Balance Sheet Liquefaction And The Race For Precious Metals

 

The Fed seems to be stuck because of housing market weakness and its associated mortgage backed securities. The repo market appears to be where the stress is most threatening, though hidden from view. These trillion dollar daily transactions are the lifeblood of world financial markets.

Furthermore, the size of global financial markets has become so large that their downfall would severely threaten the underlying economy.

The Fed can only supply the much needed repo market collateral through deficits, hence the need for war to stimulate the economy and lending interest. They have apparently lost the ability to taper with the last fumbling attempt.

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