The Financial System Is Broken (w/ Jeff Snider)

Jeff Snider, head of global research at Alhambra Investment Partners, has been covering the repo market breakdown since May 2018. With the recent spike in repo rates, it seems like the rest of the market has finally started to take notice. Snider explains why this problem is not coming up out of the blue and breaks down why he views recent market moves as a sign that the banks are telegraphing their knowledge of major threats to the monetary system. Filmed on September 27, 2019 in New York.

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The Financial System Is Broken (w/ Jeff Snider)

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[RealVisionFinance]

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[ytyt]

This stuff does my head in, but I appreciate Jeff doing his best to explain this absurdly complex subject matter to regular people

[bensavage]

Communism: we just haven't done it right. Fiat collapses: We just didn't print enough.

[michaelweyenberg]

There are some banks that are not solvent. The others know it, so the rates go high to justify their risk. Fed has to come bail them out.

[fallenangel]

0:18 "I take a particular focus on something ... Eurodollar sistem ..."
explained
1. Never written, created by the British in the 60s
2. If British banks are to intermediate between two non-resident in a foreign currency (in this case $) this particular intermediation (this bill) will NOT be considered by the Bank of England UNDER it's own jurisdiction
NO REGULATION
3. banks began to create a market for $ in London called Eurodollar market = it's about providing a legal space in which you pretend activity is taking place somewhere else
4. when American banks realized that London offered the ability to AVOID us regulation - they moved their international operations to the City of London
5. to differentiate their Euromarket activities from the the domestic ones - Banks kept two sets of accounts ... and BE (Bank of England) declared that the "London Euro $ market accounts were NOT in London"

In other words
These are dealings in $ that are outside of the view of US & British REGULATORS

[bigglesworth]

This guy Snider should be the Secretary of the Treasury!

[BinHexOctal]

This guy makes a lot of sense and has a ton of knowledge, more of him please.

[BRUtahn]

It is amazing to hear from career experts who are not just fear mongering and/or trying to sell something. Thanks for posting!!

[deathguarddavegoogley]

There’s only one reason why banks won’t lend to each other. It’s because they don’t think they’ll get their money back or it’s because they think they may need that money at very short notice themselves. That tells you something about the insider view on what is really going on in the banking system.

[mettaphysicist]

Great interview, great interviewee, great insights.

[insguy]

The top bullet point on the final screen nails it: "THE REAL PROBLEM IS TIED TO A SHORTAGE OF PRISTINE COLLATERAL." This is exactly what led to the 2008 crises in mortgage backed securities. Banks not taking advantage of the spread between repos and the EFR indicates raised risk perception of the collateral underlying repos. The Fed needs a way to monitor and regulate the value of collateral in the repo market — not an easy thing to do in the diffuse and opaque Eurodollar markets beyond the reach of U.S. regulations.

[JohnnyTubeNYC]

Federal Reserve: Not federal and has no reserves.

[honestycounts]

The reason why banks are refusing to get involved in the repo market is because some of those banks are so insolvent that when economic conditions begin to get tight (recession) those insolvent banks won't be able to pay back borrowed cash. So the fact that the repo market is a mess indicates that the recession has begun.

[samueldance]

Jesus. I worked this out when I was 19 and studying the Roaring 20s, Great Depression and then World War 2. K economics did not bail the world out, though some of the macro reforms (Glass-Stegal Act) were great. (Another discussion)

In fact we were heading into a recession in the late 1930s. We were "bailed out" by WW2. Huge capital controls were put in place.. basically a highly socialistic economy, wealthy people were taxed heavily, (70% or more from memory). This forced them to invest in business and government bonds. People were put to work for the war effort.
Unemployment dropped, men went to war or to factories to such an extent that women entered the workforce en masse too. Thus the Great Depression ended.

The annoying part is that K economics then became validated as the be all end all of economics.. yes it has some function, but the paradigm has shifted.

The reality is, if you have more children or people you have more growth. Can easily provide for the smaller generation that is above you (post-war boomers however...).

Right now in Japan and Southern EU. That is not the case... too many old people to few young. Resulting in long, protracted period of anemic growth that will not end till their population stops its decline.

There are, from what I can see two solutions to this;
1- accept poor growth or even recession and maintain standards of living as best as can be managed, whilst the economy shrinks. Till the population of that nation maintains a sort of equilibrium and or growth.
2- Mass migration programs that selectively choose young people from around the world that replace the lack of children those countries are having.
Both of these will have "problems".
3 - (unlikely scenario) nations with negative demographic growth, start having above replacement level childbirth, beyond 2.1, 2.5 to 3?
There is your answer.

[kevinslattery]

🔊 Global business has slowed, therefore lending too. As he says, the system needs to spin faster on high credit expansion. The underlying issue is the global monetary system the world has known for 300 years is based on growth, on credit expansion and IS INHERENTLY UNSTABLE! It is also unethical, manipulated and kills nature and the true nature of man.

[hassanigraves]

I think the issue is Corp. Bonds via money market operations...For example, if I get a home improvement loan from Home Depot, what takes place in the system is that my account is debited a loan from HD, and HD is credited a note from me. HD CFO will combine hundreds of notes created from sovereign debt (like credit cards, & Net30 accts.) Into securities backed by secured parties, and combine those assets with other “assets” backed by equip. and buildings, along w/ their paper investments (like stocks n bonds) from other companies that HD now holds...all of these Corp. “assets” in HD possession will be used to underwrite and transform the assets into Corp. issued HD bonds. Banks around the world will have access to buy HD Corp. Bonds. As a result, HD takes hard cash from the banks and gives the banks their Corp. Bonds.

The magic here is that the banks can go to an insurance bank and swap a HD Corp. bond for a REPO, which maintains a suppressed repo rate and keeps the system afloat...So, one would have to wonder, is the rise in junk rated corp. related to the rise in REPO rates? Have banks completely aborted the Corp. Bond market? Are we living in a world full of Zombie Corporations waiting to die?

[Dave]

Overview:The Western World has reached the pinnacle in infrastructure- housing and business- expensive and modern. And we cannot really keep expanding- all we need now is repair and replacement.

[jaleotech]

Hey they found a smart guy this time. They've had some total duds in the past week just talking buzzwords

[Clubrat]

Jeff snider is the best! Making sense and explaining this nonsense monetary system!

[cv-edf]

If we had Jeffs all over the monetary market place we’d be in a much better place...👍🌟