Fed Discount Window Weekly Update
This week’s Primary Credit activity at the Fed’s Discount Window:
This week’s primary credit balance was $6.7 billion, up from $6.5 billion a week ago.
We expect the primary credit balance to increase over the course of 2024 so long as short rates remain elevated and the yield curve remains inverted. An inverted yield curve makes it difficult for banks to run a profitable loan book given elevated short term savings rates.
CRE will be the source of the next financial crisis and related bailout. Our view is that a Trump Presidency would see some sort of CRE bailout fund in the $250 billion range that would see a significant chunk of that new Treasury debt purchased by the Fed.
The more we stave off an economic cleansing by running massive fiscal deficits, the worse the Federal Government makes the economy by way of elevated prices. As we have written numerous times, year-over-year CPI growth is no longer the problem. The problem is that the price of goods and services have become so elevated since 2021 that America’s middle class is getting hollowed out as the cost of living has dramatically increased. The Dollar has dramatically weakened. Forget the DXY. All central banks are misbehaving. The DXY is not important. What is important is the Dollar’s purchasing power today versus prior periods. When you grow M1 from $4 Trillion in January 2020 to $21 Trillion in February 2022 as the Fed did in response to the Covid flu, prices get inflated - permanently.
Federal Reserve Balance Sheet: Factors Affecting Reserve Balances - H.4.1: https://www.federalreserve.gov/releases/h41/current/