The Government Plan To Hack The Economy In 6 Months | Mark Moss

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Summary

➡ The Mark Moss show talks about how the government is trying to boost the economy before the election by injecting money into the markets, a move that doesn’t align with the Federal Reserve’s efforts to fight inflation. This is being done through various methods, including selling more bills and lowering bank reserve requirements. The government is also planning to tap into homeowner equity by allowing homeowners to take out second mortgages. This strategy aims to stimulate spending and keep the economy afloat, but it could have potential downsides and unintended consequences.
➡ The Federal Housing Finance Agency is set to approve Freddie Mac’s purchase of certain single-family closed second mortgages as a new product. This move could unlock about $32 trillion in homeowner equity, providing more liquidity to the market. However, this could lead to more inflation and put borrowers into more debt, increasing financial risk. The proposal could also lead to more mortgage-backed securities being sold on Wall Street, potentially impacting real estate and stock prices.
➡ The government is planning to ease lending restrictions, which will increase the amount of money available for loans. This will likely boost the real estate market and other asset prices. Additionally, politicians are proposing measures like 3% mortgages and student loan forgiveness to further increase this liquidity. Keep an eye on Bitcoin and tech stocks, as they are often the first to react to these changes.

Transcript

The government can’t afford to let the economy crash before the election if they have any hope of staying in power. And so they just introduced a backdoor plan to stimulate the markets and get their liquidity. There’s nothing the Fed can do about it. But the problem is their strategy doesn’t align with the Fed’s fight against inflation. The government needs more liquidity. The Fed is trying to remove it. So to avoid being caught in the crass fire, we need to plan ahead. So in this video, I’m going to break down where exactly this stimulus is coming from and how it’s actually costing the government nothing to inject it.

What the potential downsides and unintended consequences of this could be. And most importantly, how you and I as investors can position ourselves to benefit from all of this. Now, for anyone new here, my name is Mark Moss, and I make these videos to break down complex financial subjects so more people can understand them. Now, over the last two years, while almost everyone on YouTube has been calling for, you know, the markets to crash. I’ve made over a dozen videos specifically explaining how the US Treasury is driving the market and working against the Fed.

And this move today is the latest trick up their sleeve. So let’s go. All right, so we’re talking about liquidity. Liquidity is what drives the markets, what drives the economy, that’s what drives asset prices. And it’s why we need liquidity. At least some of us want liquidity. Some of us don’t. What do I mean by that? So when we have liquidity, when there’s more money, more loans available, there’s more money for you and I, which means we can go buy more things, which means that businesses make more money from us buying things, which means they have more money to buy more things.

And we see asset prices going up and we all feel rich and wealthy and all those things. The problem is that that all that money in the system pushes prices higher consumer prices, higher or inflation. And so the problem is, is that the Federal Reserve, which is trying to keep inflation at their goal of 2% said, well, Hey, inflation is too high. So let’s start a process of tightening, tightening liquidity. Quantitative tightening is what they call it to slow that down. Now we can see in this current form of quantitative tightening that we have right now, the current QT, the goal of the current current QT is to drain the excess liquidity.

They want to get the liquidity out of the system. So you and I have the opposite. You and I feel broke. We see our asset price going down, our home value is going down. We don’t have as much money. So we don’t spend as much. The reason why they want to do that is if we don’t spend as much, then hopefully inflation comes down. But the problem is that the government is going into an election year and they won’t get reelected if we go into recession. So they want the liquidity. They’ll take the inflation, but the Fed has a goal and they need 2%.

And so it’s created this tug of war sort of effect. And so we have the treasury that’s continued to be taking on more and more debt. And what we can see is they’re issuing a ton of these, these bills. So you can see how fast this has gone up. This is basically like a cash injection. So think about like a dollar in your pocket. Maybe you have, we call those bills, right? A hundred dollar bill. And that’s basically because there’s no duration. A hundred dollar bill is, is available right now. Whereas bonds could have like a 30 year duration.

So bills or anything that has like less than a one year. So it’s basically like injecting cash directly into the system. So there’s been this tug of war. Like I said, I’ve broken down a whole bunch of videos on this specifically. Now this is officially not a pivot and this is, this is important to understand. So everyone’s waiting for the Fed to pivot to get off of their tightening stance and move back into an easing stance, which will then create more liquidity. But the treasury is like, hang on, if you’re not going to pivot and provide liquidity, we’re going to do it ourselves.

