On Friday, October 31, the Federal Reserve injected $29.4 billion into repo markets, shoring up dwindling bank reserves, but since then, the number has grown substantially, to the point at which the Fed has pumped in a total of $125 billion in just five days October 31 - November 4).
That's a rather large sum of money - about $360 for every American citizen - and it indicates the degree of stress and lack of liquidity in financial markets. Money is being drained from the system by various means, some of it related to the government shutdown, now the longest in U.S. history, which some people suggest is costing the economy $5 billion per day. The math almost adds up. With the government shutdown now in its 37th day, at a rate of $5 billion per day, that would amount to $185 billion.
Maybe the $5 billion per day number isn't quite right, but it appears to be close. Without adequate money flows, from people to businesses to banks and vice versa, with the government acting as a kind of middleman, the system seizes up and money stops flowing. Stress is usually experienced at the margins, with poor people the first to notice. Suspension of SNAP benefits for November are beginning to have an effect in poor communities, with food banks and private charities seeking to fill the void, but, since the government isn't very good at partial measures - recent court decisions have forced the government to use emergency funds though they're only enough to supply roughly two-thirds of the usual $9 billion a month - rejiggering 42 million individual accounts at state levels isn't going to happen overnight.
Thus, the money that usually flows through the system is caught in a bottleneck of the government's own making. While it is shameful that so many Americans need to receive assistance just to buy groceries, the overall effect of choking off the flow of funds affects not only the people who receive the money, but small merchants, grocery chains, and food providers all the way up to corporations like Tyson Foods, Pepsico, Yum! Brands and Coca-Cola, eventually showing up as decreasing deposits at commercial banks, which is why the Fed has stepped in to fill the void so aggressively.
But, what about December, January, and beyond? And what about all the government employees that have been furloughed or are working without pay? The usual flow of money has been adversely affected by the government shutdown and it doesn't seem to be anywhere near being resolved. After a while, investors will begin to notice, which is why stocks and crypto issues went south on Tuesday. Albeit a little overdue to reflect on the ground reality, people and institutions are beginning to sense that the problems in financial markets are deeper and more structural than monetary easing by the Fed can handle.
Tuesday's predictable deat cat bounce supplied some temporary relief in the stock markets, but the indices began to swoon as the session drew to a close. While the S&P 500 did manage to finish ahead by 24 points, it was up nearly 60 just prior to 2:00 pm ET. Not everybody was sold on the idea of buying the dip or that the economy is fundamentally sound, probably because it's not. The U.S. economy is weak and it gets weaker every day the government shutdown continues, and maybe that's the point. Maybe the government has finally decided to throw up its hands and declare that it cannot continue on the long path of debt and deficits, inflation and growing poverty that has become endemic. Maybe they won't reopen the government after all, though one wonders how the neocons in congress and the administration plan on funding the bombing of Venezuela... and Ukraine... and Gaza.
To be perfectly honest, the U.S. government isn't fully shut down, only the parts deemed non-essential, which raises the question, if they're not essential, why are we paying for them in the first place? Beyond that casual observation, the IRS is still functioning, so there is some tax money coming in, and Treasury auctions continue, so the government hasn't stopped borrowing. There's some money coming in, but, not as much. The kicker is that some expenses have been curtailed, for now, so Treasury Secretary Bessent has plenty of wiggle room to move money to wherever it is needed. Such a deal!
Approaching the open, stock futures are modestly higher based on the notion that spiraling corporate layoffs due to AI are increasing the odds for a December rate cut. Seriously, you can't make this stuff up. Could it be that corporate layoffs are due to business slowing and not AI? Maybe? And, so, that would be bad for stocks, no? Um, no, layoffs reduce overhead, leading to higher profits, but, rate cuts, too. The goal here is to have robots and AI bots doing all the work, Americans out on the streets, the federal funds rate at 0.25% and stocks to the moon.
Makes perfect sense.
Gold and silver are rebounding. China has tightened export controls on silver, along with tungsten and antimony. Spot silver is bid at $48.33. Spot gold, $4,006.80. WTI crude futures, after a few days in the 60s, is back down to $59.79.
At the Close, Wednesday, November 5, 2025:
Dow: 47,311.00, +225.76 (+0.48%)
NASDAQ: 23,499.80, +151.16 (+0.65%)
S&P 500: 6,796.29, +24.74 (+0.37%)
NYSE Composite: 21,361.57, +78.86 (+0.37%)
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