Fracturing of The Big Club | QPOL Issue #54

A thesis written for the Bitcoin Magazine Print Issue "The Gatekeepers Edition"

QPOL

and

Green Candle Investments

Jun 27, 2023

“It's a big club and you ain’t in it.”

- George Carlin, The Beacon Theater November 5, 2005

Believe it or not, our late comedic hero is wrong. It is in fact NOT a singular “big club” that we the plebs aren’t in. There are multiple factions of mafia bosses within it with competing interests fighting for survival. Specifically, the Federal Reserve is off the reservation as being the central bank to bail out the world.

Given all this, it is reasonable to think market participants assume Fed Chair Jerome Powell is having to work overtime to fulfill the Fed’s mandate of stable prices and high employment. In doing so, Powell is given no other option but to fight back against the pressures of inflation by pulling a Paul Volcker 2.0 through raising interest rates to preserve the Fed’s credibility as the steward of the world’s monetary policy.

However, given the wide array of monetary tools at the Fed’s disposal, this time is actually different and the personnel is the policy. Powell has firmly asserted that the Federal Reserve will continue to raise rates despite some short-term economic “pain” until inflation has reached 2%. To truly achieve this goal however, Powell will end the Fed Put.

The Fed has left the reservation as the lender of only resort by collapsing the offshore dollar markets to regain control of U.S. monetary policy and make it more domestically focused. In doing so, the Fed is fighting to preserve America’s monetary, and arguably national, independence.

The Fed is fighting a war against central banks, primarily the European Central Bank (ECB). More importantly though, it’s fighting back against Davos and their Great Reset. By Davos, I’m referring to old-money, European oligarch globalists, think WEF, Rothschilds, CFR, and similar ilk, which share similar globalist agendas.

Davos Determinism

The goal of Davos is a post-nation state world where sovereign nations are replaced by corporations under their control. This is how the Great Reset is accomplished. It’s part of the plan to have governments overpromise and under deliver on liabilities to their citizens. Sovereigns will default on their debt which will force all central banks to issue retail CBDC’s under the IMF, BIS, or the World Bank’s behest. The two-tired world of commercial banking as we know it is destroyed. This is how Davos gathers complete control of the money spigot.

The offshore dollar market (Eurodollar) is the source of Davos’s power. Therefore, the Fed is using its monetary tools to fight back against these offshore dollar markets. For brevity, let’s refer to the offshore dollar market as ODM. To understand the Fed’s enemy and their actions, let’s have a crash course on the ODM.

ODM Crash Course

The offshore dollar markets are called the Eurodollar markets simply because they began in Europe. Euro dollars have nothing to do with the Euro;a complete misnomer. After Europe was flat-lined from the turmoil of WWII, they accepted dollar loans from America to rebuild, known as the Marshall Plan. Essentially, dollars that sit in foreign banks are levered up to create fractional reserve loans outside the Federal Reserve’s jurisdiction. This enables non-American banks to create more credit dollars (“print more money”) than the Federal Reserve itself. For accuracy’s sake, the Fed doesn’t actually do the printing; congress does via fiscal policy. The Fed then reacts to said legistlation enabling “printing” through monetary policy, which we’ll get to in a later section.

The source of the ODM power comes from European, Asian, and other non-American banks. The offshore dollar market enables them to create dollars in order to exert its influence by buying governments, militaries, politicians, and disrupting capital markets and pricing signals through those markets. If the end goal for Davos is to have a central bank run system where the Fed issues a CBDC from the dictates of the IMF, who does that NOT benefit? For one, the commercial banks; the de facto shareholders of the Fed.

The Fed Funds Rate

The most prominent tool the Fed uses to manage the economy is the discount rate This rate heavily influences Federal funds rate (FFR). It’s important to distinguish the two. So let’s do that real quick here.

In simple terms, the fed funds rate is the interest rate that banks charge each other for overnight loans. It's set by the Federal Open Market Committee (FOMC) and is influenced by the supply and demand dynamics of the interbank lending market.

On the other hand, the discount rate is the interest rate at which banks can borrow money directly from the Federal Reserve's discount window. It's set by the Federal Reserve's board of governors and is generally higher than the fed funds rate. The discount rate serves as a backup source of liquidity for banks when they can't borrow from other banks in the market.

Now, being the lender of last resort, the Fed can theoretically print unlimited amounts of elastic money in order to cover any amount of liquidity mismatches in the money markets. If banks lend out too much money and fail to pay each other back to meet required reserve rates at closing time, the Fed can bail them out at cheap, preferential interest rates.

For example — if a bank needs $10 billion by 5 P.M. to cover its payroll and lending obligations, they can just get that money from the Fed at a cheap rate to save their butt. The amount of money the Fed can print to prevent these imbalances is unlimited, unless the people’s confidence in this system erodes. As long as the sheep don’t ask where the money comes from, the party keeps going.

