Doomstead Diner Menu => Economics => Topic started by: RE on February 19, 2012, 12:33:17 PM

Title: Da Fed: Central Banking According to RE
Post by: RE on February 19, 2012, 12:33:17 PM
Mostly Text.  Click the Link for the full version of the article on the Blog
http://www.doomsteaddiner.net/blog/2012/02/24/da-fed-central-banking-according-to-re/ (http://www.doomsteaddiner.net/blog/2012/02/24/da-fed-central-banking-according-to-re/)

http://www.youtube.com/v/i-j3xITvYQY

With Da Fed being the most popular Punching Bag these days for all our monetary
problems, its often postulated that if we simply eliminate it, all these
problems would be eliminated. Nothing could be further from the truth of
course. Under most scenarios you can think of, things will get quite a bit
worse. Of course, they are going to get worse anyhow and Da Fed is an
instrument of great Evil, so it must be done away with, but people do need to
realize this won't reap much in the way of short term benefits.

What Da Fed does, and in fact all CBs do is provide coordination and Central
Planning in a large economic system utilizing Money. Any Bank can go ahead and
print Bank Notes and get a money based economy going anywhere based on the
Assets that bank holds in its "Reserve". Those assets could be anything from
Gold to Land to Manufacturing Plants to Oil, doesn't matter what as long as
those assets hold some perceived value in the economy. There must of course be
a SURPLUS in the econmy of the most basic goods first though, because in the
absence of such a surplus nothing else holds any value. IOW, once Food is in
short supply, all the Gold in your basement safe won't buy it.

In many prior posts I have gone over the principles of how money itself evolves,
so its a good time here to look a bit further into how Central Banking evolved,
and why it became particularly powerful in the Industrial Era.

Everyplace in everytime hasn't always had a whole bunch of Precious Metals
around to Coin Up and use for Money. The spot might have been plentiful in many
other resources, well into Surplus of the basics, but little in the way of PMs
around. You could take Africa as an example where Cowrie Shells were used for
Money for quite some time, but a better example for our puposes is North America
in the early days of Colonization.

England, France, Portugal and Spain themselves never seemed to have enough Gold
around in those years, since they were always busy with wars against each other
going back to the collapse of the Roman Empire. The coinage they did have was
always necessary to pay soldiers, who generally would take no other form of
Money since it didn't generally hold value too well in a Wartime scenario.
Besides the soldiers, there was the necessity of purchasing all the Consumables
of a War, Guns, Ammo, Horses, Food for the Soldiers etc. Again, during a time
of War, the folks in control of these resources would only part with them for
payment in specie, not Sovereign Promises which would go bad if the side you
provided the stuff to lost the war. Of course, "Democracy" eventually changed
this dynamic some, which I will explain as we go along here.

So anyhow, the Colonial powers tended to hoard any PMs they got hold of, and
rather than pay for raw materials in specie to their dependent colonies, they
basically just got Credits on the Balance Sheet of the East India Company.
e.g., if you delivered a certain amount of Lumber for instance to the docks, you
had Credit with which to buy more Crosscut Saws and so forth coming back the
other way, thus expanding your Lumber Bizness. However, no Gold is showing up
in your economy this way to use to pay the Lumberjacks, so what do you do here?
Answer, the Lumber Company starts printing its own notes, which you then can use
to buy your own Crosscut Saw in the Company Store, along with other nicely
produced Goods from Europe also, like Cloth produced on Industrial Looms.

In fact any Gold or Silver that does turn up circulating in the economy gets
sucked OUT of the economy because the King over In Europe will only accept as
Tax Payment what you manage to squeeze out here from immigrants who arrived with
a few Pieces of Eight or Louis D'Ors in their pockets.

Recent immigrants to the FSofA not being quite the money DOPES people are today
realized they could set up their own Banking houses and systems, get some
internal trade going and pretty much avoid Taxation by the King on this. So
laws are passed as to what is allowed to be used as Legal Tender which makes
local trade even more difficult, and Colonists and Pigmen alike are very unhappy
with the situation. Eventually they Revolt and start up a New Country, mainly
so they can control their own commerce, not get taxed to beat the band and yes,
create their own Money also.

The Founding Fathers, the Aristocracy of the New country are well aware of
Monetary issues, so they make some laws on Coinage rules and invest in CONgress
the power to coin money, but this doesn't stope Banksters from creating Notes
and there still is a remarkable dearth of available PMs to coin up here during
this period In fact I am pretty sure at the end of the Revolutionary War the
new Nation started out in debt to the French and probably Kraut banksters as
well.

So now in the early days of the FSofA you have a very chaotic system of
different Banksters creating Notes for local commerce, a few PMs floating
around, and very POWERFUL Banking interests from the Old Country who want to
gain hegemony over the system. They eventually get Alexander Hamilton to set up
the First Bank of the US, which in due course Fails of course screwing numerous
people. More chaos ensues. Then the Second Bank of the FSofA gets chartered
and things go OK until the late 1840s or so, when there are yet more Banking
problems going on over in Europe. Andy Jackson "kills" the 2nd Bank of the
FSofA, and now we move into the "Free Banking" period which lasts all the way up
until Da Fed is chartered in 1913.

Now, while Pollyanna Free Market Economic History buffs look at this period as
one of great Growth and Freedom, what it really allowed for was a massive grab
of resources by the most powerful Banking Houses over in Europe, and besides
that was a fundamental cause of the Civil War. During the period, the big FSofA
Banking interests consolidated under the Robber Barons, Rockefeller, Carnegie,
Morgan and Mellon. These folks got mega-rich on the backs of Chinese and Irish
they imported over here to build the Railroads, who while they were better off
than they were in their home countries in those years were certainly not living
high on the hog here.

The period also is one in which Crime flourished throughout the land, it was the
heyday of the Gunslingers of the Old West of course. These folks though were
petty thieves compared to the thievery the US Calvary was engaged in as it
cleared the land of Natives and Colonists alike to get rights of way for the
Railroads and gain the Mineral Rights for Oil and Coal containing land.

For J6P of those years, if he was fortunate out living in a Little House on the
Prairie and not in the direct path of the Railroad or sitting on top of an Oil
field, he probably did OK most of the time without much money living close to a
subsitence lifestyle. The various Financial Panics through the years probably
didn't affect him all that much, although there were certainly "Hard Times",
where more than the average number of boys left the Farm and took up Gunslinging
and Bank Robbery as a means of making a living. Jed Clampett not withstanding,
anytime some Rube did happen to be living on top of an Oil Field, he was quickly
snookered out of it and if he didn't sell out his mineral rights to Standard Oil
he bought instead a Ticket to the Great Beyond.

So now you have this Great Nation of the FSofA in the post Civil War years, the
Railroads expanding their tentacles across the once pristine landscape and
Factory towns popping up like Buboes across the Northeast and around the Great
Lakes. Is there any "National Money" really floating around here though? Not
really, the Railroads are all paying the Chinese and Irish in their own Scrip
and so are all the Factory Towns. Lincoln did issue "Greenbacks" and there are
"Dollars" floating around in the larger economies, but even besides the systemic
financial Panics of the period you get many individual bank and company failures
along the way also. The number of times J6P working in some Factory town got
hosed when the Factory closed up and he was left holding a bunch of worthless
Company Scrip to buy goods at the now Outta Biz commpany store is incalculable.

So in this New World where J6P is dependent on Jobs in Industry, he WANTS a
Single Currency good anywhere in the Nation which he can Save if he is a
penurious and industrious sort of fellow, which when his Job in the Company
Store goes south he can still use to buy stuff at some other store in some other
town, where hopefully he can find a new job also paying this Dependable Currency
of the Dollar.

Into this vaccuum in 1913 step our friends the Rockefellers, Rothschilds,
Morgans and Mellons to establish Da Fed after secret meetings on Jekyll Island.
The agreement amongst them is to Charter a new Central Bank which will issue the
Currency they ALL will use in their Company Stores, and which Da Goobermint will
have to Borrow from THEM if it wants to buy anything. Since they now Own most
of what is worth owning by this time and all other New Biznesses are much
smaller than they are, these new biznesses ALSO must use this money rather than
issuing their own Company Scrip. So, even if not directly Owned by JP Morgan,
Mom & Pop Biz is indirectly owned by him because in order to use this Money,
they are paying a 3% Tax on it all the time. This is done on an aggregate level
to keep the system rolling and is partially recycled back into Da Goobermint,
but even just 1% of the entire Production of the country is constantly being fed
into the hands of the few people who hold the stock and control over Da Federal
Reserve, the Central Bank in control of the creation of Currency. How much they
will create at any given time and how it gets lent out all passes through the
Primary Dealers, who then determine how much will be Invested into various types
of Stocks and Bonds being issued out. So the economy is essentially Centrally
Planned by the owners of these Banks and Corporations, and they build out the
economy for their own greatest benefit. Tha greatest benefit comes in the
Monopolization of core Industries producing, well, EVERYTHING. Food production
especially becomes consolidated to the point where it almost becomes impossible
to grow your own food these days.

