The Explosive Truth About Our Central Bankers
The Fed lied to us.
If you’ll recall, on March 23, 2020, the Federal Reserve stated that it would begin buying both U.S. Treasuries and corporate bonds with unlimited funds.
The announcement was historic in nature. Never before in its 107-year history had the Fed bought corporate bonds before. In fact, it was technically illegal for the Fed to do this – the Federal Reserve Act of 1913 expressly forbid the Fed from buying corporate bonds and other risk assets.
The Fed got around that legislation by setting up a credit facility with the Treasury called the Corporate Credit Facility or the CCF. (There are actually two of these now, one for buying investment grade corporate bonds and the other for buying corporate junk bonds.)
In its simplest form, the Fed would print new money and then funnel this money into the credit facility. The Treasury, not the Fed, would then take the money and use it to buy corporate bonds and corporate bond ETFs on the open market.
This was a HUGE development for the markets. And it is not coincidence that both stocks and corporate bonds bottomed the day the Fed made the announcement.
A Major Reveal About the Fed
Jeffrey Gundlach is a self-made billionaire bond fund manager. As such, he is one of the largest buyers of bonds in the markets.
And last week on Friday, May 1, 2020, he tweeted the following:
The Fed responded to this accusation yesterday, Monday May 4, by posting on its website that it would begin buying corporate bonds in “early May”:
When will the CCFs be operational?
The SMCCF is expected to begin purchasing eligible ETFs in early May. The PMCCF is expected to become operational and the SMCCF is expected to begin purchasing eligible corporate bonds soon thereafter. Additional details on timing will be made available as those dates approach.
Source: New York Federal Reserve
Remember, the Fed promised to buy corporate bonds back on MARCH 23. And that announcement stopped the stock market meltdown.
Now it is May 5 – six weeks later – and the Fed hasn’t bought a single corporate bond.
Stocks literally rallied 30% on a lie.
These are crazy times.
And of course, this begs the question…
What else is the Fed lying about?
Editor, Money & Crisis