Reverse Repo Explained

I’m just gonna drop this here right off the bat. Source is below, where I say “check this out:”

Hi, Ape fam. Longtime lurker. First big post. Wish me luck!

There’s been a lot of talk about the Reverse Repo agreement (RRP) numbers and market lately, but I get the impression that most people are getting confused and still don’t know much about the bond market, repo market vs RRP, what it is, or what any of it means. Here’s my attempt at explaining [some of] it. It is a bit of a deep dive, but I do think it’s important to understand to get a wider scope on what’s happening in the economy, besides just GME and other heavily shorted/naked shorted stocks. Understanding the bond market also gives you a glimpse inside of what might be going on in the commercial banking side of the equation, to which (from what I’ve seen) we’ve largely not considered — focusing mostly on just Citadel’s dirty laundry instead.

There might be some repetition in here, so I apologize. Between lack of sleep and copy-pasta-ing from my Twitter, there’s bound to be some overlap.

tl;dr: the record breaking RRP numbers don’t necessarily mean anything beyond the fact that banks just have too much cash and can’t get rid of it. We’ve had large spikes before. I’m more inclined to think this might be some shilly FUD tactic to cause forum sliding, but regardless of that, I’m here to share wrinkles.

tl;dr2: Some describe high RRP as banks “drowning in cash / liquidity.” A lot of people seem to be jumping to the conclusion that high RRP numbers will cause a financial collapse, but this is fallacious because correlation does not equal causation, even if the two appear to be correlated, but 1) people are getting confused with the repo market instead of looking at the RRP, and so therefore 2) high RRP is NOT correlated with financial collapse. That being said, I do personally think we ARE on the brink of financial collapse, so the real questions are why, how, why are banks drowning in so much cash, and what happens next? Finally, I attempt to tie this all into GME and other meme stonks, eventually. Michael Burry as well. I do think there is a connection.

TA;CR: 3rd tl;dr at the bottom, huehuehue

Warning: This is a long winded link dump. Also a reminder to not trust anybody, me included, and to always check the links you’re about to click. Preferably Google the information yourself to verify. I’ve had numerous hack and phishing attempts in recent weeks, a noticeable sharp increase since being more public about GME, so I hope everybody else is being careful too.

INTRO:

Let’s talk about the repo market first, before getting into the REVERSE repo agreement. The Repo Market is a short term asset swap borrowing program — usually overnight — that is the lifeblood of global trade. Since the US Dollar is the world’s reserve currency, the world needs US Dollars to conduct in trade. Basically how it works is that whoever needs cash posts collateral to get the cash. This is not to be confused with the REVERSE Repo agreement (RRP), which is a liability swap. I think this is where some people are getting confused, so I will attempt to clarify to the best of my ability.

The RRP is similar, except in the opposite direction. Instead of posting an asset as collateral, this is a LIABILITY swap (not an asset swap). What is a liability to a bank? Cash. Specifically, having TOO MUCH cash sitting in reserve, because banks have to pay interest on cash sitting in your savings accounts, CDs, etc.

Both repo and reverse repo can involve securities, bonds, notes, but usually involves T-bills. T-bills are pristine collateral because they’re highly, highly liquid and have very fast maturity — 12 months or less. If the market suddenly becomes illiquid for them for some odd reason (and therefore let’s say that their hypothetical value drops for some reason), banks can just wait for their short maturity date to arrive and they regain their value. Very cool.

As a bit of a side note, at the start of the pandemic, when the Fed turned on the QE Treasury vacuum machine, they were sucking up T-bills as well. Banks and institutions complained about this and so the Fed quickly focused on notes and bonds instead. You can see that their balance sheet contains very small amounts of bills, compared to everything else. This number has not changed since basically the start of the pandemic (I’ve personally only seen July of 2020, but reportedly no bills have been sucked up by the Fed since even before that. Not really worth verifying imo, so I won’t in order to save time).

This is the most recent one, and bills have not increased in about a year or more

Other assets and securities besides T-bills may be swapped, but as countless articles, posts, and discussions have shown recently, those asset standards have been tightened up a lot (goodbye BBB- junk bonds! Gtfo!)

