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Trump ignores HIS OWN Economic TIME BOMB that HAS ARRIVED | MeidasTouch | YouTubeToText
YouTube Transcript: Trump ignores HIS OWN Economic TIME BOMB that HAS ARRIVED
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Core Theme
A significant discrepancy of $1.4 trillion has been discovered between US Treasury data and hedge fund disclosures regarding holdings of US securities, primarily through offshore entities in the Cayman Islands, revealing a potentially destabilizing over-reliance on highly leveraged "basis trades" within the shadow banking system.
This is Max from UNFR for the Midas
Touch Network. In our last several
videos here on Midas, I've been
highlighting some of the serious cracks
in the US economic system and revealed
the wholesale ineptitude on display
among leadership in the Trump
administration. See, there are ticking
time bombs hidden all over the US
economy. But maybe the most explosive
report yet was quietly released by the
Federal Reserve just last week. And as
expected, this is how the mainstream
media and markets on Wall Street responded.
It makes no sense. Under any other
circumstance, this would be an absolute
bombshell. But the chaos of the Trump
administration means it's just another
day in Bizarro America. But I promise
you, you're going to want to hear this
one. So, let's go. [Music]
[Music]
So, we just released an exhaustive piece
on UNFR that pulls together some of the
stories that we've broken here on MIDAS
along with some new information that
fully contextualizes just how deep the
US economic crisis goes. And it's hard
to square this sentiment with how insane
the returns in the stock market have
been. But I think that's actually part
of the story. See, investors are
increasingly running out of options to
get guaranteed returns. So, they're just
riding the wave of the stock market,
which itself is riding the wave of the
so-called Magnificent 7 tech stocks. But
nothing explains the two-tiered economy
better than the growth in the stock
market and the plummeting incomes and
increasing unemployment among the
masses. Now, adding salt to the wound,
we have the government shutdown, which
is also hiding some of the degrading
economic data that we usually have
access to. But government agencies
affected by the shutdown aren't the only
ones with data. And what I'm going to
share with you will absolutely blow your
mind. Now, to properly set the table for
this, we have to revisit and update our
theme from the last Midas video that
talked about the private credit markets.
And I'll link that episode in the uh
notes below in case you missed it. So,
basically, after the global financial
crisis, the US government put stringent
regulations and capital reserve
requirements on the banks. The goal was
to prevent them from engaging in the
risky behavior that led to the great
recession. But the years of flooding the
market with cheap and easy money after
the crisis and another monster liquidity
flood during COVID left the banking
sector flushed with cash and anxious to
put it to work. But oh those darn
regulations. Well, ever the ingenious
industry that it is, the banks indeed
found a way to put this money to work.
What you're looking at here is the
growth of the private credit market or
the shadow banking sector. This is just
the credit portion, mind you. But even
still, we're talking about a sector that
grew from around $350 billion to nearly
2 trillion over the last 15 years, and
it's projected to climb even higher. The
technical term for this market is the
NBFI or non-bank financial
intermediation market. The industry
prefers to use this because of the
negative connotation associated with the
phrase shadow banking sector, but
they're one and the same, and I think
that more accurately describes what's
going on here. So, we're going to stick
with shadow banking. Now, to be clear,
this isn't just a US phenomenon. It's a
global one, but we're at the heart of it
all. So, in July of 2025, this isn't the
big report, but it helps set the table.
In July of 2025, the Financial Stability
Board, an international body that
monitors the global financial system,
issued a report titled Leverage in
Non-Bank Financial Intermediation. And
the paper takes aim at the lack of
oversight into the shadow banking market
and the amount of offbalance sheet
leverage in the system. So essentially
banks are allowing these shadow banking
firms to gamble on loans and securities
with extreme leverage sometimes upwards
of a 100 times. Now, according to the
paper, quote, "If not properly managed,
the buildup of leverage creates a
vulnerability that when subject to a
shock can propagate strains through the
financial system, amplify stress and
lead to systemic disruption through two
main channels." End quote. Okay, so the
first channel is the originating
position that is forced to unwind
certain assets and this leads to what
they call unexpected liquidity demands.