Bernanke’s Bailout Bag

During the Lehman Brothers crisis in 2008, then Fed Chairman, Ben Bernanke, instituted two important monetary programs; interest on excess reserves (IOER), and the reverse repo window. Both policies are used to tighten or remove liquidity from the markets. Banks continued tightening for years in order to sterilize all the QE money the Fed created for bailouts during the Great Recession. Bernanke’s self-coined “sterilization” is why there was no hyperinflation during the Great Recession. Had the banks not been incentivized to tighten, all that money would have chased the limited supply of goods in the economy.

Interest On Excessive Reserves

With IOER, any excess reserves in the banking system could be held at the Fed and earn interest. This dries up liquidity in the market as banks often do not have the excess capital to honor loans. In the past, banks rarely used IOER because what the Fed paid was usually below the going rate offered in the money market; nobody used the facility as rates were 0-bound.

In the wake of Lehman Brothers and quantitative easing (QE), Bernanke raised IOER to 25 basis points. Naturally, banks responded and rolled with the new policy and parked $2.8 trillion at the Fed to earn a quarter point in interest. If IOER is higher than what banks can make in the overnight money market, they’ll park their reserves at the Fed.

Repo 101

Another tightening tool the Fed utilizes is a repurchase agreement. This tool is similar to Bernake’s method of quantitative easing during the Great Recession. In an economic crisis, desperate times certainly call for desperate measures. Repo contracts take place in a much shorter time-frame;a little something I like to refer to as “high time-preference QE”.

A repo contract is an agreement the Fed makes with a bank to temporarily buy a security (collateral) with a promise of returning it with a small return or higher price (interest). In the case of a liquidity crisis, the bank is short on cash and taps the Fed window to request a securitized loan. The Fed gives the bank cash and in exchange receives a security from the bank. The cash helps with the bank’s lending obligations and adds liquidity in the economy which eases market tension and uncertainty. In real terms, bailing out the “too-big-to-fail” institutions with QE. Once the loan comes to term, the Fed and bank swap assets for cash, and the bank pays the interest owed, presumably .

A reverse repo contract is the exact opposite of the above. In this scenario, the Fed sends securities to the bank in exchange for cash. This reallocation of capital into accounts at the Fed tightens and dries up dollar liquidity from the market

The way the Fed has begun to destroy the offshore dollar market can be broken down to three steps.

Step One

The first strategy the Fed implemented was that American banks stopped accepting Eurodebt as collateral in January 2019. This decision caused the repo spasm that Fall when European banks were starved of quality collateral. No collateral meant Davos couldn’t get dollar reserves in exchange to lever up and by fractional reserve, print more money than the Fed itself; the ODM is outside the Fed’s jurisdiction. But no reserves meant no more printing of Eurodollars. The beginning of the death of the ODM.

Step Two

The second step was to suck up all dollar liquidity out of the world by incentivizing the holders of those dollars to park them at a reverse repo facility, both foreign and domestic, to gain more yield than anywhere else in the market. This is exactly what Powell did last year at the FOMC meeting on June 16 2021. On December 20, 2021, approximately $1.7 trillion flowed into the Fed's repo facility; the highest one-day cash injection to date. When your government’s debt is offering you negative yields on excess euros, a positive yield of 0.05% in the world’s reserve currency is mighty attractive. With this move, whatever excess dollars were being held overseas were incentivized to be removed from the market to gain interest, further strengthening the dollar and its demand. By removing the dollars from the economy, the Fedstarved the ODM.

Step Three

Lastly and most recently, in January 2022, all newly issued U.S. domestic debt was re-indexed from LIBOR (London Interbank Overnight Rate) to SOFR (Secure Overnight Funding Rate). Previously, all U.S. debt was indexed to LIBOR, a rate that is established by 18 panel banks at the City of London, only 1 of which represented the interests of America; the J.P. Morgan office in London. SOFR, in contrast, is indexed to real market activity between financial institutions in the U.S. It is based on something real as opposed to an arbitrary number dictated by the European banks. This reindexing to SOFR removed US exposure to Eurobank balance sheets so while theLIBOR rates blow out, the U.S. is not affected. Americans would no longer feel the hurt via increased rates on their credit cards, mortgages, etc. Under SOFR, U.S. rates no longer have to increase for Americans in order to socialize the losses in Europe.

The Path for Monetary Independence

As long as interest rates are going down, ODM banks can refinance any debt they have issued. They are like the family with no money that keeps extracting the equity from their home to buy plastic consumer crap. When interest rates rise, hold onto your butts.

All three steps are positioned to enable the destruction of the ODM, cause capital flight to flow into the US, and also give America the ability to raise rates by no longer having the exposure to toxic and hindering European debt liabilities. Thus once fully implemented, the Fed will have officially gained back its monetary independence. These actions demonstrate how the Federal Reserve is officially in unchartered territory. A “normalcy” in inflation, employment, and price stability will be a mere byproduct of their intended goal.