Now, why, oh why did CONgress and Treasury not simply continue the printing of
Greenbacks and keep Money Production "In House" as the province of the Public,
as opposed to a few powerful Banking Houses? There are numerous reasons for
this, though the biggest one is simply general Ignorance of how money works by
people who are Elected out of the general population, and the ones who are not
Ignorant are already Corrupt and easily bought by Monied interests.

The composition of the House and Senate in 1913 was little different than it is
today, you have some Populist types elected from the Hoi Polloi who are usually
Rubes, and then some (and more all the time of course) Rich folks who buy their
way into office. You know, Michale Bloomberg, Mitt Romney et al. The Rubes are
replaceable Idiots, and they gotta raise money to get reelected and not get
Assassinated on the pages of the Corporate Owned Newspaper, and the Monied
interests are interested in making sure they stay RICH. So in 1913, when the
crew from Jekyll Island presents this "Federal Reserve" Plan, its pretty easy to
get all the Votes necessary in CONgress to approve it, and POOF, here in the
FSofA Central Banking is BORN AGAIN, with yes of course the very same folks
running this system as were running it over in Europe going back to time
immemorial here. Postulate among more than a few people here being that those
folks are actually the Elders of Zion, running the whole system since it began
even predating the Roman Empire and predating Babylon also. In the broadest
sense this just about has to be true, what isn't real clear is how well
particular family lines held up through so many millenia, but the overall
banking system can be connected up quite well going back through the Medici and
the Catholic Church, then predating that through Roman Banking connections to
Egypt and then from there predating in Egypts Banking connecitons to Persia and
the Mesopotamian Empire.

The insufficient supply of PMs I mentioned early on here was resolved through
the combination of the Bond Market and Parliamentary "Democracy". While in the
Early days Merchants would only take from a King his Gold in payment for the
various goods and services he needed to Make War, the invention of a Democracy
made Debts which a Nation State took on to make War last indefinitely long. If
a King took on a debt, when the King dies, the debt dies with him. When a
Nation through its "Representative Goobermint" takes on a Debt, it lasts
essentially forever, unless and until the entire Goobermint comes crashing down
in a Revolution, and even then once a New Goobermint is established, in order to
get back into the Good Graces of the Money Lenders, in the Name of the People
the New Goobermint has to accept at least part of the responsibility to pay back
old debts incurred by the last Goobermint. With the establishment of such
"Popular Goobermints", Bonds became BETTER than Gold, and so in the years since
the Bond Market of Sovereign Debt has been the big driver for Money Creation.
If Sovereigns created Debt FREE money and directly issued Currency, there would
BE no Bond Market, and no way for private Merchants to sieve money from the
population. So it never evolved that way, anytime it started it got squashed
out by those running an already functioning monetary system.

This leads us finally to today, where after lo all these many years the Chickens
come Home to Roost, and the Sovereign Bond Market is in catastrophic failure
mode. Debt has been heaped on Debt, Pyramided and Rehypothecated up many times
over here. "Good as Gold" (better actually) Sovereign Debt is used as
Collateral to borrow against not once, but many times over on the asumption of
course all the bad bets won't go bad at the same time, forcing Margin Calls from
all corners. Soon as any one of these goes bad though, all the people owning
rehypothecated debt get nervous and call in their loans. So, if you used Greek
Sovereign "good as gold" Bonds upon which to borrow money several times over to
buy a variety of other assets, soon as the Greek Bonds go bad, every Lender who
loaned you some money based on those Greek Bonds sends in the Repo Man.

It would be bad enough if it was JUST the Greek Sovereign Bonds here, but the
fact is of course it is ALL of them. Pretty much every Sovereign State on earth
INCLUDING the Chinese and Germans has borrowed against the future, based on the
idea of Perpetual Growth of their economies, which as we know cannot possibly
happen in a world of finite resources. Besides that, all the Debt even if not
denominated in the Dominant Fiat denomination of Dollars is integrally connected
through the Bond Market, so when that collapses all the Fiat does also of
whatever denomination no matter who is printing it.

There is sufficient separation here between economies that Euros, Yen, Dollars,
Francs etc can all be printed at various different rates which produces varying
rates of inflation and deflation in these economies, but its really impossible
for anyone of them to truly "Monetize the Debt". The Debt is actually many
times the amount of currency in existence resultant from fractional banking and
rehypothecation. Helicopter Ben can print a $1T or two a year maybe, but actual
dollar Denominated Debt floating around out there is in the $100s of Ts and
maybe Quadrillions. Try to make good on that through monetization, the world is
swimming in Dollar Bills a mile thick covering the entire globe right up to
Alaska. OK, I'm guessing here, but its a lot of paper anyhow.LOL. So, we come
right back around to the reality that most of this debt is irredeemable and
simply will be flushed down the toilet, but that debt represents MOST of the
Wealth of the top .01% of the World. Allow the Greeks to declare BK and wash
their debt, the Irish will want that too. So will the Italians. So the Bond
Holders don't want to wash ANYBODY's debt out here. They will have to of
course, because that which cannot be paid will not be, but they keep stringing
it out here pressing austerity down and squeezing out every last drop possible,
and the populations mostly accept it because economic Collapse and total failure
of the monetary system is WORSE than austerity. At least until the austerity is
SOOO tight you just can't live anymore anyhow and and its worse than Death to
keep trying to live under it. When more than a certain percentage of the
population reaches that point, then you get your Revolutions. I'll ballpark
that at around 25%, but that is not a 25% figure of Unemployment. Its a 25%
figure of people with ZERO resources who can't even get Bennies like transfer
payments and SNAP Cards. We are still well under that here in the FSofA of
course.

Nevertheless, as the Cascade proceeds along here, as first the Greeks go Down
and then the Italians, the collapsing debt will reverberate through the Banking
system, eventually collapsing all the Fiat, as the Bond Market becomes
irretrievably broken. At this point, Money on the International level ceases to
function. this wil be very disruptive obviously to political stability
everywhere, and substituting Gold just won't work well or for too long even if
tried. As I see it, the only thing which might briefly work in stages is doing
some Credit Money creation a la Ellen Brown, but this only possibly works to
salvage some commerce for a while locally if people still accept this money. In
order to meet the needs of so many people, Da Goobermint would have the tendency
to issue far too much of it and it would hyperinflate. It also would have only
one real source of distribution, that would be from Da Goobermint. So all Jobs
would be Goobermint Jobs. Essentially, its the Soviet Model and it just has
tons of problems associated with it, the most apparent of which is a high level
of corruption. Let's face it, if you turned CONgress into the Politburo and
gave them the monopoly over issuing money and dishing it out, they would just be
the same type of Power Brokers that the TBTF Banks are now. However, as was the
case with the Soviets, it could stave off a total Mad Max outcome for a while if
undertaken with some degree of success, and would seem to be a likely outcome in
the near term.

The greater problem than Goobermint stepping in here to retake Money Creation
from the hands of the Illuminati is that the collapse will make apparent the
real lack of resources necessary to support 7B people on the planet. Not that
such resources don't currently exist in aggregate, they still do. Problem is
the new money created won't function Cross Border in international trade.
Disparate Credit Money issued by varying goobermints is like Scrip issued by
different Companies, it doesn't buy anything at another company store unless
there is agreed on valuations for the notes. When the Dollar collapses, all
these agreed on valuations go out the window here, and it would be very chaotic,
to say the least.

Still, it holds the system together a while longer if it gets implemented
successfully in some locales by some Goobermints. The issue here is though that
the international trade in Oil and food would be so disrupted by this that many
areas that are not self sufficient would suffer extreme deprivation, aka a good
portion of the population would Starve to Death. This has blowback in terms of
conflict at the borders of all these places, as people on one side of a border
currently starving attempt to get to the other side where people are not doing
too great, but not yet starving. So you get lots of local cross border wars,
along with internal Mad Max issues.