And so they’ve been doing this by, as I said, by selling more bills into the market. The bills create that short term liquidity. And you can take a look at this right here. The bills right here are the light blue. Look at the amount of bills they put into the system. And you might notice that we haven’t seen this amount of bills into the system since the pandemic of 2020 when the entire world shut down and they literally had to pay people to stay at home. Yeah. We’re putting that much into the system right now.

It’s pretty crazy. Now, but we also have other ways that they’re injecting money, even without the fed doing the pivot, everyone’s waiting for. So like this, for example, is the BTFP. It’s the bank term funding program. So when the banks started going under in March of 2023, they started injecting money for the banks. You can see it went straight up. It’s been coming down. But as of right now, we still have over a hundred billion dollars of liquidity just from this. So these are some of the stealth ways, the sneaky ways that they inject money without the fed pivot.

This is what I’ve been talking about for the last two years. When everyone else is calling for the market to crash, waiting for the fed to pivot. I’m like, no, they already are. Here’s another example right here. The federal reserve board right here announces the reserve requirements exemption. Okay. And the low reserve transfer of 2024. So banks are supposed to have some reserves for the amount of assets with the amount of loans they put out. And what the federal reserve did to get more money into the system is they lowered the amount of reserves.

The banks have to have, it says right here, the reserve requirements for depository institutions, which will remain at zero. So you hear about fractional reserve banking where they’re supposed to keep, you know, 10% of the amount of loans that extending in the reserves, but here they will remain at zero. So these are all things that have been done to get more liquidity into the system, even though the fed hasn’t officially pivoted. Now, if you want to know more about liquidity, which you should, cause that’s really what drives asset prices. It’s a lot deeper than, than just this, but I want to show you the brand new thing.

The treasury is doing right now, but there’s a lot of ways are getting liquidity into the system. And more specifically, there’s certain types of assets that are very sensitive to liquidity. So next week I’m going to do a live presentation. I got about 30 charts probably that I’ll show all the different ways liquidity is getting into the system and more specifically, which of the assets are the most sensitive and we’ll move up the most. If you want to join me, it’s free, it’s live. Come hang out, look at the presentation and, uh, join me live.

I’ll answer all your questions live because you want to know what this means and how to apply it. So don’t miss a chance to come hang out. There’s a link in the description down below. Hope to see you there, but we can see that it’s not a pivot. They’re getting liquidity into the system any way they can, but right now there’s a brand new way they’re doing it. And the government, the treasury has eyed a brand new $32 trillion pool of liquidity. They’re about to tap into now. This is a pretty big deal and it’s completely independent of anything the fed can do because the government policy changed.

And I’m talking about homeowner equity. All right. So the reason why a lot of analysts have gotten this wrong, some of the, some of the guys that I really respect, like Harry Dent Jr. For example, I’ve read five of his books. His research is amazing, but they fail to consider how many more tricks up the sleeve, the government, the fed can have. And most people, including myself, we didn’t think about these things. These are things like, this is another trick up the sleeve. Oh, let’s tap into homeowner equity. Let’s inject that into the market.

So how are we doing that? Well, what we can see is that what they’ve done is they filed a new proposal, Freddie, Freddie Mac. So the government basically provides liquidity for home loans through Fannie, Freddie, and now Jenny. Okay. So these are like government backed programs for mortgages and they file the proposal for a purchase of single family closed in second mortgages. Okay. So they issue first mortgages, but now they want to do second mortgages. That means they want to allow all these homeowners that have equity in their homes to tap into that equity, get it out of their home and start spending it into the market.

All right. Now the agency that’s going to approve this is the federal housing finance agency. And it says right here, Freddie Mac is to purchase certain single family closed in second mortgages as a new product. Now that’s a pretty big deal. How does it get the $32 trillion out there? Well, one thing that we can see right here is the amount of homeowner equity. Okay. So there was a little bit of equity in homes right here. Obviously 2006, 2007, before the 2008 crash, we had a lot, but what we can see is from this peak right here to the point right here, we’ve seen equity go up here.

