Wow! US Fed Intervenes - "Nothing to see here...move along...keep buying stocks!"

See this...

https://www.bnnbloomberg.ca/fed-injects-cash-for-fourth-day-as-funding-markets-stabilize-1.1319319

The US Fed had to provide liquidity into the short term market to stabilize the borrowing markets. In total, they injected $278 Billion in four days.

What does this mean? Let's keep this simple... 

Companies and banks were in need of overnight borrowing so they could satisfy their obligations - they did not have this cash. The demand was so great, and there was so little money available that short term rates for that money exploded. The US Fed had to jump in and provide enough short term cash to keep rates low.

So, the problem was that there wasn't enough liquidity available for short term lending, at least not enough so that it could be borrowed at low rates. Put another way, not enough lenders were available or willing to supply liquidity into this market for short term debt. 

The idea of a "liquidity problem" is essentially the definition of a financial crisis. It happens when financial institutions stop lending to one another and to others. When this happens, the world can go from excess available cash to not enough cash in a heartbeat.

And last week, the world's financial heart skipped a beat. 

You need to understand that the US Fed did not intervene because it wanted to, as a part of normal day-to-day operations, but because it had to in order to prevent the possibility of a financial crisis stemming from a frozen market for short term debt.  

But that was last week. Are lenders ready to lend now, so that the US Fed can stand down? 

I have to think that US Fed officials have been talking to private lenders continually this weekend to make sure that they do get back in the game. Because if they are not back in the game and lending enough to meet demand at low rates next week, we could be in for a very interesting few weeks. We should have an indication of where this is going as early as Monday morning.

We have had free money for a decade...that may have ended last Tuesday.

The Swindle Continues.