THE MISCONCEPTION:

Let’s go back to the Repo market (NOT the RRP). The repo market needs to operate smoothly or else it can lead to bad things in the equities (stonk) market. For example, in 2019, the overnight repo rate spiked from ~2.50 to almost ~9.50 (see image below) and it caused a mini crash in the stock market:

randomish article explaining it and showing the rate spike: https://www.brookings.edu/blog/up-front/2020/01/28/what-is-the-repo-market-and-why-does-it-matter/

This image is taken from the article above:

spike

Mini crash that followed weeks after the spike

Note: I’m just using WeBull charts cuz I’m used to them. Most of my money is in Fidelity, and I’m trying to get out of WeBull ASAP, but they haven’t been letting me transfer my account for the past 5 weeks. I’m working on it, I promise. Stop yelling at me.

So if that was 2019, where are we today?

Sep 17, 2019 spike on left in blue. Today we’re super low and flat, ever since March 2020

Sauce: https://www.newyorkfed.org/markets/reference-rates/sofr
Sauce of the sauce (because they changed link locations recently) here — click on “secured overnight financing rate (SOFR)”: https://www.newyorkfed.org/markets/reference-rates

No stock chart because, well, you probably already know we’re trending upwards or trading sideways around higher and higher ATHs across major indices right now. More sideways if you like looking at other indices as leading indicators: IWM, SMH, transportation, etc.
Anyway, the point is that the Repo rate spiking can cause economic issues, but 1) we don’t have a spike, and 2) if people are getting the two confused, the REVERSE repo agreement is probably one of the last places you wanna look to see if there are problems under the hood. There are literally THOUSANDS of other much more important places to scrutinize, as this sub has been slowly uncovering. High RRP simply means that banks have too much cash. We will discuss why.

See? We’re fiiiiiine /s

Note: I am going to try to figure out why I’m not seeing the spikes u/atobitt posted in “The Everything Short.” I’m not trying to hide anything, I’m just trying to get this DD out so that we can get some eyes on it and discuss.

Posting again for reference

Ok, so the RRP is just used when banks have too much cash and want to get rid of it temporarily and hopefully make a return on their cash. Giant spikes in RRP have happened before (See above. Source linked below), similar in size to the ones we’re seeing now. Spoiler: nothing major happened. Disappointed? Please read on. I’ll get to today soon™.

So we had a little bit of RRP in 2009 (not pictured. It was too tiny by today’s standards), when the stock market finally was allowed to crash after the Great Financial Crisis (GFC) of 2008. The spike was significant then, but is a tiny blip on the radar compared to the RRP since end of 2013/early 2014 to present day.

You can check it out for yourself. Check this out: https://fred.stlouisfed.org/series/RRPONTSYD
Drag the slider on the bottom around so you can see more as well. You can zoom in or out with it. Neat.
Also scroll down and you can see the Fed describe what I’ve already described to verify if my information is correct. Moving on…

So you see that we’ve had enormous spikes in RRP before but nothing catastrophic happened. Check out any number of the giant spikes we’ve had since 2014. Did the world end? No. Is today’s RRP crazy high? Well, yes and no — yes, they’re historically higher than ever, but they’re not much higher than previous spikes we’ve seen a BUNCH of times in the past.

There’s also been some misinformation floating around that $500 Billion USD is the ceiling for the RRP. This is incorrect. Each participant can take out a maximum of $80B in RRP, and the average so far for the past couple of days is like ~$10B per participant or less (~500B / 50ish participants = ~$10B per participant. Meaning we *could* go much, much higher — around $4.5 TRILLION by today’s regulations). So we’re very far away from the actual ceiling on the RRP. The fact that you’re seeing over $500B in RRP on a pretty regular basis now is not a sign of anything crazy happening, necessarily. It’s *technically* within the bounds of what’s allowed, although that $80B cap was only recently raised in March of 2021. “Technically.” https://www.newyorkfed.org/markets/opolicy/operating_policy_210317

Prior to 2008, the repo and RRP were used to fine tune cashflow among institutions facing liquidity issues. If one bank needed cash, and another bank had too much cash, they could use the RRP to swap it around. Here’s a couple more links and videos:
https://www.investopedia.com/terms/r/reverserepurchaseagreement.asp

REVIEW:

