In the US inflation is racing along at over 5% because the Congressional deficits are getting out of hand. This has forced the fed to adopt an inflationary monetary policy. Some commentators are calling for a doom day demise of the dollar.

With inflation running high, food prices are rising as is housing. Used cars are also more expensive. This is due entirely to M1 spiking substantially in 2020.

Yellen said that she expects inflation to ease in a few months but until the bond refunding is dialed back the flood of cash will drive inflation. If the fed does not dial back bond sales soon inflation may get out of hand.

With interest rates driven so low it tends to discourage savings and benefits the indebted. The flood of cash actually drives prices up which is the mechanism for inflation.

M1$19.221 trillion
M2$19.417 trillion
M3$20.370 trillion
Repo Rate0.07%
Central Bank Balance Sheet$8.097773 trillion
Banks Balance Sheet$21.280 trillion

M1 is the most widely used which includes cash in circulation, checking and savings. M2 adds term deposits and money market accounts. Larger deposits include Bankers Acceptances in increments of $100,000 and run for 1-6 months.

Overnight repo rate is the interest rate at which different market participants swap treasuries for cash to cover short-term cash needs. The repo rate is helping to ensure banks have the liquidity to meet their daily operational needs and maintain sufficient reserves. The repo rate usually trades in line with the Federal Reserve’s target interest rate.

The fed has been buying bonds and some mortgages due to the problems with the old Fannie Mae and Freddie Mac who were bankrupted by wallpaper in the excesses of 2001 until it blew up in 2007. The so-called alt-A mortgages were an symptom of the unbridled greed.


In China banks have been swapping banker acceptances in order to maintain stability. China still has to work on financial systems to stabilize the global trade systems. China is still largely a cash based market as credit systems are immature. China is making moves to modernize the economy but this will take time. National debt is about $5.683 trillion adding local debts increases this value by at least x3.25.

Globally there been a lot of overleveraged investments. Chinese property developers are up to their necks in red ink. The government has its hands full dealing with problems galore.

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