Here's a Bloomberg news report from September 17, 2019 talking about some banking thing called the Repo Market. I'm a geek on this stuff, and I didn't know what the Repo Market really was. Here's a short video explaining the Repo Market. But this seizing up of the little known (to average people) Repo Market was the real start of the depression (yes, it's technically a depression now) we're in. Most people paid little attention. But the Federal Reserve (of New York) had to rush in and create $50 billion+ in one day, to keep the banking system from crashing. Then it had to create more money shortly after, and it became an ongoing bailout, day after day, week after week, flying under most people's radar. Then, the virus hit our shores, which became the bad news the stock market couldn't ignore, and then came February/March stock market crash, followed by the business shutdown, which is when everyone realized there were serious issues in the U.S. (and world, economy).
"The Phoenix Great Depression" is the name I gave to this economic crisis, which I've been blogging about for three years. I have been watching some ultra-long term trends and cycles play out, and could tell in late 2017-2018, that "the next recession" was really going to be a serious one, and possibly a long, full blown, depression or great depression. I coined the term, "The Phoenix Great Recession" in my old, personal blog, (Steve Emig: The White Bear) in October 2019. Nobody was ready to hear the word "depression" yet. Most people still aren't.
Basically, The Repo Market functions kind of like a pawn shop for banks. A bank needs a few million bucks to make its quotas for the night's books. So it sells something of value to another bank, usually U.S. treasury bills/bonds/notes. The borrowing bank gets the money to cover its short term needs, and it buys back the T-bills (or whatever) the next day, or maybe two days later, and pays the lending bank interest. "Repo" stands for re-purchase, not repossession.
What happened last September is that some banks (probably part of the "shadow banking system"), looked so sketchy, that nobody wanted to lend to them, so they charged much higher interest than normal. That seized up this overnight market, and freaked out Big Banking insiders, and The Fed came to the rescue. The Repo Market played a big role in keeping Lehman Brothers alive back in 2008, before if finally became insolvent and closed up, the turning point in the 2007-2009 Great Recession. So this time around, The Fed started bailing the system out, and it's been bailing the system out ever since. The money they've created out of nowhere, and "injected" into the banking system is the money that's driven the rise in stocks and real estate since last year. The markets aren't rising because of solid, fundamental reasons, there's just a ton of money for banks to gamble with right now. The Fed can't keep doing what they're doing forever, without completely devaluing the dollar until it loses all value. Right now the whole system is being propped up, and nobody knows a good way out of this mess. So that's where we are a year into this economic crisis.