Banks, especially the big banks and the mortgage banks, have access to the RRP to get rid of excess cash temporarily. Why would a bank want to get rid of their cash? Unlike you or me, cash is actually a liability (NOT an asset) to a bank because they have to pay interest to deposits. Savings accounts, CDs, etc. They also normally lend the excess money out to people, and so they need some money to pay people back their money, as well as to cover anybody trying to withdraw cash from the system. The money the banks keep is called the Required Reserve, which can also earn interest through the Interest On Required Reserves (IORR, next link and explanation below). This whole banking process of people depositing cash and banks lending the majority of it out is what’s known as Fractional Reserve Lending, and warrants its own deep dive down the seemingly endless rabbit hole — it’s kind of a super power and is a wild concept to wrap your head around. Alas, it is not that relevant to this post’s purpose. I do highly recommend diving into it on your own, though.

Interestingly, while everybody is blaming the Fed for printing a ton of money, the truth is that banks create WAY MORE money during times of high lending growth and demand than Quantitative Easing (QE) does. It is because of fractional reserve lending, that superpower we talked about, where money deposited can be loaned out, only to be deposited again and loaned out again and again and again. Fractional reserve banking, y’all! WILD concept.

HOW DO BANKS MAKE MONEY?:

Banks obviously don’t want to have liabilities, and usually they can park the reserves they have in the RRP or get paid by the FED through the Interest On Excess Reserves rate (IOER) to make a little bit of money. The problem here is that the current IOER is 0.10% and the RRP is at 0% because, last I checked, the economy wasn’t doing so hot. Those rates are nothing!

Current IOER and a brief primer on very recent changes made to the Fed’s toolkit: https://www.federalreserve.gov/monetarypolicy/reqresbalances.htm

Animated YouTube video from WSJ (I know…) explaining it: https://www.youtube.com/watch?v=Oz5hNemSdWc

So if cash is a liability, and the IOER and RRP rates are basically zero, then how do banks even make money? Answer: by giving out loans (and overdraft fees, but let’s not talk about that right now).

We live in a debt-based Keynesian economic system, which basically flips everything upside-down on its head compared to the way most people understand money and how it works. To create money, you must go into debt. To destroy money, you pay off your debts. That’s how our economy works. (my reaction when I learned this stuff: Up is down, left is right, black is white, right is wrong. Fuckin’ WILD.)

Banks are required to keep a minimum amount of money on deposit (to have a margin of safety in case of something like a bank run, for example, where everybody panics and rushes to the bank to try to withdraw all their money: https://www.investopedia.com/terms/b/bankrun.asp ). Anything beyond this is excess reserves (the ER part of IOER). Whatever is left over after the required reserves can then be lent out to borrowers coming to the bank to take out a loan. The loan is how the banks make money, because now you’re the one paying the bank interest. This is how money is created in our economy, i.e. You take out a 30-year mortgage and put down a deposit, and you can buy a house that’s worth much more than what you have put down or what most people have saved up. Boom — money creation. Otherwise, no house for you. In exchange, you pay back more than what you took out.

Other assets to a bank are when you go and take out a loan of any kind — car, business, mortgage loan (as we’ve talked about), or a credit card that you carry a balance on. Also, again, when you overdraft in your account and the bank charges you an exorbitant amount of money for having no money.

I still don’t want to talk about it. To be fair though, I think overdraft numbers are from 2019, so this isn’t apples to apples, but it’s close enough for government work.

The problem today is that banks aren’t lending. The reason why is open to debate and potential speculation, but the fact of the matter is that lending growth is historically low compared to previous years.

https://www.youtube.com/watch?v=_YSojD8_qB0
This guy, Steven van Metre, and his YouTube channel are a fucking goldmine of information. Seriously one of the smartest guys I’ve seen so far and backs it up with real data. Check out that video for credit data, but also his entire channel for more info about bonds, repo market, etc. etc. You will be blown away.
I’ll just tell you now that van Metre is extremely bond-bullish, and remind you the Dr. Michael Burry — one of the OG $GME bulls from a couple years ago, and the guy that discovered the housing bubble before the GFC — has taken out big bets against the bond market. The two also disagree on inflation: van Metre sees deflation coming, and Burry sees HYPERinflation coming. The big difference between the two is that van Metre doesn’t know as much as we know about the naked short selling on GameStop. Maybe that’s the hinge on which these drastically different viewpoints pivot? Idk… Van Metre won’t respond to my messages. I’ve tried. Don’t harass him though — I like him.