Now in this case, think of the effect on
home prices as an asset class when the
mortgage back securities trades started
to unwind in 2008. The second channel
involves counterparties or basically
everybody else on the other side of the
trade. So this can range from commercial
banks and shadow banks that help
syndicate the products all the way to
the US Treasury. So an unwinding or
liquidation of distressed entities could
also impose direct losses on those
counterparties leading to a cascade of
financial stress resulting in forced
liquidations. So that's the backdrop to
explain the most bizarre revelation in
recent days. So here's the closing line
from this bombshell report that was
released on October 15th from the
Federal Reserve. quote, "The puzzling
disconnect between the tick and form PF
data on Cayman Islands holdings of US
treasuries is under active
investigation." Okay, this is crazy and
I'm going to do my best to explain
what's going on here. In a few of our
prior videos, we've talked extensively
about tick data and repo markets. So, as
a refresher, tick is Treasury
International Capital data and it tracks
the amount of money that's coming in or
going out of the United States. And with
the exception of Trump's Liberation Day
fiasco, the United States always, I mean
always experiences an inflow of capital
because of the high demand for US
dollars because we're the world's
reserve currency. Also, the incredible
performance of our stock and our bond
markets. Now, the repo markets are just
accounts that the Federal Reserve uses
to either inject or extract liquidity
from the markets. They're stabilizing
mechanisms that it uses to ensure that
there's enough money in the system. Now,
what we've been reporting on Midas
almost exclusively, it seems, is that
something strange is happening with the
tick data. Fewer and fewer quote unquote
official sources, meaning foreign
central banks, have been buying our
treasuries. Now, remember, this is how
we fund our deficits. So, while central
banks shed US dollars in favor of other
currencies and physical stores of value
like gold, so-called private sources
have stepped in to purchase them
instead. So on the surface it looks as
though the Treasury auctions are
relatively stable. And then came the
white paper that the Fed released on
October 15. So up until this paper was
released, it was believed that hedge
funds held around $400 billion in
short-term treasuries. Now these
purchases aren't acts of patriotism.
They make money on the actual treasury
themselves, but also on something called
basis trading. We'll get to that in a
minute. So this amount, the $400 billion
figure came from the tick data. That's
from the US Treasury. But the Federal
Reserve dug into what's called form PF
filings. These are hedge fund trading
disclosures that have to go to the SEC
and they uncovered something very, very
different. The form PF filings show that
hedge funds registered to the Cayman
Islands are holding on to more than 1.8
trillion in US securities. It's hard to
know where to even begin with this
information. First of all, the fact that
the two primary economic agencies in
this country, which are themselves the
biggest in the world, have a $1.4
trillion reconciliation problem is
alarming enough. Even more troubling is
once again these hedge funds aren't
purchasing treasuries to perform their
patriotic duty and stand in where
central banks are leaving or to just
earn the stable returns that the notes
offer. They're leveraging them to the
hilt to profit from something called a
basis trade. As insane as it sounds, the
treasury market is also an enormous
gambling sector with trillions of
dollars flowing through it. A basis
trade is a very common trade in the
commodities market because it allows
participants to hedge against future
price fluctuations. So in things like
hard commodities and agriculture, this
is really important because when the
work is done to actually take a
commodity out of the ground or produce a
commodity to go to market, you want to
be sure that that price is pretty stable
when it finally goes out to be sold. But
it turns out there's a staggering amount
of basis trading also in just the
treasury markets. Basically, every bond
has a futures contract associated with
it. So, you have the present-day bond
and what it might be priced at in the
near future. In a basis trade, an
investor will purchase whichever one is
cheaper and then sell the more expensive
one and then hope that the values
converge over time. And when you close
out these positions, there's a small
amount of profit in the middle. And I
mean tiny. So, because the Treasury
markets are so stable and short-term
notes aren't typically all that
volatile, these trades are as close to a
lock as the markets offer. The problem
is that there isn't a lot of money to be
made here, and that's where the leverage
comes in. The shadow banking sector,
most notably these hedge funds, is very,
very active in these markets. So in
order to make these trades worthwhile,
they borrow excessive amounts from
investment banks to leverage these
trades. So if they have a $100 in one
position, they might borrow a hundred
times that to make the investment
worthwhile. So this means that most of
the money in the market is actually
borrowed money, which begs the question,
what happens when these trades become
less of a lock? Because the margins on
basis trades are so slim, even small
market disruptions can trigger rapid
losses, forced selling or systemic
stress. So instead of converging over
time, the spot and future prices
actually diverge. And this dynamic is
what regulators, including the Fed and
the FSB, have recently highlighted as a
potential financial stability risk,
especially as many of these leverage
funds operate through offshore entities
like the Cayman Islands to take
advantage of lighter regulation. So that
means that any marginal disruptions or
any changes in value any volatility to
the upside or the downside event
essentially any variation beyond the
expected maturity means that these hedge
funds have enormous exposure. It also
means that our debt is held in what can
only be considered a Ponzi scheme. So as
I said in our repo market and our dollar
debasement video, this is the moment
that you assemble the troops. You get
the Fed, the Treasury, the Senate
Banking Committee, the Council of
Economic Adviserss, and all of the Fed
member banks together to do a risk
assessment of the shadow banking market.
Instead, we're ripping apart the White
House to make room for a gaudy ballroom.
Treasury data overstated by $1.4
trillion. No problem. Just move those
sconces a little bit to the left and
make sure that there's enough light on
my throne. Honestly, you just can't make
this stuff up anymore. For the Midas
Touch Network, I'm Max from UNFR. For
the full expose on Fed and Treasury
activity, make sure to check out our
channel at UNFR. Also, connect with me
on Blue Sky at UNFR as well. I'd love to
hear from you. As always, thanks to the
Might as Mighty for having me here, and
I'll catch you next time. Love this
video? Support independent media and
unlock exclusive content. Add free
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others. Let's keep growing together. [Music]
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