So, as you can see here, bad as the Central Banking paradigm is, once it
collapses you get many more and worse problems which people seek to avoid here.
Can't be avoided forever, but nobody wants it to be TODAY, in My Little Town.
The fact it will inevitably end up with so many people off the cliff and such a
major population reduction makes it impossible to say what will come after this
in the end. It could be enslavement of the remaining population by a few; it
could be a balkanization with many smaller self sustaining populations on an Ag
level, it could be a vast reduction to Primitivism in the Hunter-Gatherer
paradigm, or it could be an Extinction Level Event. We won't know the answer to
this in our lifetimes, though we may see the beginnings of it to have a better
idea of which way it will go here. What is definitely true though is that when
the Central bank model fails and the Dollar goes the way of the Dinosaur, the
changes will begin in earnest. Root for the End of Da Fed if you wish to, I
certainly do. Realize however that the end of Da Fed is no solution to our
problems, but rather will only bring to the surface many deeper ones embedded in
the monetary sytem.

The End of Da Fed is not the End of our problems. It is not even the Beginning
of the End. It is just the End of the Beginning.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: nobody on February 23, 2012, 05:48:02 AM
This was a pleasure to read and a real nice job integrating your own ideas with a few others' lying around here and there.  I disagree with your conclusion that it will be the "long emergency" and we won't see cataclysm in our lifetimes.  I don't know about that.  We just might.
Title: Re: Da Fed: Central Banking According to RE
Post by: Jb on February 24, 2012, 09:09:29 AM
RE said: " Realize however that the end of Da Fed is no solution to our
problems, but rather will only bring to the surface many deeper ones embedded in
the monetary sytem."

Agreed. This is what Steve L. was talking about - the two economies. The industrial economy of extraction, processing, manufacturing, shipping and consuming is dependent on the financial economy to provide the credit / debt for the other to occur.

Remove the Fed and other central banks and the industrial economy is toast.

So I guess the question is, facing such a dilemna, wouldn't the governments around the world do everything necessary to keep the financial economy functioning? Isn't this what we see going on now? If so, then maybe we won't have an all out collapse over a very short time frame. Maybe it will drag out over decades ala Greer.

If TPTB can't keep it going, then Orlov is right: his five stages of collapse happen in one stage. Families and neighbors will band together (other thread), take refuge in a house or barn together and shoot anyone that comes within range. Isn't this how people survived the plague in Europe? Sorry, getting OT.
Title: Re: Da Fed: Central Banking According to RE
Post by: English Prose on February 26, 2012, 02:16:40 AM
The end game is a given, we are only debating the timing.

Personally I can see this charade playing out for at least another decade, or even two, in the "developed" nation states.

Kunstler is right.... it will be A Long Emergency.
Title: Re: Da Fed: Central Banking According to RE
Post by: Stucky on February 26, 2012, 04:30:08 AM
I think 7 million will die very soon.  What say you??  lol

Very nice web site, btw.

Peace.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2012, 04:45:11 AM
7M is Chump Change Stuck in this go round.  Those were old numbers with a much lower population base.  This one is Big Time.  Anything less than Billions is meaningless.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: reanteben on February 26, 2012, 02:22:05 PM
it's an infantile die off. 7M in the very soon timeframe sounds about right for late period extend and pretend (LPEAP). we had 150K/day dead in the best of times.
Title: Rome and Central planning
Post by: Surly1 on April 12, 2012, 02:45:19 PM
Saw this today and could simply not resist, as RE addresses this very thing in his post.
RE, it's not the obligatory references to Strauss & Howe, and Tacitus (a la Jimbo), but he does discuss the policies of Diocletian. "War economy," indeed.

(http://azizonomics.files.wordpress.com/2012/04/diocletian.jpg?w=600)

http://azizonomics.com/2012/04/12/rome-central-planning/

Central planning — like war  — never changes. It has always been a powerful and effective way of achieving an explicit objective (e.g. building a bridge, or a road), but one that has has always come with detrimental side-effects. And the more central planners try to minimise the side-effects, the more side-effects appear. And so the whack-a-mole goes on.

This was true in the days of Rome, too.

From Dennis Gartman:

    Rome had its socialist interlude under Diocletian. Faced with increasing poverty and restlessness among the masses, and with the imminent danger of barbarian invasion, he issued in A.D. 301 an edictum de pretiis, which denounced monopolists for keeping goods from the market to raise prices, and set maximum prices and wages for all important articles and services. Extensive public works were undertaken to put the unemployed to work, and food was distributed gratis, or at reduced prices, to the poor. The government – which already owned most mines, quarries, and salt deposits – brought nearly all major industries and guilds under detailed control. “In every large town,” we are told, “the state became a powerful employer, standing head and shoulders above the private industrialists, who were in any case crushed by taxation.” When businessmen predicted ruin, Diocletian explained that the barbarians were at the gate, and that individual liberty had to be shelved until collective liberty could be made secure. The socialism of Diocletian was a war economy, made possible by fear of foreign attack. Other factors equal, internal liberty varies inversely with external danger.

    The task of controlling men in economic detail proved too much for Diocletian’s expanding, expensive, and corrupt bureaucracy. To support this officialdom – the army, the courts, public works, and the dole – taxation rose to such heights that people lost the incentive to work or earn, and an erosive contest began between lawyers finding devices to evade taxes and lawyers formulating laws to prevent evasion. Thousands of Romans, to escape the tax gatherer, fled over the frontiers to seek refuge among the barbarians. Seeking to check this elusive mobility and to facilitate regulation and taxation, the government issued decrees binding the peasant to his field and the worker to his shop until all their debts and taxes had been paid. In this and other ways medieval serfdom began.

So much for the view that increasing aggregate demand is the recipe for wider prosperity; Diocletian surely raised it a lot. But that didn’t really accomplish much, either in terms of wider prosperity, or in terms of the sustainability of the Roman civilisation. Raised aggregate demand is only useful if it contributes to creating and producing things that society needs and wants. And as Hayek brutally demonstrated, central planning is notoriously useless at determining what people actually want.

Of course, no modern centralist (e.g. Krugman) explicitly endorses price controls although, I am sure some of the more Hayekian or Paulian-minded among us will point out among other things that the minimum wage and the setting of interest rates are both kinds of price control. Diocletian however, was far more expansive.

From Wiki:

    The first two-thirds of the Edict doubled the value of the copper and bronze coins, and set the death penalty for profiteers and speculators, who were blamed for the inflation and who were compared to the barbarian tribes attacking the empire. Merchants were forbidden to take their goods elsewhere and charge a higher price, and transport costs could not be used as an excuse to raise prices.

    The last third of the Edict, divided into 32 sections, imposed a price ceiling - a maxima - for over a thousand products. These products included various food items (beef, grain, wine, beer, sausages, etc), clothing (shoes, cloaks, etc), freight charges for sea travel, and weekly wages. The highest limit was on one pound of purple-dyed silk, which was set at 150,000 denarii (the price of a lion was set at the same price).

And how did it work out?

    The Edict did not solve all of the problems in the economy. Diocletian’s mass minting of coins of low metallic value continued to increase inflation, and the maximum prices in the Edict were apparently too low.

    Merchants either stopped producing goods, sold their goods illegally, or used barter. The Edict tended to disrupt trade and commerce, especially among merchants. It is safe to assume that a gray market economy evolved out of the edict at least between merchants.

Bernanke of course is much more sophisticated; he uses the facility of the primary dealer banks to hide the currency inflation necessary to monetize government debt. Central planning wins again? No; central planning always comes with unpredictable boomerang side effects.

I suppose, though, that it is comforting that history is repeating itself. After the horrors of medieval feudalism, we pulled ourselves up anew from the wastes of history.

Title: Re: Da Fed: Central Banking According to RE
Post by: RE on April 12, 2012, 03:02:28 PM
The parallels between the Roman Empire Collapse and this one are astounding.   It's times like these I wish I could read Latin like my Illuminati Spawn college girlfriend.  I'd be pouring over those texts now.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on April 12, 2012, 05:26:59 PM
It was one hell of a collapse that Rome had, a centuries long straight down grind. I hope we are that lucky in ours, but it doesn't appear to be very likely.
Title: Re: Da Fed: Central Banking According to RE
Post by: Danno on April 13, 2012, 07:45:26 PM
Hi RE,
I would like to question the prediction, at least what looks to be a prediction of the end of the FED, and life as we know it. The first thought is that we did the depression/deflation thing in the 30s and the result was the haves coming through smelling of roses. It was an incredible transfer of real wealth to the haves. It was no accident, it was well engineered.

And here we are again. The FED is just a figure head for the banking system. J P Morgan and the like know just what they are doing. Heck, JP got the cleaned up assets of Bear handed to them on a silver platter. BofA, a rouge bank, an outsider, had to eat Lehman or die. These guys make up all the base money they want, no questions asked. They know exactly what they are doing.