Back to the topic at hand: Lately, we’ve been seeing unusual RRP activity because banks simply have too much cash and can’t afford to pay the interest on it, so they trade the cash in for bonds through the RRP market. Again, normally they give away the excess cash in the form of a loan, but they’re not doing that right now. Economic conditions aren’t great so you see low/0% interest rates on lots of things right now as well. Where did this money come from? Well, it could be from all the Pandemic relief acts we’ve gotten: the CARES act, the PPP program, unemployment, Pandemic Unemployment Assitance program, mortage forbearance, rent abatement, the overall economic downturn as everybody quarantined and stopped spending money, etc. There is some debate as to if all of this matches up to the huge increase in the money supply, but more research needs to be done on this. Maybe some tinfoil hatting as well — just a hunch on the tinfoil hat.

Anyway, that’s why you see higher and higher RRP:

That’s a lot of excess reserves! But still technically far below the ceiling, despite being over $500B

Now because of everything that’s happened in the past 1.5 years, people also aren’t spending money.

Money Velocity is the measure of how many times money exchanges hands. A velocity of 2 means you get paid, you pay someone else, and then that person saves it or pays off debt. A score of 1 means you don’t spend it at all. Please fact check me on this, but I’m fairly certain that’s accurate.

Instead, people are either saving, or using the money they get to pay off debt. But we just learned that we live in a Keynesian debt-based economy, right? This destroys money! Remember, money is created when loans are taken out and people go into debt. So paying off debt destroys money!

Not to be confused with M1 money supply. I’ll admit that I’m a smooth brain, so I’m still shaky in my understanding of the difference between M1 and M2. If someone could explain, that’d be great. I’ll edit to update.

So we’re in a pretty crazy situation: 1) banks aren’t loaning money so money isn’t being created, 2) people are paying off debt, so money is being destroyed, 3) people without debt are saving which is causing the RRP to go up because banks are sitting on way too much cash, and 4) nobody is spending any money, so the money velocity is almost completely dead at a score barely above 1.

On top of that, the Fed is doing unlimited Quantitative Easing (QE), which sucks up Treasuries off the open market (therefore is technically supposed to be deflationary, not inflationary). It’s a big, bad, negative cycle we’re stuck in.

I sense that some people in the audience may have some objections to what I just said, so I’m going to address them in this next section.

YOU’RE BEING LIED TO:

Another common misconception is that all the money printing that the Fed is doing is going to cause massive amounts of inflation. This is false, because that money printing for Quantitative Easing is NEVER SUPPOSED TO MAKE IT INTO THE REAL ECONOMY. If your smooth and wrinkle brains are flashing back to u/atobitt‘s “The Everything Short”, you’re way ahead of me and deserve a pat on the back.
So you’ve got the pristine collateral of the T-bills that you convinced the Fed to stop soaking up, you’ve got the rehypothecation counterfeiting machine, and that equals TENDIES. A LOT OF THEM.

If I had that many tendies, I’d buy something other than ramen and free meme stonk movie theater popcorn for dinner. My car would probably finally get a new coat of paint instead of looking like Deadpool’s nutsack 2 days after a bad sunburn.

But if you were a rich girl (nanananananananananananananana), where would you put your tendies? Besides the Cayman Islands, that is…

Probably the stonk market, right? So that you could use your tendies to make more tendies cuz yo dawg I heard you like tendies? Maybe that’s why we’re seeing ridiculous all time highs?

Disclaimer: this is just my personal apespiracy theory. I don’t have any sort of smoking gun for proof, but to my smooth, smooth brain, it seems to make logical sense. I think this much has been supported by “The Everything Short,” as well as some of u/sharkbaitlol ‘s “CHAOS THEORY” DD. It does assume that these DD’s are correct, and leaves open the possibility that it’s not just Palafox but other entities as well — I have no idea who, so don’t ask. I have a lot of DD to catch up on as well as review, so if I missed something, let me know.

If you haven’t read The Everything Short and CHAOS THEORY by now, you’re seriously doing yourself a disservice. Go read them ASAP!

TO THE MOON!

