For a long time, we’ve been ranting about how the Bond Market is a dying canary in the financial coal mine.  And that it will wreak havoc around the globe.

(Read “The Coming Debt Crisis vs the Average Person”)

For those unfamiliar with the canary analogy, it has its history in the coal mining industry.

Coal miners – who were unsure about gas leaks – would release a canary into the mine and if the canary died from inhaling gas, then that was a sure sign of danger.

It may sound cruel but it did save the lives of miners who risked their lives.

But it’s no where near as cruel as the toxic fumes being belched out of the REPO market.  And more recently, the Reverse-REPO market.

In Plain English, a “reverse repo”, is where banks go to borrow from banks, typically offering collateral (US Treasuries) for some short-term liquidity.

Repos are classified as a money-market instrument, and they are usually used to raise short-term capital.

More importantly they’re essential in keeping liquidity among the major banks.

Therein lies the problem.

As we have said numerous times in the past “Banks don’t trust other banks.”

And liquidity – which the financial coal mine depends on – is drying up in record numbers.

A Dying Canary in the Coal Mine

Cue up Wells Fargo.

Just like most banks think of themselves first and clients second, Wells announced they are permanently suspending/closing all personal lines of credit (from $3k to $300K) in the coming weeks.

WHY?

They’re basically confessing that they’re worried (seriously worried) about inevitable credit/loan defaults on their consumer credit lines.

And they’re not alone.

Warnings from the Boyz in the “Club”

J.P. Morgan Chase – and the rest of the financial coal miners – are scrambling for liquidity.

Why?

The Reverse-REPO market is showing signs of cracks in the market similar to what happened in 2007-2008.

Yikes!

As a result, the repo market has skyrocketed as banks are parking nearly $1Trillion per day at the Fed, which is 3X the normal operational amount.

And this is a screaming sign of counter-party risk among the banks themselves.

They know their last hope is the Fed, not each other.

Long story short.

Moving money from the banks to the Fed itself means less bank reserves and hence less bank lending.

But don’t expect the presstitutes to say much about it.

And, for sure, they won’t tell you how to protect yourself from the inevitable results of a liquidity crisis.

Be we do.

And you can learn more about how to profit from the imminent crisis HERE.

Share this with a friend.

And tell them: We’re Not Just About Finance.

https://www.financialsmatter.com/connecting-the-dots/

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