Direct deposits as well as other transactions were impeded Thursday by a malfunction at the Federal Reserve that has since been settled. Is this a simple system malfunction or the sign of something bigger, could we be witnessing effects of Liquidity Crisis?

Financial institutions were informed on Thursday morning regarding a “disruption” in the Fed’s automated clearing house (ACH) system that triggered payment delays. Financial institutions use the ACH network to swiftly send money to each other to go to direct deposits and other transactions such as online bill pay.

The Fed reported that all operations were functioning normally later on in the day, and technological staff had “settled the concern.” The central bank claimed that remittance records for the business day of December 18 have been completed, although some transaction records may be prolonged.

“We apologize for the inconvenience and disturbance this has caused your transactions”

Federal Reserve

It’s not clear what caused the issues or how many banks were affected. Federal Reserve technical staff continue to investigate the source of the problem, the Fed said in a statement.

2019 has disclosed a fundamental reality: Central banks simply cannot remove themselves from the monstrosity they have already created and also made markets dependent on.

It seems, 2018 was the only year after the financial crisis that reserve banks lowered liquidity on a net basis, as a consequence it exploded in everyone’s face:

Total assets of major central banks in emerging effects of liquidity crisis

All previous moves to neutral caused even more intervention, with one of the most disruptive move taking place on the heels of the 2015-2016 earnings economic downturn.

The Fed Has
To Be Unreliable

In 2018 the Fed moved to ultimately reduce the size of its ledger. It failed deplorably. The series of interactions as well as activities by the Fed in the previous year discloses an additional fundamental fact: Absolutely nothing the Fed states can be relied on; none of their interactions have any kind of predictive definition:

Fed Balance Sheet Size

In the 4th quarter the Fed has actually been required to set on a course of ever-increasing liquidity shots, with its annual report now predestined to get to record highs as very early as probably the first quarter of 2020.

It has actually been a giant system failing. Central banks can’t minimize liquidity, or else markets break down. There are many widespread effects of liquidity crisis. The process of never allowing markets remedy themselves is creating appraisals throughout the economic spectrum that are even worse than in 2000, as home wide range (focused amongst the leading 10%) relative to GDP has actually gotten to extraordinary degrees:

These problems indicate that markets continue to be at a tangible reversion danger. At the end of December 2018 we discussed favorable technical reconnects to occur in 2019 as a result of deeply oversold conditions. Now a year later we’re seeing several of the very same conditions but to the upside, recommending that we will certainly witness rehabilitative reconnect task into 2020.

Be clear: The liquidity avalanche will certainly continue right into year-end and also, till something breaks, the advantage train can proceed despite overbought problems.

What can investors do to
resulting from effects of liquidity crisis?

What’s suggested for investors? One word: Diversify. If you’re looking to really protect your assets from any effects of liquidity crisis, or in general to avoid substantial loss from a sudden recession or economic downturn, diversify with alternative assets such as precious metals. 

The end of 2019 is approaching quickly. There is still a limited time to safeguard your wealth with precious metals. If you have a retirement fund, such as an IRA or a 401(k), call Bright Future Financial at (855) 200-5383 to discuss your options. Bright Future Financial can help you transfer your retirement accounts into a type of IRA which allows you to legally purchase alternative assets such as precious metals, real estate, and more. 2020 is around the corner, but there is still time to get help and shield yourself from effects of liquidity crisis.

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