Conjecture warning: So maybe QE money really is leaking into the real economy. Well, it’s mostly just leaking into the stock market, if my theory + the Palafox DD is correct. It’s not leaking into retail pockets in a very meaningful way, as far as I can see. This group of apes here on r/superstonk might be an exception, because y’all are a savvy buncha apes that know how to stonk.

I do think Wall St and MSM wants everybody to believe that the Federal relief programs are responsible for what’s about to come, but I just don’t think that’s true. I think there are a lot of people suffering out there, facing evictions, homelessness, and possibly starvation because of everything that’s happened over the past 1.5 years. Gut feeling. Again, needs more research *technically,* but I feel like that’s an excuse to be cruel in order to delay handing over money.

So besides the narrative that unemployment checks and Pandemic relief programs and the Fed are causing inflation, what other narratives might the Wall St-owned MSM be pushing on people? How about inflation itself?
Let’s go through this together, okay? This is either going to be beating a dead horse to some people, or so antithetical to what you might have been misled to believe, that I think it’s important to review and scrutinize.

First, what is the definition of inflation? Well, there are a couple of answers to that question, because even the definition of inflation has changed over the years. It used to be defined as an expansion of the money supply. If that’s the case, you just look at the M1 and the M2 data (shown earlier above) from the FRED website and you’re done. Chart go up? Boom inflation.

Here’s another, more accurate definition: Inflation is when there’s more money chasing after the same (or less) amount of goods and services.

If there’s more money in the system, and that money is going after the same goods and services, the law of supply and demand would say that prices should go up, right?

Is that what we have today? Absolutely not. If anything, we have LESS goods and services due to supply chain issues and business closures and labor shortages. I have a feeling that even the money supply data is wrong and/or HEAVILY manipulated or probably polluted, because I know tons of people that have LESS money now, but are chasing after less goods and services. Could just be me.

It’s true that the CPI numbers have been high lately, and that suggests that we have inflation, but do you see how it doesn’t really make sense together?

Looking at the actual data instead of listening to MSM, it would seem like we’re still trying to recover from the pandemic, as well as supply chain disruptions. Think Suez Canal blockages, pipeline hacks and shutdowns, borders being closed, trade tensions between nations, factory slowdowns,

Also, if QE REMOVES liquidity from the market, isn’t that disinflationary if not outright deflationary? QE shouldn’t be inflationary. If it were, shouldn’t we have seen some inflation by now, after all the QE we’ve done since the GFC in 2008? Ditto Japan. Japan has been doing QE for ages, but the thing we have in common is that we seem to be unable to achieve these target inflation goals that the govt and the Fed have set.

Also, technology is inherently deflationary. Working from home means you don’t need a car or gas (or electricity for your EV). Quarantining and not being able to do much of anything , etc. is all deflationary, where did this inflation narrative come from?

ENTER: INFLATION EXPECTATION:

Inflation expectation is basically the threat of inflation without real inflation. One of the goals of this is to get you to spend money on things now, rather than pay down debt or save, which destroys money or decreases money velocity. This is debatable, but a healthy economy, the way ours is currently designed, does have some inflation in it (which helps us get out of debt, if we can slowly inflate away old debt), and has money flowing around so that everybody gets a little bit of it so they can pay for whatever they want to pay for. I’m oversimplifying by a lot, but it’s a good enough description for this purpose.

Ok, let’s try to look at the data and see if we can find inflation:

https://www.investing.com/economic-calendar/
This is a VERY powerful tool that nobody I know looks at, except for van Metre who introduced it to me. Click filters, set a date range at the top calendar icon — I like to look month by month and compare it to previous months. Also scroll down and select the categories you want to look at. Having the default multiple countries selected is useful to compare things globally.

This is where watching some of Van Metre’s videos is a lot more helpful than reading me rant on. Just trust me when I tell you that he thinks that the elevated CPI reports are transitory in nature, and that the data itself (factoring out base effects from ~a year ago) is not showing signs of inflation, but rather that we’re headed in the wrong direction in regards to a healthy economy, worldwide.

Again, if inflation is an increase in money, we have to look at money creation or consumer credit. We seem to be getting a temporary spike, relative to recently, but overall it’s still really low compared to where economists would like it to be at for a healthy economy.