The government will not be steeping in to take over control of the banks money. Those guys on the banking communities are paid very well to stay out of the banks business except when it is good for the banks business. Look at the size of the banking lobby. Look at the history of banking once the FR Act gave them carte blanche to create our legal tender. No, I don't see it. There is no mechanism to clearly show the demise of the banking system. If anything, they have the little people right where they want them.



http://www.youtube.com/v/v3vbCxj2ifs


(I could not find one of these that allowed embedding, but the link works.)

Best, Dan.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on April 13, 2012, 10:01:55 PM
Hi RE,
I would like to question the prediction, at least what looks to be a prediction of the end of the FED, and life as we know it. The first thought is that we did the depression/deflation thing in the 30s and the result was the haves coming through smelling of roses. It was an incredible transfer of real wealth to the haves. It was no accident, it was well engineered.

And here we are again. The FED is just a figure head for the banking system. J P Morgan and the like know just what they are doing. Heck, JP got the cleaned up assets of Bear handed to them on a silver platter. BofA, a rouge bank, an outsider, had to eat Lehman or die. These guys make up all the base money they want, no questions asked. They know exactly what they are doing.

The government will not be steeping in to take over control of the banks money. Those guys on the banking communities are paid very well to stay out of the banks business except when it is good for the banks business. Look at the size of the banking lobby. Look at the history of banking once the FR Act gave them carte blanche to create our legal tender. No, I don't see it. There is no mechanism to clearly show the demise of the banking system. If anything, they have the little people right where they want them.

Complicated question Danno, one which I could only answer by doing a whole lot of speculating.  However, a worthy subject to tackle for sure.  I might try this one over the weekend.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Shaik on April 27, 2012, 09:51:40 PM
Commercial banking will beocme a boring, low-growth low-profit, low-innovation business again.  Balance sheets will beocme a whole lot less leveraged.  Loans will be given to those who can actually pay them back.  People will have to have downpayments and good credit.  People will probably begin to trade mortgage backed securities and derivatives again, but there will be more scruting into the relaibility and quality of these instruments.
Title: Re: Da Fed: Central Banking According to RE
Post by: Hassen on April 27, 2012, 11:59:12 PM
Usually banks ask for an opening deosipt of at least $100. Some banks may charge a fee if you savings account falls under a minimum level. Yes, you earn interest, though it isn't very much, but it will depend on your bank. You will need your parents with you to open an account.
Title: Re: Da Fed: Central Banking According to RE
Post by: Carmina on April 28, 2012, 02:14:37 AM
I could be wrong. I thought the reiotulvon started already, i.e. Ireland, Iceland, Arab spring, Greek, Spain, UK, TEA parties, and OWS. It is the process of democracy echos support not the violence. Remember the movie  National Treasure  If there is one thing I learn from the movie is this    Government should be setup so no man should be afraid of another.  It is no longer true in many countries. Isn't it? Just look at how protesters are treated. Since when guardians become dictators?! My 2 cents. JW, Vancouver.
Title: Re: Da Fed: Central Banking According to RE
Post by: agelbert on September 01, 2012, 12:51:53 PM
This article at Counterpunch underlines RE's "How it Works" take on the fed as well as other elites throughout history.

Quote
Why You’re a Lot Poorer Than You Thought You Were

Snippet:
Quote
So QE is just a scam to line the pockets of the investor class. Imagine that! It took 4 years and a research team of financial geniuses from the BOE to figure that out.
 
And here’s something else that’s worth mulling over; working people are getting totally screwed in the deal. Not only are savers and fixed-income retirees being robbed of the puny gains they would have seen if rates were in their normal range instead of zero, but also the prospect of more QE has sent gas futures spiking, while food prices are sure to follow. This is from Bloomberg in an article titled “Bernanke Boosts Oil Bulls to Highest Since May: Energy Markets”:
 

“Hedge funds raised bullish bets on oil to a three-month high on signs that Federal Reserve Chairman Ben S. Bernanke will take measures to bolster U.S. economic growth and spur a rally in commodities.
 
Money managers increased net-long positions, or wagers on rising prices, by 18 percent in the seven days ended Aug. 21, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Aug. 24. They were at the highest level since the week ended May 1.” (Bloomberg)
 
Higher prices at the pump. That ought to rev-up consumer spending, don’t you think?
 
Still, Bernanke and his fellow doves at the Fed aren’t going to be deterred by something as inconsequential as the travails of working people. Oh no. After all, he has his real constituents to consider, the parasitic Wall Street robber barons. Their needs come first, and what they want is another round of funny-money so they refill the larder at the Hamptons with Beluga and bubbly. That’s why members of the Fed have already started chirping for more “more accommodation”. Here’s what Chicago Fed President Charles Evans had to say last week in his ominous-sounding bulletin titled “Some Thoughts on Global Risks and Monetary Policy”:
 

“Finding a way to deliver more accommodation… is particularly important now because delays in reducing unemployment are costly. An unusually large percentage of the unemployed have been without work for quite an extended period of time; their skills can become less current or even deteriorate, leaving affected workers with permanent scars on their lifetime earnings. And any resulting lower aggregate productivity also weighs on potential output, wages and profits for the economy as a whole. The damage intensifies the longer that unemployment remains high. Failure to act aggressively now could lower the capacity of the economy for many years to come….
 
Given the risks we face, I think it is vital that we make such moves today. I don’t think we should be in a mode where we are waiting to see what the next few data releases bring. We are well past the threshold for additional action; we should take that action now.”
 
What gall! Does anyone really believe that a Fed president gives a rat’s ass about lower unemployment? It’s a joke.
 
And where’s the proof that QE lowers unemployment, increases wages or benefits the economy as a whole? Nowhere. Evans idea of “accommodation” is just another way of shoveling money to his rich friends.
 
Now get a load of this in the Wall Street Journal:
 

“During the recession, people who lost long-held jobs struggled to find new employment and often took substantial pay cuts if they did find new work. Little appears to have changed after the recession ended, a new Labor Department report shows.
 
From 2009 to 2011, 6.1 million workers lost jobs they had held for at least three years. Just over half — 56% — of them were reemployed by this January, the department found in its latest survey of displaced workers. Two years ago, the survey found that 49% of people who lost such jobs from 2007 to 2009 were reemployed.
 
People lucky enough to find new work are often taking steep wage cuts. Of the displaced workers who lost full-time wage and salary jobs from 2009-2011 and were reemployed by January, just 46% were earning as much or more than they did in their lost job. A third of them reported earnings losses of 20% or more.” (“New Jobs Come With Lower Wages”, Wall Street Journal)
 
So even the people who were “lucky enough to find work” are worse off than they were before. Hey, but at least they found a job, right? What about the people who weren’t able to find work at all? What will happen to them?
 
No worries. Obama and his deficit-slashing buddies in the congress have that all figured out. As soon as the election’s over, President Socialist is going to start kicking people off extended unemployment benefits as fast as humanly possible leaving millions of working people without enough money to house or feed their families. Here’s how it’s all going to go down:
 

“Over 500,000 people have lost extended unemployment benefits since the start of the year, and two million more are scheduled to lose their benefits on January 1, 2013…. Emergency Unemployment Compensation (EUC), is scheduled to end completely on January 1, ending unemployment payments for 2 million more people overnight.
 
With the start of the new year, there will be no part of the country that offers more than 26 weeks of unemployment benefits. This is far less than the average duration of unemployment, which has hovered near 40 weeks for over a year…..
 
Despite the disastrous impact of the cuts, it has been largely ignored both by the major media and in the US elections. Moreover, the Obama administration has already let it be known that it will not seek a renewal of extended jobless benefits.” (“Extended jobless benefits end for 500,000 US workers”, World Socialist web Site)
 
Can you see how nicely this segues with Michelle’s anti-obesity campaign? The administration plans to increase worker “flexibility”, by putting millions of jobless people on a crash diet.
 
And, don’t kid yourself, unemployment is just one of the many programs that Obama plans to eviscerate following the vote-count. He’s also going to zero-in on Social Security, Medicare and Medicaid. They’re all on the chopping block, every last one of them. That’s what the so called Fiscal Cliff is all about; it’s a public relations hoax to conceal Obama’s plan to dismantle the vital programs that provide medicine, shelter and a meager retirement for the sick, the needy and the elderly, you know, the folks the Republicans refer to as “useless eaters”.
 
All of these reports (Sentier, Pew, the Fed’s Survey of Consumer Finances) underline the same point, that the middle class is embroiled in a war-to-the-death with carpetbagging vermin who plan to deprive them of work, strip their assets, foreclose their homes, and leave them penniless to face old age. It’s just good old class warfare–and as Warren Buffett opined–his class is winning.
 
MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

Full article here:
http://www.counterpunch.org/2012/08/31/why-youre-a-lot-poorer-than-you-thought-you-were/ (http://www.counterpunch.org/2012/08/31/why-youre-a-lot-poorer-than-you-thought-you-were/)
Title: Fed assists Goldman Sachs in offloading risk to WE-THE-PEOPLE
Post by: agelbert on September 06, 2012, 11:55:26 PM
Fed assists Goldman Sachs in offloading risk to WE-THE-PEOPLE

At one time, this sort of blatant theft was called fraud and conspiracy to commit fraud. Nowadays it's called "savy business practices".
Bernanke - the front man for grand larceny on steroids.



:icon_mad:   :angry1:   :angry2:   :angry3:   :angry4:   :BangHead:  :angry5:
Title: Re: Da Fed: Central Banking According to RE
Post by: ralfy on September 08, 2012, 06:57:03 AM
From what I gathered, most money is created not by governments or central banks but by commercial banks. That's why they, and not governments, run the world economy:

"Revealed – the capitalist network that runs the world"

http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html (http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html)
Title: Re: Da Fed: Central Banking According to RE
Post by: g on September 08, 2012, 07:10:30 AM
From what I gathered, most money is created not by governments or central banks but by commercial banks. That's why they, and not governments, run the world economy:

"Revealed – the capitalist network that runs the world"

http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html (http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html)

IMHO you are in error with this line of reasoning. Every bank in the would would be bankrupt today, and most are technically, save for some government sanctioned accounting gimmickry. Don't let corrupt government off the hook by this diversion.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on September 08, 2012, 10:05:49 AM
IMHO you are in error with this line of reasoning. Every bank in the would would be bankrupt today, and most are technically, save for some government sanctioned accounting gimmickry. Don't let corrupt government off the hook by this diversion.

Banks own Da Goobermint

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: ralfy on September 08, 2012, 11:04:54 AM

IMHO you are in error with this line of reasoning. Every bank in the would would be bankrupt today, and most are technically, save for some government sanctioned accounting gimmickry. Don't let corrupt government off the hook by this diversion.

The reason why banks are not "bankrupt today" is because production and consumption of various goods and services have been increasing for decades, financed by increasing money supply. That's why money supply has been increasing exponentially during the same period. And as more move to the service industry, esp. finance, even more money is created.

That's where your middle class lifestyle comes from. That's also why 70 pct of workers in the U.S. are in the service industry and why around 70 pct of the economy is based on consumer spending. That's why U.S. banks are exposed to over $370 trillion in unregulated derivatives, why government debt, including future liabilities, have exceeded $200 trillion, and why household debt has exceeded $13 trillion, at one point personal debt even exceeding disposable income. That's why around 60 pct of consumer spending is based on houses being used as collateral to buy even more stuff. Guess who sells many of that stuff? Guess which companies control most of food processing and distribution worldwide, not to mention media corporations, mining, oil, and mineral interests, etc?

Don't let the corrupt financial elite off the hook by allowing corporate shills to put the blame solely on their stooges, corrupt government. Don't let citizens off the hook, the same who bought and sold houses, engaged in consumer spending, voted government that worked for these private corporations and provided tax cuts, and corporations that in turn provided easy credit. Government-sanctioned? Try deregulation leading to over a quadrillion dollars (notional value) in unregulated derivatives worldwide. Compared to that, any pathetic bailout looks like chump change.

And if you think that's bad, wait till you see what is in store concerning peak oil and global warming. That'll make the current economic crisis look like a walk in the park and give new meaning to the word "bankrupt."

Title: Re: Da Fed: Central Banking According to RE
Post by: g on September 08, 2012, 02:08:46 PM
IMHO you are in error with this line of reasoning. Every bank in the would would be bankrupt today, and most are technically, save for some government sanctioned accounting gimmickry. Don't let corrupt government off the hook by this diversion.

Banks own Da Goobermint

That gets back to the chicken or egg game. One thing is for sure, the public is now the proud owner of the fucking toxic debt, and you can thank whomever you wish for that gift, a Greek gift might I add.  Bendover!    :exp-angry:

Title: Re: Da Fed: Central Banking According to RE
Post by: RE on September 08, 2012, 04:16:56 PM
One thing is for sure, the public is now the proud owner of the fucking toxic debt, and you can thank whomever you wish for that gift, a Greek gift might I add.  Bendover!    :exp-angry:

A temporary Bookkeeping artifice until the Clawbacks start.

http://www.youtube.com/v/lo5BBHtn4tM

On a monetary level, in reality nobody owes anything, because it is Irredeemable Debt.  That which cannot be paid back will not be paid back.  Essentially the Monetary system will collapse in the Bye and Bye, then lots of people will DIE, then the few remaining people will be living by subsistence and barter.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: ralfy on September 09, 2012, 01:31:54 AM

Banks own Da Goobermint

That gets back to the chicken or egg game. One thing is for sure, the public is now the proud owner of the fucking toxic debt, and you can thank whomever you wish for that gift, a Greek gift might I add.  Bendover!    :exp-angry:


Indeed. That is why it is not a "chicken or egg game." Change the government and the elite will put a new one in place. Try to stop them and the military will take over. A revolt will ultimately lead to anarchy, from which any order is restored by the formation of a government by a new group of elite.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on September 09, 2012, 02:41:22 AM
Change the government and the elite will put a new one in place. Try to stop them and the military will take over. A revolt will ultimately lead to anarchy, from which any order is restored by the formation of a government by a new group of elite.

Only for so long as the Conduits function.  When the Conduits fail, the formation of Goobermint on anywhere near the scale we have now is impossible.  There will of course still be those who take control and those who are controlled, but nowhere near the SCALE on which this is done now.  It is a devolution of the One to the Many.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: ralfy on September 09, 2012, 09:51:23 AM

Only for so long as the Conduits function.  When the Conduits fail, the formation of Goobermint on anywhere near the scale we have now is impossible.  There will of course still be those who take control and those who are controlled, but nowhere near the SCALE on which this is done now.  It is a devolution of the One to the Many.

RE

Not just government but the private corporations that it works for and the middle class that voted for it in return for easy credit and tax cuts.

In general, we are looking at a global economy not controlled by central banking but by private corporations, esp. banks, for which governments work for in exchange for tax revenues. The global middle class (i.e., those who earn around $10 to $20 a day or more) which makes up only around 15 pct of the world's population but is responsible for over 60 pct of personal consumption, supports the same private corporations and governments in exchange for middle class conveniences (e.g., Internet access) and other benefits (e.g., service industry work, easy credit, tax cuts.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on September 09, 2012, 02:57:30 PM


In general, we are looking at a global economy not controlled by central banking but by private corporations, esp. banks, for which governments work for in exchange for tax revenues.

IMHO, this is the Main Conduit which has reached its Peak Power and is now on the way out.  The Global Economy and Central Banking is all dependent on the Thermodynamic Energy of Oil to hold together.  The Power that John D. Rockefeller and the rest of the Illuminati gained by tieing together Oil and making the Dollar Credits he created a proxy for Oil is in the process of collapse.  It can't be replaced by another Global Currency that everyone will accept, so you have a Fall of the Tower of Babel situation.  Power Centers will become much more local and regional.  War Lordism for the most part I suspect for a while.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on July 28, 2013, 11:12:27 PM
From George Washington via Global Research.

RE

The Federal Reserve Is Bailing Out Foreign Banks … More than the American People or Economy
   
   
By Washington's Blog (http://www.globalresearch.ca/author/washington-s-blog)
    
Global Research, July 28, 2013



            
 
  (http://www.globalresearch.ca/wp-content/uploads/2013/07/fedreserve.jpeg) 
 
Federal Reserve Policy Mainly Benefits Big Foreign Banks
We’ve extensively documented that the Federal Reserve is intentionally locking up bank money so that it is not loaned out to Main Street (http://www.washingtonsblog.com/2011/07/confirmed-federal-reserve-policy-is-killing-lending-employment-and-the-economy.html). Specifically – due to Fed policy – 81.5% (http://www.washingtonsblog.com/2013/06/81-5-of-money-created-through-quantitative-easing-is-sitting-there-gathering-dust-instead-of-helping-the-economy.html) of all money created by quantitative easing is sitting there gathering dust in the form of “excess reserves” … instead of being loaned out to help Main Street or the American economy.
And we’ve extensively documented that a large percentage of the bailouts (http://www.washingtonsblog.com/2011/06/ron-paul-one-third-of-fed-bailout-loans-and-essentially-100-of-ny-fed-loans-went-to-foreign-banks.html) went to foreign banks (and see this (http://www.zerohedge.com/article/fed-releases-details-secret-855-billion-single-tranche-omo-bailout-program-just-another-fore) and this (http://www.washingtonsblog.com/2013/03/money-is-being-sucked-out-of-the-u-s-economy-but-big-bucks-are-being-made-abroad.html)). (A 2010 Fed audit also revealed that of the $1.25 trillion of mortgage-backed securities the central bank purchased after the housing bubble popped (http://www.federalreserve.gov/newsevents/reform_mbs.htm), some $442.7 billion -  more than 35% – were bought from foreign banks.)
It turns out that these themes are all connected.
Specifically, most of the Fed-created money which is gathering dust is actually being held by foreign banks.
The Levy Economics Institute noted (http://www.levyinstitute.org/pubs/wp_763.pdf) in May:

Excess reserves are the surplus of reserves against deposits and certain other liabilities that depository institutions (loosely called “banks”) hold above the amounts that the Board requires within ranges set by federal law. The general requirement is that covered institutions maintain reserves at least equal to ten percent of liabilities payable on demand. For the first time in history, there is statistical evidence that as much as one-half or more of excess reserves are held for United States banking offices of foreign banks.