Powell and other Fed officials cannot reveal their true intentions or they’d suffer a severe political loss. They are trying to preserve credibility in not only themselves, but the Fed as an institution and American capitalism as we know it. They must tread lightly. Despite their rhetoric, what’s more important is to watch what they do, not what they say. It is fair to say they are fighting for survival by destroying the offshore dollar market. One thing for sure, the Fed’s boogie man is definitely not inflation.

Commercial banks are currently the middleman and their decentralized architecture is antithetical to a Davos neo-feudalist society where they control the means of production. This is why “Team Fed”, as I call them, are NOT on board the Davos train. The Great Reset is not a world with them in it and they are fighting to preserve their dominant privilege of the monetary transmission mechanism: the creation of private capital of the Commercial banks; shareholders of the Fed by issuing loans. The banks are the largest lobbying firm in the world and will not give up their power for Davos’s vision of a “green future” that divests from oil and gas. As Jaime Dimon has clearly stated, doing so would literally “pave the road to Hell for America”.

COVID as Blackmail and Pivot Potential

The only way the Fed pivots is if America is dragged into WWIII to fight Russia and the only way to fund said war is to force-deficit spend itself into oblivion. The same tactic was attempted by Davos with COVID response. COVID response was blackmail against tightening monetary policy in response to the repo spasm of 2019 when the banks stopped accepting Eurodebt as collateral and giving offshore banks reserves in return (as mentioned above in step one). The COVID spending manifested through the CARES act was a direct attack on the Fed to force stimulus that would ruin the Fed’s credibility by causing hyperinflation. Similar to Bernanke’s IOER loophole, Powell used the reverse repo facilities to sterilize that inflation. Financial hit jobs such as these are what would cause the Fed to pivot.

FTX Connection

The largest financial scandal of the decade cannot go unnoticed in this geopolitical and macro battle of the financial giants.

It seems possible that SBF was owned and operated by Davos as a front for Offshore Dollar Market money creation and laundering through Ukraine beyond the jurisdiction of the Fed.

Davos used FTX as the tool for regulatory capture of the entire crypto industry. They need to control the industry in order to control stablecoins because stablecoins are the next generation of ODM.

The ODM is being destroyed as Powell raises rates and bankrupts Davos. Therefore Davos’s only hope was to capture the entire stablecoin market so they can keep printing more money to fund wars, overthrow governments, and steal midterm elections.

Knowing CZ could not be captured since Binance is not under any national jurisdiction, Davos tried buying him out by pumping up FTT. CZ called their bluff and bankrupted them by sending FTT to zero to escape soft-power control from the Davos outfit that was FTX

This sent a shockwave through the contagion of all 134 Alameda firms and the greater crypto industry. The entire market crashed especially as firm were forced to sell their bitcoin holdings to make good on their liabilities.

The only way Davos really wins is to force the Fed to pivot. At this point, the Fed will only pivot if the U.S. is forced into a war by the Brits, like the previous World Wars, against Russia and China.

This is why Powell needs to bankrupt the Eurodollar market and Davos before a military or intelligence operation. As the offshore dollar markets are being drained through rate hikes, Davos took to stablecoins instead. CZ crashing FTX was him doing Powell, the Fed and their shareholders at the New York banks a solid.

CZ might not be friends with team Fed, but they're temporary allies because BRICS and American sovereigntists do not want WWIII whereas Davos might. It's the only way they get their Great Reset and rule over the world island’s money as they have wanted for centuries.

Simply put, the blow up of FTX and ponzi crypto companies was a coordinated attack by powers at the Fed and BRICS allies against global powers out of the EU.

The New Crypto Cartel and a Path Forwad

Powell has stated on numerous occasions that he doesn't have a problem with Bitcoin, he has a problem with stablecoins. Stablecoins are created beyond the Fed's jurisdiction, and therefore are the evolution of the offshore dollar market the Fed has been working to destroy to preserve credibility and monetary independence.

Given the vast exposure JP Morgan has to the crypto industry, it seems evident that team Fed is working diligently to control the flow of crypto dollars. The majority of Tether is issued on Ethereum, and Jaime Dimon practically owns Consensys.

Stablecoins aside, the Fed is still working to prove its credibility and therefore is most likely to use bitcoin to back treasuries and make America’s debt look attractive. This war is about capital flight to where my money will be best treated.

You have Davos plutocrats fighting against American sovereigntist plutocrats. Murray Rothbard himself aligned with the partisan force that would give him the sweeter deal and most prosperous life, not just for himself but society. If it is not evident from above, it should be obvious which outcome is best for humanity. Regardless where you stand or if you even agree, the key takeaway from this story is that there’s much more nuance that people should consider and not merely gloss over if they want to be a part of the conversation. Thankfully, Bitcoin provides the deafeningly obvious solution that may not provide a clear path forward, but a path nonetheless.

~ Mr. Pseu