There’s definitely a more visually appealing source for consumer credit but I can’t seem to find it right now. I’ll amend this post as soon as I do find it. Or if someone in the comments can help. Keep in mind that you have to factor out base effects from a year ago so that you don’t get misled into misinterpreting the data as good when it’s actually bad or really bad.

Cash saved up in the banking system is now clogging things up, and so now banks have too much cash, hence the high RRP reports you’re seeing. They gotta get rid of it somehow.
https://www.wsj.com/articles/banks-to-companies-no-more-deposits-please-11623238200

Now Janet Yellen is saying that she wants higher rates when the economy is like this? Makes absolutely no sense. https://www.reuters.com/business/yellen-says-higher-interest-rates-would-be-plus-us-fed-bloomberg-news-2021-06-06/

So, I think we’re just constantly being lied to. There’s a lot more going on behind the scenes than they’re letting on.

WHY AREN’T BANKS LENDING?

So if cash is bad for banks, and loans are assets to a bank, but banks aren’t lending, then what is going on? Because of economic conditions, banks aren’t confident that giving out mortgages and other loans will be profitable because the odds of people defaulting is high. At least that seems to be van Metre’s interpretation of it, and it seems to be a very reasonable explanation. If you want to get tin foil hatty, we don’t really know why banks aren’t lending, but so far nothing explained above indicates that this has anything to do with heavily shorted companies and naked shorts.

Ironically, despite record low rates, the rates may not actually be low enough, because banks aren’t getting requests for loans from, for example, people with high income and perfect credit. So, loans are seen as risky. If the rates come down, maybe then we will see them come out. After all, who wouldn’t want a 0% loan? It’s free money! Or (this is not legal in America AFAIK) what about NEGATIVE interest rates? You mean to tell me that the bank will PAY ME to take out a loan? SIGN ME UP! /s

Alternatively, maybe qualified borrowers aren’t coming out because they know we’re sitting on an economic time bomb. We had historically high mortgage delinquency rates (30 days+) and historically high severely delinquent mortgage rates as well (90 days+) in April and early May, although it appears to be improving now. It’s still higher than the tipping point that caused the housing bubble of 2008 to burst, though. So, it’s still a big concern. How much of this is due to mortgage forbearance from the CARES act of 2020? I don’t know. But, and I’m thinking hypothetically now, a lot of those people that took out mortgage forbearance put that money into the stock market, and I think it’s safe to assume that some of those people may have gotten wiped out when some crazy shit happened in January till now. Regardless of that, the numbers indicate that housing is going to crash soon. Once evictions and foreclosures start rolling out, it’s going to be pretty bad for the housing market.
https://www.mba.org/2021-press-releases/may/mortgage-delinquencies-decrease-in-the-first-quarter-of-2021

Keep in mind that Collateralized Debt Obligations and Mortgage backed securities (MBS) still exist — they never went away after the disaster in 2008. You can see the Fed soaking these up too and putting it on their balance sheet.

Mortgage forbearance ends this month, unless it gets extended again. Once it ends, the delinquent mortgages must be paid back. How many people are going to be able to afford that? Nobody knows.

Okay, so no loans. Where are banks making money? Instead of loans, the banks are doing QE, or quantitative easing. This is where the FED prints unlimited amounts of money and uses the banks to buy treasuries such as TLT (20+ year bond) off of the global market Banks buy bonds and flip them to the FED, who is a guaranteed buyer. Profit! Again, QE soaks up excess treasuries, notes, and bonds off the open market and they go on the Fed’s balance sheet. It’s a jail or a graveyard for Treasuries, MBS, etc. Whatever QE sucks up is supposed to stay trapped in the Fed’s balance sheet. It’s not supposed to make it back out unless the Fed decides to do so (probably years down the line, if ever).

Mortgage rates ARE historically low, but nobody that the banks seem to trust is asking for loans / the banks aren’t giving out loans. How do you get people to borrow money? Do you raise rates or do you lower rates and make it really cheap to borrow money? Answer: You lower rates and make it really cheap to borrow. Alternatively, maybe people are waiting for the housing market to crash so that they can buy up property for really cheap? Maybe both.