Zero Hedge reports (http://www.zerohedge.com/news/2013-07-27/liquidity-update-record-high-deposits-fed-reserves-and-foreign-bank-cash-fed-owns-31) today:

As per last night’s [Federal Reserve] H.8 update (http://www.federalreserve.gov/releases/h8/current/), commercial bank deposits rose by $94 billion in the week ended July 17: the fourth largest weekly increase in history …. This took total commercial bank deposits to an all-time high of $9.54 trillion.

***
The entire difference can be attributed to the $2+ trillion in excess reserves created by the Fed since the start of the [global financial crisis] .
(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/Commercial%20Bank%20Deposits%20and%20Loans_0.jpg) (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/Commercial%20Bank%20Deposits%20and%20Loans.jpg)

Speaking of Fed reserves with banks, the most recent number was $2.1 trillion, and its allocation breakdown by Domestic (small and large) and Foreign banks operating in the US is as follows:
(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/Reserve%20cash%20vs%20cash%20holdings_0.jpg) (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/Reserve%20cash%20vs%20cash%20holdings.jpg)

Foreign banks continue to be the biggest beneficiary of the Fed’s monthly $85 billion liquidity largesse, just as they were the biggest winners during QE2.
(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/Foreign%20cash%20by%20regime%20QE2%20vs%203_0.jpg) (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/Foreign%20cash%20by%20regime%20QE2%20vs%203.jpg)

In fact, the total reserve cash distribution continues to favor foreign banks, which now have a record $1.13 trillion in cash, or $9 billion more than all Domestically-chartered banks, at $1.122 trillion. The notable shift of cash reallocation from domestic to foreign banks since QE2 can be seen on the chart below.
(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/cash%20domestic%20vs%20foreign_0.jpg) (http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2013/07/cash%20domestic%20vs%20foreign.jpg)

To nobody’s surprise, global liquidity (as created by the Fed) continues to be infinitely fungible, and increasingly benefits offshore-based (mainly European) banks.
(And see this earlier report (http://www.zerohedge.com/news/2013-05-21/thanks-qe-bernanke-has-injected-foreign-banks-over-1-trillion-cash-first-time-ever) from Zero Hedge).
We’ve repeatedly noted that loose Federal Reserve policy benefits of the super-elite at the expense of (http://www.washingtonsblog.com/2012/12/quantitative-easing-benefits-the-super-elite-and-hurts-the-little-guy-and-the-american-economy.html) Main Street, the U.S. economy or the average American.
It now appears that the policy benefits foreign super-elite even more than the elites in the U.S.
The Federal Reserve – like many parts of the U.S. government – are sucking the prosperity out of America … and shipping it abroad (http://www.washingtonsblog.com/2013/03/money-is-being-sucked-out-of-the-u-s-economy-but-big-bucks-are-being-made-abroad.html).
    
   
Title: Re: Da Fed: Central Banking According to RE
Post by: ralfy on August 25, 2013, 11:32:29 PM
As I said, it's not exactly central banking, i.e., if by "central banking" we mean government-controlled banks:

http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html (http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html)

Title: Re: Da Fed: Central Banking According to RE
Post by: RE on August 26, 2013, 03:29:42 AM
As I said, it's not exactly central banking, i.e., if by "central banking" we mean government-controlled banks:

http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html (http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html)

Much as it is nice to see some activity in this thread and hear from you also Ralfy, what does this article tell us that we don't already know?

The TBTF Banks own just about everything.  Same TBTF Banks are the ones that Issue Credit to buy anything.  Stock in said TBTF Banks and major Multinational corporations is owned by just a few people, mostly hidden and unknown in terms of their power and control.

Said article makes the case it is not a Conspiracy, just an Emergent Property of Systems, which may be true but it doesn't make the outcome any different here. Still EVIL.  :evil4:

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: ralfy on August 26, 2013, 10:01:42 AM

Much as it is nice to see some activity in this thread and hear from you also Ralfy, what does this article tell us that we don't already know?

The TBTF Banks own just about everything.  Same TBTF Banks are the ones that Issue Credit to buy anything.  Stock in said TBTF Banks and major Multinational corporations is owned by just a few people, mostly hidden and unknown in terms of their power and control.

Said article makes the case it is not a Conspiracy, just an Emergent Property of Systems, which may be true but it doesn't make the outcome any different here. Still EVIL.  :evil4:

RE

The irony is that much of their wealth consists of credit, and the value of that credit can only be maintained, if not grow, through increased production and consumption of goods.

That is why in place of a "central banking paradigm" and even "central planning," we have the inevitable results of free market capitalism, i.e., financial speculation coupled with consumer spending. The results are a global financial crisis, peak oil, and global warming.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on October 23, 2013, 01:32:37 AM
Who Owns The Federal Reserve? (http://www.globalresearch.ca/who-owns-the-federal-reserve/10489)

The Fed is privately owned. Its shareholders are private banks

By Ellen Brown
Global Research, October 21, 2013
Web of Debt and Global Research 8 October 2008
Region: USA
Theme: Global Economy

Who Owns The Federal Reserve?

    “Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.”

– The Honorable Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s

The Federal Reserve (or Fed) has assumed sweeping new powers in the last year. In an unprecedented move in March 2008, the New York Fed advanced the funds for JPMorgan Chase Bank to buy investment bank Bear Stearns for pennies on the dollar. The deal was particularly controversial because Jamie Dimon, CEO of JPMorgan, sits on the board of the New York Fed and participated in the secret weekend negotiations.1 In September 2008, the Federal Reserve did something even more unprecedented, when it bought the world’s largest insurance company. The Fed announced on September 16 that it was giving an $85 billion loan to American International Group (AIG) for a nearly 80% stake in the mega-insurer. The Associated Press called it a “government takeover,” but this was no ordinary nationalization. Unlike the U.S. Treasury, which took over Fannie Mae and Freddie Mac the week before, the Fed is not a government-owned agency. Also unprecedented was the way the deal was funded. The Associated Press reported:

“The Treasury Department, for the first time in its history, said it would begin selling bonds for the Federal Reserve in an effort to help the central bank deal with its unprecedented borrowing needs.”2

This is extraordinary. Why is the Treasury issuing U.S. government bonds (or debt) to fund the Fed, which is itself supposedly “the lender of last resort” created to fund the banks and the federal government? Yahoo Finance reported on September 17:

“The Treasury is setting up a temporary financing program at the Fed’s request. The program will auction Treasury bills to raise cash for the Fed’s use. The initiative aims to help the Fed manage its balance sheet following its efforts to enhance its liquidity facilities over the previous few quarters.”

Normally, the Fed swaps green pieces of paper called Federal Reserve Notes for pink pieces of paper called U.S. bonds (the federal government’s I.O.U.s), in order to provide Congress with the dollars it cannot raise through taxes. Now, it seems, the government is issuing bonds, not for its own use, but for the use of the Fed! Perhaps the plan is to swap them with the banks’ dodgy derivatives collateral directly, without actually putting them up for sale to outside buyers. According to Wikipedia (which translates Fedspeak into somewhat clearer terms than the Fed’s own website):

“The Term Securities Lending Facility is a 28-day facility that will offer Treasury general collateral to the Federal Reserve Bank of New York’s primary dealers in exchange for other program-eligible collateral. It is intended to promote liquidity in the financing markets for Treasury and other collateral and thus to foster the functioning of financial markets more generally. . . . The resource allows dealers to switch debt that is less liquid for U.S. government securities that are easily tradable.”

