Photo by Tim Evanson.
PBI Chair Ellen Brown’s latest article in Truthdig explains why the Fed has been pouring hundreds of billions of dollars into the repo market — a $1 trillion-a-day credit machine — even though the Federal Reserve Act limits central bank lending to only licensed depository banks. The repo (repurchase agreement) market is where both banks and “shadow banks” borrow to finance their trades. The result is government-backed risk-free loans to hedge funds and other speculators at less than 2%. Ellen writes:
“The repo market is a fragile house of cards waiting for a strong wind to blow it down, propped up by misguided monetary policies that have forced central banks to underwrite its highly risky ventures.”
Ellen points out the consequences:
“The financialized economy – including stocks, corporate bonds and real estate – is now booming. Meanwhile, the bulk of the population struggles to meet daily expenses. The world’s 500 richest people got $12 trillion richer in 2019, while 45% of Americans have no savings, and nearly 70% could not come up with $1,000 in an emergency without borrowing.”