We had about 14.3 and right here today we’re at about 32.3. So what this means is that homeowner equity, the amount of equity in homes has gone up by what is that? 130%. So we’re sitting on about $30 trillion of equity, which is amazing. So if we can just pull some of those couple of trillion dollars out injected the market, we can get more liquidity and there’s nothing the Fed can do about it. Now let’s just take a historical view to understand what kind of impacts this might have. So for example, in 2007, sort of at the height of the last bubble before the great financial crash happened, there was about $700 billion of second loans outstanding.

Okay. To set kind of we have about only 350 billion. So people haven’t been tapping into this for any number of reasons, partly because the banks don’t make them readily available back in 2005, six, seven. They were just trying to get everybody as much money as they could. People were going by in second, third homes, all these different investments with that money or even living off of it, pools, cars, whatever it may be. And so everyone was taking that money to the tune of 700 billion. And even though home prices have gone up, even though home equity has gone up, the amount of outstanding seconds is actually half of what it was before.

Now, it should have gone up. What we can see since that time period of here, about 2006, 2007 home prices have gone up by about 70%. Your home was worth about 70% more than it was back in 2007. But again, home equity has gone up by about 130%. But the amount of people tapping into that, like I said, is about half of that. Okay. We can see here Bank of America, which is one of the major leaders in kind of providing these secondary mortgage loans, cut their mortgage loans, second loans from 150 billion they had on their books down to only 25 billion.

So it was a massive mile of liquidity drain that’s come out of that. Now, this is sort of like I said, stuck liquidity. All right. $32 trillion of it, the government, the treasury, they want as much liquidity into the system as they can, but they’re sort of being held back by the Fed because the Fed’s like, nope, we need to get 2% inflation before we reduce any, put any more money in. Now, what we can see is that in 2022, if we want to start to calculate how much liquidity could we really see maybe this year coming into the market? Well, we know in 2022, about 50% of the mortgage loans that were done were what we call non-traditional banks.

All right. Now, the reason why that’s important is because these non-traditional financial institutions, they don’t have the assets to keep this onto their books. So they have to sell these loans in the secondary market to Fannie, Freddie and Jenny. So they originate the loan and then they sell it to the government, basically. All right. Now, the reason why that’s important is because there’s a very well oiled machine on the back end for mortgage backed securities or MBS. Now you might be familiar with MBS if you know what happened in 2008, or maybe you’ve watched that movie, The Big Short.

If you haven’t watched that movie, The Big Short, I’d highly recommend it. And so basically they take these mortgage products and they package them up into securities and they trade them, they sell them on wall street. So that’s already all built. There’s massive liquidity ready to absorb these mortgage backed securities if it can only get there. And that’s exactly what we’re talking about. So now with this proposal change, we can package these up from the government. We can securitize them and they can be sold bought and sold in wall street and provide massive liquidity.

Okay. So how much we’re talking about how much and how soon, but first let’s understand some of these impacts. So what are the potential downsides of all this liquidity? I mean, there’s obviously the, you know, most obvious answer, which is more liquidity equals more inflation. Okay. So that’s, that’s the battle, right? The fed doesn’t want the inflation, the government, the treasury, they’ll take it. I’d like to know what you think about this. I think that most people would rather have inflation and still have enough money, you know, still have their jobs, still see their home values or stock values higher and just deal with higher prices.

I think more people would rather have that or would they rather see prices crash down and the prices of gas and food actually comes down a little bit. Let me know just comment down below. Would you rather see inflation or would you rather see asset prices higher in inflation or would you rather see inflation going down? Let me know. I think they’ll see more, more inflation. That’s the obvious, but what are some of the other unintended consequences? Well, for example, it’s going to put borrowers into more debt. So right now my home is worth, I don’t know, 300,000.

I owe 150,000. So I have 150,000 of debt. But if I tap into some of that equity, my debt levels go up. So now I have more debt, but what’s the problem with that? Well, more debt, more leverage, more risk. So for example, if the market turns down, maybe I don’t, uh, I don’t have any equity left in my house and I can’t sell it. So instead of being able to sell my house now, maybe it goes into foreclosure. That’s a problem. We know that the elderly are very at risk right now.

