emergency emergency call 911 call the police call the fire department call an ambulance no forget that call the national guard no forget that call the army the navy the air force and the marines now forget that call the federal reserve because this is a financial crisis we don't really know what it is yet but there is something probably big going on underneath the surface you know we'll be finding out someday but uh maybe they have been able to paper things over maybe not now believe it or not i've had this browser window


open since may uh when i first you know i was i i very often go to the federal reserve's website i click on this i click on that just to sort of update myself on what's happening in all of the different uh the the data that they keep track of and i noticed this uh the reverse repurchase agreements and so this was in may back in here may and i'm glad that i really didn't say anything about it back then because you know it hadn't really exceeded its previous high so it was less than half a


trillion uh dollars at the time and then it just exploded in in june and uh by the end of june we were up at 1.2 trillion uh from just you know the in in may we were talking about half a trillion uh and then it peaked at 1.4 it is pulled back a little bit now so what is a repurchase agreement now just below this chart on the website i'm not going to scroll what i did was i copy pasted it so that i could highlight some things reverse repurchase agreements are transactions in which securities are


sold so they're selling them from the federal reserve to a set of counterparties under an agreement to buy them back and they buy them back with some interest um the reverse repurchase agreements absorb reserve balances from the banking system the federal reserve receives cash in a repurchase agreement and provides collateral to the counterparties who are the counterparties these are big banks and and brokerage houses members of the federal reserve system and and others uh and so they those big entities have a need for


some reason for high quality collateral and they've got too much bank reserves too many dollars that the federal reserve has basically given them and so they take some of those reserves and they loan those to the federal reserve and borrow the securities so the federal reserve is giving the bank this security they get cash in exchange the dollars that the federal reserve creates that never actually leaves the federal reserve it's in all of the bank accounts for the big commercial banks at the federal reserve


the bank reserves those dollars and when those dollars go back to the federal reserve's account they vanish they're gone but they're replaced by this repurchase agreement and so the the balance sheet doesn't change but the reverse repurchase agreements absorb reserve balances from the banking system uh so remember that because we're going to come back to it now about a month ago articles started coming out about repurchase agreements and here's one of them from august 10th


and the fed responds to the group of 30 and creates two standing repo facilities now this article is fairly technical but two days later a a a very uh well-written article from dave krantzler with a title that i like is the fed bracing for impact that came out two days later on august 12th so dave krantzler thank you very much anyway in this article he says that wall street on parade read through the fed's annual report for 2020 and discovered a direct correlation between the fed's deployment of large


repo operations which precedes the onset of a financial crisis and if you go back and you take a look at it you'll see that this is regular repurchase agreements so here what is going on is um the banks have the collateral and they need they're in need of bank reserves they're in need of some dollars from the fed and so they loan the uh collateral to the fed and the fed uh gives them creates dollars and gives them the fed basically invents the dollars buys these assets with a temper it's a temporary agreement


usually overnight one week one month three months but it's usually most of them are overnight so this is cumulative it's a whole bunch of overnight loans uh but a lot of them get rolled over and so uh they're you know they take out a brand new overnight loan the next day and the next day and the next day and the next day but you can see the onset of 2008 crisis and bam and then for some reason it goes to zero and then and this is interesting that back in september of 2019 something was happening and this is many


many months before the pandemic something was happening and then they start to withdraw some of these and then suddenly bam there's almost almost half a trillion dollars the cumulative amount of repos compared to about 30 you know 20 30 billion almost half a trillion so this is is big and it does uh it is a good predictor of crises now we'll go back to reverse repurchase agreements and you can see there was a you know we're going along at 35 40 it used to be down at around 20 billion 35


40 and suddenly this huge spike doesn't look so huge well wait a minute i'm gonna the reason it doesn't look huge is because of this big spike and these charts are auto scaling so it compresses it once that spike happened it compressed all the data so let's go back uh to like here and you can see that this was a pretty gigantic spike that happened in 2008 but back to our story so we've got you know i started watching this in may and then it just absolutely exploded and peaked at 1.4 trillion now the


difference between it was down at about 200 billion right here so you're at 200 you're 0.2 trillion and you go to uh 1.4 trillion so there's 1.2 trillion dollar difference between here now remember reverse repurchase agreements absorb balances remember that you know it should be draining reserve balances so let's check this out okay here's the st louis federal reserve monetary base and this goes all the way back to january 1918. i just love this but wait a minute it stops in november of of


