I write as Dr. Fauci just finished his last press conference without offering so much as a hint of apology for what has happened. Meanwhile, I’m sure Dr. Ladapo is tending to his work in Florida where he has been charged with dealing with public health policy with honesty, truth, and wisdom. I know who gets my vote for hero of the pandemic. 

Tyler Durden Fri, 11/25/2022 - 16:00

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