Something Just Broke – It Appears That A Liquidity Crisis Is Upon Us, And That Is Really Bad News For The Financial Markets

What is the Fed not telling us? The numbers clearly indicate that big trouble is brewing in the banking system. I wish that I could specifically tell you which banks are in the most trouble, but at this stage we simply aren’t being told anything. They probably figure that the best approach is to try to keep everyone as calm as possible. But they won’t be able to keep a lid on what is going on indefinitely, and when word finally gets out people could start to panic.

In recent weeks, bank reserves have fallen to alarmingly low levels.

In fact, last week they fell to the lowest level that we have seen in more than four years…

US bank reserves have crashed to a four-year low, plunging to about $2.8 trillion, according to the latest Federal Reserve data, sending fresh warning signals across Wall Street and Washington. The steep decline marks the second straight week reserves have stayed below $3 trillion, a critical threshold analysts say could test the banking system’s liquidity strength.

By itself, this doesn’t necessarily signal that we are facing a major crisis.

But everyone agrees that what we are witnessing is certainly unusual.

What is causing far more alarm is what occurred on Friday.

All of a sudden, there was an insane amount of demand for overnight repo cash…

Federal Reserve reportedly pumped about $29.4 billion into the markets via overnight repos.

That’s a big number and it signals something I’m watching closely. According to the data for “Overnight Repurchase Agreements — Treasury Securities Purchased by the Fed” the figure for Oct 31, 2025 is $29.400 billion.

In other words: The Fed is quietly stepping in and stepping up.

To me, this is clear evidence that something just broke.

Who suddenly needed that much cash?

And why did they need it?

The chart that I have posted below comes directly from the Federal Reserve, and it should chill you to the core…

But that wasn’t the end of it.

By the end of the day on Friday, it was quite obvious that something extremely strange had just happened…

Federal Reserve liquidity facilities caught fire on Friday as month-end pressures pushed a key lending tool to a record level of usage.

The Fed’s Standing Repo Facility lent a total of $50.35 billion on Friday to eligible financial firms in two separate availabilities, the highest-ever usage since the tool was put in place in 2021 to provide fast loans collateralized with Treasury or mortgage bonds. At the same time, financial firms also parked a considerable amount of cash on Fed books, with the reverse repo facility seeing inflows of $51.8 billion.

So what is the bottom line?

The bottom line is that it very much smells like a major crisis is brewing.

But let’s wait and see what happens on Monday.

If we see figures on Monday that are fairly normal, perhaps we have more time before things start breaking loose in the markets.

However, if we see even larger numbers on Monday, hold on tight.

In either case, the financial markets will not be able to stay disconnected from the real economy forever.

Just like in 2008 and 2009, large employers all over the United States have been conducting mass layoffs. Sadly, this time around that includes some of our largest and most prosperous employers…

The Trump administration offered buyouts to the entire federal workforce this year, aiming to reduce it by as much as 10%. Roughly 75,000 workers accepted. More recently, Amazon, UPS and Target all announced private-sector layoffs.

Buyouts can sound tempting. A five-figure severance package might be the most money a worker has ever seen in one paycheck. But it’s also the last paycheck your employer will give you.

We haven’t seen anything like this in many years.

Bankruptcies are soaring, delinquency rates are spiking, thousands of stores and restaurants are permanently shutting their doors, and just about everything just keeps getting more expensive.

What we are now facing is being described as “Depression 2.0”.

Unfortunately, this is just the beginning and most of the population understands this.

In fact, one recent survey discovered that 57 percent of Americans expect economic conditions to get even worse over the next year.

Many of you are going to be facing some very hard decisions in the coming months.

If you currently have a job that you highly value, I would recommend holding on to it as tightly as you can.

But if you feel that it is absolutely necessary to go somewhere else, you will just have to do what you have to do.

Just understand that if you leave your current position it will not be easy to find a new one at all.

In 2008 and 2009, millions of Americans lost their jobs.

Many of them didn’t have anything to fall back on, and so large numbers of them also lost their homes.

This is one of the reasons why it is so critical to have a sizable emergency fund. At this point, even the mainstream media is stressing the importance of this…

Most people live paycheck to paycheck, and when the economy crashes, that leaves no room to breathe. Having three to six months of essential expenses tucked away can make all the difference when cash flow dries up or jobs disappear overnight.

Keep your emergency savings in an easily accessible account, not tied up in volatile investments. It’s not about hoarding—it’s about buying time and peace of mind. When others panic, you’ll have the stability to make smart, calm decisions.

I expect things to start moving very quickly now.

If the problems in our banking system bubble to the surface and start becoming highly visible, it will create a lot of fear.

And it is just a matter of time before our absurdly overvalued stock market takes a dramatic tumble.

Of course all of this is happening at a time when so many other elements of “the Perfect Storm” are coming together.

We are right on the brink of multiple major wars, global food supplies are rapidly getting tighter, we are being told that the next worldwide pandemic could break out at any moment, and on average the U.S. has been getting hit by a “billion dollar disaster” about every two weeks.

I expect so much chaos to be unleashed during the weeks ahead, and that means that we should expect the turmoil that we are currently witnessing on Wall Street to escalate quite a bit more.

Michael’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.

About the Author: Michael Snyder’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com. He has also written nine other books that are available on Amazon.com including “Chaos”, “End Times”, “7 Year Apocalypse”, “Lost Prophecies Of The Future Of America”, “The Beginning Of The End”, and “Living A Life That Really Matters”. When you purchase any of Michael’s books you help to support the work that he is doing. You can also get his articles by email as soon as he publishes them by subscribing to his Substack newsletter. Michael has published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and he always freely and happily allows others to republish those articles on their own websites. These are such troubled times, and people need hope. John 3:16 tells us about the hope that God has given us through Jesus Christ: “For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.” If you have not already done so, we strongly urge you to invite Jesus Christ to be your Lord and Savior today.