Is The Fed Preparing For The Next Financial Earthquake To Hit?

financeBy Dave Kranzler

The Fed announced a series of three “expedited procedure, closed” meetings Monday thru Wednesday this week:  FRB Board Meetings.  The Monday meeting was allegedly “a review and determination by the Board of Governors” of the advance and discount rates charged by the Fed.  This is somewhat an absurd waste of time as both of those bank funding mechanisms have become antiquated and rarely used.  The discount window collects dust until a specific bank’s credit profile has collapsed to an extent that prevents it from accessing the interbank-lending market.  It’s seen as an act of desperation.  It’s doubtful that the meeting was convened to discuss the discount rate.

The announced subject matter of the two subsequent meetings are perhaps of more interest:  “bank supervisory matter” (Tuesday) and “periodic briefing and discussion on financial markets, institutions, and infrastructure” (Wednesday).

I find the latter two topics in the context of the fact that it appears that the European banking system – to which the U.S. Too Big To Fail Banks are inextricably tied – appears to be melting down.

For me the “tell tale” for the Western financial system is Deutsche Bank.  Deutsche Bank has emerged as a “rogue” bank of sorts that had taken on a catastrophic amount of reckless credit market risks.  Notwithstanding its literal financial nuclear portfolio of derivatives, DB thrust its balance sheet into every sector of the global economic system that has been melting down over the past 12-24 months including energy, commodities, “Club Med” European banks and junk bonds.  It also began to choke to death on bank debt loans to companies like Glencore and Volkswagen.

Untitled1-2The trading action in DB’s stock price has been unable to mask the underlying meltdown going on at the company:

Untitled-12As you can see, DB’s stock price has been significantly underperforming the BKX bank financial index since mid-July. Coincidentally, or perhaps not coincidentally, the S&P 500 suffered an 11% drop in mid-August.

Bloomberg News released a report about three weeks ago that surprisingly received little to no commentary in the alternative media world. It was reported that Goldman and JP Morgan were in discussions to buy $1.1 gross “notional” amount of DB’s distressed credit default swaps (LINK). That in and of itself was not necessarily interesting, but the article reported that DB had already sold off two-thirds of its distressed CDS swap book to since October 2015 to Citicorp. The CDS securities were “single-name” direct (not cleared thru DTC) OTC derivatives, meaning they are of the riskiest, most unregulated and most toxic variety.

If you notice on the graph above, around the time that DB was engaged in selling some of its toxic waste to Citi in October, the stock began take a dive and it began to diverge negatively from the rest of the big bank stocks.

I would suggest, and have been suggesting, that there’s been a series of mini-meltdowns that have been occurring in the Western financial system since late last summer.  I also have written analysis which has connected these meltdowns to Deutsche Bank and has connected the “stick saves” in the markets to the Fed.

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I’m suggesting here that the Fed is behind the Citi, Goldman and JP Morgan CDS transactions with Deutsche Bank as means of preventing DB’s collapse.  After all, the TBTF fail banks in the U.S. are catastrophically tied to Deutsche Bank – and  the entire European financial system – via derivatives.

Last week Deutsche Bank’s stock began to sell-off hard again.  On Monday and Tuesday DB’s stock dropped 6.6% and was down as much as 9%, significantly underperforming its peers.

It’s my view that the Fed has been conducting an ongoing de facto bailout of Deutsche Bank since mid-summer, using the balance sheets of Citi, Goldman and JP Morgan as its proxies.  In the context of the behavior of DB’s stock recently, and in the context of what is now blatant market intervention in the stock market by the Fed, and in the context of the news of the bank bail-in in Austria plus the collapsing Italian banks,  I would suggest that “expedited rule, closed door” meetings held by the Fed this were convened in order to discuss the a Western financial system which is obviously beginning collapse again.

I would also suggest that the Fed is inching closer to implementing more drastic monetary easing policy measures, which could include taking short rates negative and will likely include more money printing – either overt or cleverly disguised.

This is why gold and the mining stocks have been somewhat “melting up” despite the recent flood of anti-gold propaganda pouring from Wall Street and the mainstream media. It is likely that the “melt-up” in the precious metals space has a lot more “melting up” to do…

I’m finishing up my work on the mining stock that will be presented in the next issue of the Mining Stock Journal (released Thursday).  This is an undiscovered Company that trades under 50 cents and it’s worth several times it’s current market cap just on its royalty properties.  Oh by the way, it’s in the midst of drilling what appears to be a massive copper/gold porphyry in an area that has been previously ignored.  Click here to access the Mining Stock Journal.

You can read more from Dave Kranzler at his site

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3 Comments on "Is The Fed Preparing For The Next Financial Earthquake To Hit?"

  1. yEshUA ImmAnUEl | April 18, 2016 at 8:28 am | Reply

    “If we think right and do right we will build right and no law of evil can prevail against us.”

  2. yEshUA ImmAnUEl | April 18, 2016 at 8:29 am | Reply

    “Then,” said the lady, “I must tell thee what my modesty forbids me to say. I love thee. Look into my eyes and see whether or not what I am telling is true. Come with me, and I will give thee a substantial happiness far superior to any that thou mayst find. Can there be any greater happiness for a man than the love of a beautiful woman? I am rich, I am free, I am beautiful; I love thee with all the passionate love of which woman is capable. Come with me, and thou shalt never repent it.”
    “Fair one,” answered Jesus, “all the earthly elements of my material nature are striving to fly to thy embrace ; but they are held by the superior will of the spirit. I do not seek for that type of happiness, nor could I find contentment in the things which thou offerest me. I seek for happiness in that which is not subject to change; that which thou canst give is subject to decay. I reject thy offer.”

  3. yEshUA ImmAnUEl | April 18, 2016 at 8:30 am | Reply

    The Song of Jesus, Son of God;

    “My meal is fasting,
    my standard is awe of God..
    My clothing is of simple wool,
    my prayer in winter is at suns rise.
    My lamp is moonlight,
    My steed is my legs.
    My meal is whatever the earth gives me.
    I lay down to sleep at night and have nothing,
    I awake in the morning and have nothing,
    yet there is no one in the world
    richer than I.”

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