They’re being, they’re very susceptible to inflation. And so, um, they could be potential targets. We know costs have gone through the roof. Homeowners insurance, for example, took a big jump up here. Um, and it kind of stated this new baseline and here homeowners insurance is going up. If you own a home, you know exactly what I’m talking about on average has gone up about 11%, but in California, Florida, Texas, places like that, it’s gone up way more than that. Um, and so what we, what we know is that we already have people sort of on the brink here.

We can see that right now today, about 23% of consumer debt is held by the elderly. Now that’s a big number that’s actually doubled just since 1999. And so the elderly are sort of at risk in this environment. So they might be wanting to tap into this, but again, if anything were to happen in the economy, these people could be at risk. Okay. Another potential risk of doing this is that we have a weaker future. And so basically what we’re doing with debt is we’re taking future value and pulling it in today, but it makes the future, it makes tomorrow or next year or five years more dangerous potentially.

So we already know that, like I run up a credit card for, you know, a vacation, but now I have to pay for that in the future. So instead of future earnings going for future spending that future earning goes for the spending that I already consumed. So that’s a problem. We know that we already talked about seniors are already on shaky ground and so they’re susceptible to taking this money, but now they’re going to be even more fragile than the future. So for example, 80% of seniors right now are already at great risk of financial shock.

80% of seniors cannot withstand a financial shock. That’s a pretty big number. And so if they take on even more debt, that’s going to make it even more dangerous for them. And it’s not just seniors. We can see 49% of Americans can’t even afford a thousand dollar emergency. So we add up more debt. Now their payments, their monthly payments are higher and they’re going to be even more susceptible to future shocks. And so if we had, you know, some sort of a recession or home prices go down in the future, we could see more foreclosures, things like that.

And so that’s one of the problems of doing this. We have a potentially weaker future, but today we have more money. Okay. Now, what do we do with this information? Now that we have it as investors, that’s the big question that we’re all watching and waiting. So when we have more liquidity, again, people spend more money, asset prices go higher. What are some of the ways that we’ll see this actually manifest in asset prices? So for one, real estate, obviously, if I can tap into this money from my real estate, like we saw in 2005, six, seven people use that money to go buy more real estate.

So we can unlock some of that money, but also what it will do is it will open up more loan origination. So the government is basically going to be talking to these lenders and easing restrictions so we could see more liquidity, more loan origination, things like that. We can see right here, a headline on financial times, markets should be buoyed, should be pushed up by increased liquidity this year in 2024 because conditions are becoming easier in the global economy with an expanding pool of cash, more cash, more spending, more asset prices going higher.

So real estate will be doing that. But we also know this is only the first step in this. So like RFK, who’s running for president right now, he’s talking about bringing back a 3% mortgage, right? We know Biden’s running on a campaign to forgive student loan debt. And so we’re going to see more and more of this government assisted liquidity, right? Not from the Fed, but from the government, whether that’s giving people zero down mortgages, low down mortgages, 3% mortgages, whether it’s forgiving mortgage debt, whatever it is, we’re going to continue to see more and more of that, which again equals more liquidity, more asset prices going higher.

Okay, what else? We know that global liquidity signals for Bitcoin and other risk assets. So risk assets are very susceptible, very sensitive to this liquidity. Bitcoin is sort of the canary in the coal mine that kind of moves before everything else. And so keep your eye on Bitcoin, keep your eye on tech stocks, things like that. Also, you know, it should be pretty good for the economy. People will have money to be spending. This is what I’m expecting. Now, if you want to really understand liquidity a little bit better and understand exactly where it enters the system and which assets move first off of that.

Like I said, join me live. I have about 30 charts. We’ll talk about the assets that are most susceptible, most sensitive to this and what I’m doing about that. And like I said, it’s all lives. You can ask me all the questions. You can learn how to implement this yourself. There’s a link down below. I’d love to see you there, but let me know what you think about this latest move that the government has. Are you surprised? Another trick up their sleeve or are they running out soon? I’d love to know what you think.

Leave me a comment down below. Of course, as always, give me thumbs up if you liked the video. If you don’t, you can give me thumbs down. That’s okay. But at least tell me why in the comments down below and that’s what I got. Alright, to your success. I’m out. [tr:trw].

See more of Mark Moss on their Public Channel and the MPN Mark Moss channel.

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