“To switch debt that is less liquid for U.S. government securities that are easily tradable” means that the government gets the banks’ toxic derivative debt, and the banks get the government’s triple-A securities. Unlike the risky derivative debt, federal securities are considered “risk-free” for purposes of determining capital requirements, allowing the banks to improve their capital position so they can make new loans. (See E. Brown, “Bailout Bedlam,” webofdebt.com/articles, October 2, 2008.)

In its latest power play, on October 3, 2008, the Fed acquired the ability to pay interest to its member banks on the reserves the banks maintain at the Fed. Reuters reported on October 3:

“The U.S. Federal Reserve gained a key tactical tool from the $700 billion financial rescue package signed into law on Friday that will help it channel funds into parched credit markets. Tucked into the 451-page bill is a provision that lets the Fed pay interest on the reserves banks are required to hold at the central bank.”3

If the Fed’s money comes ultimately from the taxpayers, that means we the taxpayers are paying interest to the banks on the banks’ own reserves – reserves maintained for their own private profit. These increasingly controversial encroachments on the public purse warrant a closer look at the central banking scheme itself. Who owns the Federal Reserve, who actually controls it, where does it get its money, and whose interests is it serving?

Not Private and Not for Profit?

The Fed’s website insists that it is not a private corporation, is not operated for profit, and is not funded by Congress. But is that true? The Federal Reserve was set up in 1913 as a “lender of last resort” to backstop bank runs, following a particularly bad bank panic in 1907. The Fed’s mandate was then and continues to be to keep the private banking system intact; and that means keeping intact the system’s most valuable asset, a monopoly on creating the national money supply. Except for coins, every dollar in circulation is now created privately as a debt to the Federal Reserve or the banking system it heads.4 The Fed’s website attempts to gloss over its role as chief defender and protector of this private banking club, but let’s take a closer look. The website states:

* “The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation’s central banking system, are organized much like private corporations – possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.”

* “[The Federal Reserve] is considered an independent central bank because its decisions do not have to be ratified by the President or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.”

* “The Federal Reserve’s income is derived primarily from the interest on U.S. government securities that it has acquired through open market operations. . . . After paying its expenses, the Federal Reserve turns the rest of its earnings over to the U.S. Treasury.”5

So let’s review:

1. The Fed is privately owned.

Its shareholders are private banks. In fact, 100% of its shareholders are private banks. None of its stock is owned by the government.

2. The fact that the Fed does not get “appropriations” from Congress basically means that it gets its money from Congress without congressional approval, by engaging in “open market operations.”

Here is how it works: When the government is short of funds, the Treasury issues bonds and delivers them to bond dealers, which auction them off. When the Fed wants to “expand the money supply” (create money), it steps in and buys bonds from these dealers with newly-issued dollars acquired by the Fed for the cost of writing them into an account on a computer screen. These maneuvers are called “open market operations” because the Fed buys the bonds on the “open market” from the bond dealers. The bonds then become the “reserves” that the banking establishment uses to back its loans. In another bit of sleight of hand known as “fractional reserve” lending, the same reserves are lent many times over, further expanding the money supply, generating interest for the banks with each loan. It was this money-creating process that prompted Wright Patman, Chairman of the House Banking and Currency Committee in the 1960s, to call the Federal Reserve “a total money-making machine.” He wrote:

“When the Federal Reserve writes a check for a government bond it does exactly what any bank does, it creates money, it created money purely and simply by writing a check.”

3. The Fed generates profits for its shareholders.

The interest on bonds acquired with its newly-issued Federal Reserve Notes pays the Fed’s operating expenses plus a guaranteed 6% return to its banker shareholders. A mere 6% a year may not be considered a profit in the world of Wall Street high finance, but most businesses that manage to cover all their expenses and give their shareholders a guaranteed 6% return are considered “for profit” corporations.

In addition to this guaranteed 6%, the banks will now be getting interest from the taxpayers on their “reserves.” The basic reserve requirement set by the Federal Reserve is 10%. The website of the Federal Reserve Bank of New York explains that as money is redeposited and relent throughout the banking system, this 10% held in “reserve” can be fanned into ten times that sum in loans; that is, $10,000 in reserves becomes $100,000 in loans. Federal Reserve Statistical Release H.8 puts the total “loans and leases in bank credit” as of September 24, 2008 at $7,049 billion. Ten percent of that is $700 billion. That means we the taxpayers will be paying interest to the banks on at least $700 billion annually – this so that the banks can retain the reserves to accumulate interest on ten times that sum in loans.

The banks earn these returns from the taxpayers for the privilege of having the banks’ interests protected by an all-powerful independent private central bank, even when those interests may be opposed to the taxpayers’ — for example, when the banks use their special status as private money creators to fund speculative derivative schemes that threaten to collapse the U.S. economy. Among other special benefits, banks and other financial institutions (but not other corporations) can borrow at the low Fed funds rate of about 2%. They can then turn around and put this money into 30-year Treasury bonds at 4.5%, earning an immediate 2.5% from the taxpayers, just by virtue of their position as favored banks. A long list of banks (but not other corporations) is also now protected from the short selling that can crash the price of other stocks.

Time to Change the Statute?

According to the Fed’s website, the control Congress has over the Federal Reserve is limited to this:

“[T]he Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute.”

As we know from watching the business news, “oversight” basically means that Congress gets to see the results when it’s over. The Fed periodically reports to Congress, but the Fed doesn’t ask; it tells. The only real leverage Congress has over the Fed is that it “can alter its responsibilities by statute.” It is time for Congress to exercise that leverage and make the Federal Reserve a truly federal agency, acting by and for the people through their elected representatives. If the Fed can demand AIG’s stock in return for an $85 billion loan to the mega-insurer, we can demand the Fed’s stock in return for the trillion-or-so dollars we’ll be advancing to bail out the private banking system from its follies.

If the Fed were actually a federal agency, the government could issue U.S. legal tender directly, avoiding an unnecessary interest-bearing debt to private middlemen who create the money out of thin air themselves. Among other benefits to the taxpayers. a truly “federal” Federal Reserve could lend the full faith and credit of the United States to state and local governments interest-free, cutting the cost of infrastructure in half, restoring the thriving local economies of earlier decades.

Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and “the money trust.” She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her eleven books include the bestselling Nature’s Pharmacy, co-authored with Dr. Lynne Walker, and Forbidden Medicine. Her websites are www.webofdebt.com (http://www.webofdebt.com)  and www.ellenbrown.com (http://www.ellenbrown.com) .
Title: Century of Enslavement: The History of The Federal Reserve
Post by: RE on October 23, 2014, 11:20:37 PM
Nothing new in here that Veteran Diners are not aware of, but a good Introduction for Rookies.

It does make one want to PUKE though to see how thoroughly we have been enslaved to the Elite for the last Century through this scam.  :ranting3:

I can actually WATCH this and Download with my new Broadband Connection!  :icon_sunny:

H/T to Jimbo on TBP for this one.

http://www.youtube.com/v/5IJeemTQ7Vk?feature=player_embedded

RE
Title: "The World Must Take Its Punishment"-AEP
Post by: RE on March 11, 2015, 09:48:38 PM
Yup Ambrose, the World is really stupid for taking out all those Dollar Denominated loans!  Now Da Fed will PUNISH them for being so stupid!

Except Ambrose, didn't you say last week how BRILLIANT Da Fed was for dishing out endless free credit to kee the FSoA economy floating while Euro austerity from the ECB was strangling them?

Looking ugly when Ambrose publish doomsday pieces.

RE

Global finance faces $9 trillion stress test as dollar soars

The world is more dollarized today that any time in history, and therefore at the mercy of the US Federal Reserve as rates rise

     
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Dollar bills burning in flames
The Fed's zero rates and quantitative easing flooded the emerging world with dollar liquidity in the boom years, overwhelming all defences Photo: Alamy
 

Sitting on the desks of central bank governors and regulators across the world is a scholarly report that spells out the vertiginous scale of global debt in US dollars, and gently hints at the horrors in store as the US Federal Reserve turns off the liquidity spigot.

This dry paper is the talk of the hedge fund village in Mayfair, and the stuff of nightmares for those in Singapore or Hong Kong already caught on the wrong side of the biggest currency margin call in financial history. "Everybody is reading it," said one ex-veteran from the New York Fed.

The report - "Global dollar credit: links to US monetary policy and leverage" - was first published by the Bank for International Settlements in January, but its biting relevance is growing by the day.

It shows how the Fed's zero rates and quantitative easing flooded the emerging world with dollar liquidity in the boom years, overwhelming all defences.

This abundance enticed Asian and Latin American companies to borrow like never before in dollars - at real rates near 1pc - storing up a reckoning for the day when the US monetary cycle should turn, as it is now doing with a vengeance.