So the banks are making money this way. By flipping bonds over to the FED, the guaranteed buyer and lender of last resort. This would all be acceptable, except that u/atobitt discovered and revealed in “The Everything Short” that Citadel’s Palafox has been rehypothecating and counterfeiting treasuries and offshoring profits. Nicely done, wrinkleape! Apparently, it took Jamie Dimon millions of dollars and WEEKS to get JP Morgan employees to figure out what was going on. It was alluded to briefly in either this hearing or this hearing. I can’t remember which one.

We’re stuck in a liquidity trap. QE needs to stop, but if QE stops, the economy crashes. If QE keeps going, we keep spiraling down this hole of rehypothecation and no lending and money destruction. It’s a real problem, and the FED has painted themselves into a corner here. Van Metre either doesn’t know about Palafox’s rehypothecation or just won’t address it. I don’t know which one, and frankly it may not matter at this point. He knows about the short positioning on bonds, so he must know something.

Everybody’s been focusing on $GME and $AMC , but very few people were paying attn to the bond market. Look up the bell curve. $GME is a 5 standard deviation shorted anomaly. Hedge funds and other institutions have shorted TLT / the bond market to 4 std deviation net short, although Bloomberg data shown on van Metre’s YT episodes shows that they’ve started covering some of that bond short positioning recently. The problem here is that the bond market is ~4x the size of the stock market. So it’s still hugely shorted, despite the covering in bonds.

As a side note, I’ve studied a bit of the precious metals (PM) market as well and those guys know that the PM market, namely silver, is also HUGELY shorted. This is not a recommendation to change strategy. I am all-in on GME. I’m just pointing out that those guys in the PM world aren’t crazy either. It really is the EVERYTHING short.

I think everybody on Wall St and Washington knows how fucked this all is. At this point, I feel like it’s obvious af. Something has to give. It’s not just $GME and $AMC that’s been shorted to hell. It’s hundreds if not thousands of other stocks. Indices. The bond and PM markets too. And with all these ill-gotten gains funneled to the Cayman islands, idk if we’ll be able to get that back. So the FED may be forced to printing an ungodly amount more money than the ungodly amount they’ve already printed.

So if we’re in an everything short, who gets paid? Is it the bond investors? The PM investors? The “meme stonk” investors? I don’t know. But I think the government would rather chew off it’s own legs than to lose reserve currency status, so we’ll see what happens.

So that’s the giant conundrum: do we further devalue the dollar? Do people still trust the US dollar to be the world reserve currency? How do we unwind this everything short without causing a disaster to fix the disaster? Will be get deflation (van Metre’s view) or will we get hyperinflation if the Fed has to helicopter money its way out of this? (I’m assuming this is Burry’s view, although I don’t know for sure. Van Metre made a video commenting on Burry’s 13F recently as well).

Last one for now: as George Gammon discovered and revealed, the weird thing about the RRP is that the balance sheet isn’t adding up. If the FED is trading treasuries for cash, it should be reflected in the balance sheet. +1/-1. Instead, the balance sheet doesn’t change. +1/+1.

What does that look like to you? It looks like hiding dead bodies (rehypothecated treasuries) to me.

Ok, hopefully that was helpful. I’m super tired so I probably won’t be available for comment for a few hours. I’m a smooth brain, but I’ve been studying this for a while. I don’t know everything about how this shit works. But everything does stink, and I don’t need to have @dog_shill‘s keen nose to smell it.
One thing seems to be certain to me: with the behavior we’ve seen coming out of the banks, everything seems to be intentional. To me, it looks like banks are going to crash the market, it will be intentional, and it’s been in play for a while. Van Metre agrees for slightly different reasons, and his YT channel has at least 3 (probably more) videos about it: start here and search his videos for “crash” for more https://www.youtube.com/watch?v=mlRgIUpVVGI

TA;CR: Seems like everybody is lying and cheating and trying to hide things. It’s not just hedge funds, but it’s the Fed and the government as well. Diamond hand this shit. Insert Homer Simpson “It’s the end of the world!” meme. Moon or bust.

Final side note: Please read this tweet thread in regards to publicly talking about GameStop, especially on social media. IMO, the best thing to do is be good brand ambassadors for GME. If you believe in the company, as many of us do, we need to reconsider our public discourse around things $GME related. Seriously, go read this: https://twitter.com/ThatNeighborBoy/status/1404226754210897921?s=20

Thank you and goodnight!