2019. last updated december 13th 2019 discontinued all of these different data sets are being discontinued why you know this chart here always gave me the ability to compare what's going on right now with what was happening during world war ii and the great depression and the crash of uh here's 1929 the great depression uh and then uh world war ii december 7th 1941 is when we got into it and we actually landed troops in europe about there and so um this is what happened in world war ii but it gave me the ability


to compare these things this was extremely useful data for everybody that writes about economics what if they replaced it with the same exact thing they didn't need to replace it but now they've gotten rid of all the data before 1959 so you can no longer compare it to other big national crises emergencies but you can see the explosion and then we want to go to march because it was since march of 2021 that the federal reserve has done these reverse repurchase agreements and absorbed all of these re these reserve


balances right they're supposed to have absorbed 1.2 trillion dollars worth of reserve balances but what i see here is more than a 200 billion dollar increase in reserve balances so where is this missing 1.2 trillion dollars well this is looking at it from the federal reserve's uh from the bank's side these are the reserves that the banks have in their accounts at the federal reserve that they use they used 1.2 trillion dollars of to buy this or you know borrow this collateral to buy this collateral with


the promise that they're going to return it in a day or a week or a month or whatever so it didn't come from there so where else could it have come from well let's look at the federal reserves side of the equation instead of the bank's side of the equation this is federal reserve total assets but and nothing shows up there let's look at a breakdown of these assets so if you go to fred.stlouisfed.org and then you just put in this search field here what i did is assets colon securities held outright


because all of the assets the securities that are on the federal reserve's website on their balance sheet uh are titled this way at the beginning and then after that second colon is whatever the asset is so here we've got u.s treasuries and mortgage-backed securities and stuff so first let's take a look at the real short-term paper there are the the us treasuries come in bills notes and bonds and the easiest way to think of it is if you look at notes which are in the center notes go


from two years to 10 years anything longer than 10 years is bonds anything shorter than 10 years is bills shorter than two years is bills so uh these are securities that are less than two years in duration and um but there's only 326 billion dollars worth of them so um it could that 1.2 trillion couldn't have come from there but look at this you know they had a certain amount of them and then they gave all of these to the banks during the crisis of 08 and they were down at zero for quite a while and then


uh 2019 before the pandemic something was happening and uh they ended up buying 326 billion dollars worth and it's just been flat so it wasn't any of those that they loaned to the banks as collateral so let's go to uh notes and bonds and those are kept track of in one handy little chart so this is both notes and bonds well you know this is at 4.6 trillion dollars so you know 1.2 would take it down in here somewhere you would definitely notice it if it had come out if if this was the


collateral that the federal reserve was lending to the banks you know where is this coming from what is the shell game that is going on well another asset that they have is federal agency debt so different federal agencies can issue securities this is mostly fannie mae and freddie mac but you can see during the crisis of 08 ben bernanke was busy buying a lot of stuff but this peaks at 100 169 i'm going to round that billion dollars and then it goes down to where today it's only 2.3 billion dollars


1.2 trillion could not have come from there and so federal debt held by the federal reserve banks this is what you and i owe the federal reserve and we have to pay them through taxes this is all of the federal debt that they hold and it's mostly those bills notes and bonds which are u.s treasuries which we pay taxes to pay the principal and interest on the federal reserve bought all of these by counterfeiting currency into existence uh so something is going on what is it you know what other asset could so this


is the total by the way uh of those different uh federal debt instruments the bills notes and bonds and the uh the agency debt uh we come up about 700 and something billion dollars short so you know this is uh somewhere on one of the statements of the federal reserve i'm not going to go look for it right now uh it's it it isn't pertinent to the point that i'm trying to make but there's something going on behind the curtain and uh and there could be something coming as a surprise


hopefully i'm hoping they will paper it over everything will just continue on like it is because when the crisis comes it's going to be horrific and it doesn't matter now if they've papered over more and more and more and it's built up more and more energy we're at a point i believe of no return they've just gone past this point it's going to be absolutely horrific either way and so i just want this to go on as long as possible i'm trying to get some more information done on all of this


so the other assets that they have that that is a security that they can loan is mortgage-backed securities but that's at a little over 2.4 trillion so 1.2 trillion would take that down by almost half it would take it down way down to here and that hasn't happened so where did this come from i have no idea but something is up something is brewing and for me i'm trying my best to get prepared with my precious metals uh kryptos will probably do well but believe me uh there will come when the feces hits


the fan uh gold and silver are going to be the big winners it's the assets that the banking system relies on that the world's central banks consider a tier one asset gold and so gold and silver are going to be the big beneficiaries of whatever crisis is lurking i want to thank you very much for watching we'll see you next time