Contrary to popular belief, the world is today more dollarized than ever before. Foreigners have borrowed $9 trillion in US currency outside American jurisdiction, and therefore without the protection of a lender-of-last-resort able to issue unlimited dollars in extremis. This is up from $2 trillion in 2000.

The emerging market share - mostly Asian - has doubled to $4.5 trillion since the Lehman crisis, including camouflaged lending through banks registered in London, Zurich or the Cayman Islands.

The result is that the world credit system is acutely sensitive to any shift by the Fed. "Changes in the short-term policy rate are promptly reflected in the cost of $5 trillion in US dollar bank loans," said the BIS.

Total US dollar debt outside US

Markets are already pricing in such a change. The Fed's so-called "dot plot" - the gauge of future thinking by Fed members - hints at three rate rises this year, kicking off in June.

The BIS paper's ominous implications are already visible as the dollar rises at a parabolic rate, smashing the Brazilian real, the Turkish lira, the South African rand and the Malaysian Ringitt, and driving the euro to a 12-year low of $1.06.

The dollar index (DXY) has soared 24pc since July, and 40pc since mid-2011. This is a bigger and steeper rise than the dollar rally in the mid-1990s - also caused by a US recovery at a time of European weakness, and by Fed tightening - which set off the East Asian crisis and Russia's default in 1998.

Emerging market governments learned the bitter lesson of that shock. They no longer borrow in dollars. Companies have more than made up for them.

"The world is on a dollar standard, not a euro or a yen standard, and that is why it matters so much what the Fed does," said Stephen Jen, a former IMF official now at SLJ Macro Partners.

He says the latest spasms of stress in emerging markets are more serious than the "taper tantrum" in May 2013, when the Fed first talked of phasing out quantitative easing.

"Capital flows into these countries have continued to accelerate over recent quarters. This is mostly fickle money. The result is that there is now even more dry wood in the pile to serve as fuel," he said.

Mr Jen said Asian and Latin American companies are frantically trying to hedge their dollar debts on the derivatives markets, which drives the dollar even higher and feeds a vicious circle. "This is how avalanches start," he said.

Companies are hanging on by their fingertips across the world. Brazilian airline Gol was sitting pretty four years ago when the real was the strongest currency in the world. Three quarters of its debt is in dollars.

This has now turned into a ghastly currency mismatch as the real goes into free-fall, losing half its value. Interest payments on Gol's debts have doubled, relative to its income stream in Brazil. The loans must be repaid or rolled over in a far less benign world, if possible at all.

You would not think it possible that an Asian sovereign wealth fund could run into trouble too, but Malaysia's 1MDM state fund came close to default earlier this year after borrowing too heavily to buy energy projects and speculate on land. Its bonds are currently trading at junk level.

It became a piggy bank for the political elites and now faces a corruption probe, a recurring pattern in the BRICS and mini-BRICS as the liquidity tide recedes and exposes the underlying rot.

BIS data show that the dollar debts of Chinese companies have jumped fivefold to $1.1 trillion since 2008, and are almost certainly higher if disguised sources are included. Among the flow is a $900bn "carry trade" - mostly through Hong Kong - that amounts to a huge collective bet on a falling dollar. Woe betide them if China starts to drive down the yuan to keep growth alive.

Manoj Pradhan, from Morgan Stanley, said emerging markets were able to weather the dollar spike in 2014 because the world's deflation scare was still holding down the cost of global funding. These costs are now rising. Even Singapore's three-month Sibor used for benchmark lending is ratcheting up fast.

The added twist is that central banks in the developing world have stopped buying foreign bonds, after boosting their reserves from $1 trillion to $11 trillion since 2000.

From Societe Generale

The Institute of International Finance (IIF) calculates that the oil slump has slashed petrodollar flows by $375bn a year. Crude exporters will switch from being net buyers of $123bn of foreign bonds and assets in 2013, to net sellers of $90bn this year. Russia sold $13bn in February alone.

China has also changed sides, becoming a seller late last year as capital flight quickened. Liquidation of reserves automatically entails monetary tightening within these countries, unless offsetting action is taken. China still has the latitude to do this. Russia is not so lucky, and nor is Brazil. If they cut rates, they risk a further currency slide.

Powerful undercurrents in the world's financial system are swirling beneath the surface. Some hope that the European Central Bank's €60bn blast of QE each month will keep the asset boom going as the Fed pulls back, but this is a double-edged effect for the world as a whole. It pushes the dollar yet higher. That may matter more in the end.

It is possible that the Fed will retreat once again, judging that the world economy is still too fragile to withstand any tightening. The Atlanta Fed's forecasting model for real GDP growth in the US itself has slowed sharply since mid-February.

Yet the message from a string of Fed governors over recent days is that rate rises cannot be put off much longer, the Atlanta Fed's own Dennis Lockhart among them. "All meetings from June onwards should be on the table," he said.

The most recent Fed minutes cited worries that the flood of capital coming into the US on the back of the stronger dollar is holding down long-term borrowing rates in the US and effectively loosening monetary policy. This makes Fed tightening even more urgent, in their view, implying a "higher path" for coming rate rises.

Nobody should count on a Fed reprieve this time. The world must take its punishment.

Title: Da Fed Must be Destroyed!
Post by: RE on March 22, 2015, 05:02:56 AM
While I am in 100% agreement with this in principle, the author doesn't recognize at all that the entire industrial system is dependent on Fractional Reserve lending.  Since Industrial enterprises never pay for themselves (if they did we would not have ever escalating debt), you have to keep lending out new money to keep the system rolling.  Without Da Fed or something like it, we never would have developed the Industrial Model we have now.

Neither does he recognize that once we do "Destroy Da Fed" (or really it destroys itself), the whole industrial model we live under goes up in smoke.  He doesn't recognize that everybody's pension and Social Security will go WORTHLESS, along with all the Investments the .01% have in the Stock Market.  When Da Fed collapses, so does all of Industrial Civilization.

RE

The Federal Reserve Bank Must Be Destroyed (http://www.zerohedge.com/news/2015-03-21/federal-reserve-bank-must-be-destroyed)

Submitted by Tyler Durden on 03/21/2015 20:03 -0400

    Bank Failures
    Banking Practices
    ETC
    European Central Bank
    Federal Reserve
    Federal Reserve Bank
    Fractional Reserve Banking
    Great Depression
    Hyperinflation
    Money Supply
    Moral Hazard
    Paul Volcker
    recovery
    Unemployment


Submitted by Patrick Barron via Mises Canada blog,

“Delanda est in Susidium Foederatum Bank”

(The Federal Reserve Bank Must be Destroyed)

During the years of the Roman Republic, Cato the Elder ended every speech with the phrase “Delanda est Carthago” (Carthage must be destroyed). Rome had fought two wars with Carthage, yet the threat to the Republic remained. Cato saw Carthage as an existential threat and concluded that Rome would not be secure as long as Carthage existed. So fervently did he hold this view that he ended every speech, even about completely different subjects, with the famous phrase. I believe that we Austrians need to adopt a similar phrase to remind the American people that the US faces an existential threat from the machinations of the Federal Reserve Bank. “Delanda est in Susidium Foederatum Bank”…The Federal Reserve Bank must be destroyed. Like Carthage, the Federal Reserve Bank cannot be controlled or restrained. Either it or our republic will survive, but not both. For the sake of our nation, the Fed must be destroyed.

 

Founding the Fed Instead of Ending Fractional Reserve Banking

The Fed was founded under false economic premises–to prevent bank runs by providing temporary liquidity to banks which found themselves unable to redeem their certificates and demand deposits for cash and/or specie. The real cause of illiquid banks–fractional reserve banking–was never seriously addressed. It was assumed that banks had the legal right to invest their customers’ demand funds in loans and that runs were caused by over indulging in this practice. But as Murray N. Rothbard explain in What Has Government Done to Our Money?, loaning demand funds instantly places  the bank in an insolvent position, for it cannot redeem all of its demand accounts for cash or specie. Through the process of lending demand funds, the banks have created fiduciary media out of thin air, reducing their reserve ratio below one hundred percent. If the banks do this on a very modest basis, the public may not be aware of the fraud. However, once the rumor starts that the bank is illiquid, there is a literal “run” to the bank to withdraw demand funds. In such a case, even a bank that only modestly lent its demand funds might find itself unable to honor all withdrawal claims and would be forced to close its doors.

(NOTE: Central Banking was established to legitimize counterfeiting fraud, aka – Fractional Reserve Banking)

The Federal Reserve Bank, as the lender of last resort, was supposed to prevent such occurrences by providing temporary, penalty rate loans to struggling banks. Note that there is nothing that a central bank could provide that could not be provided by another private bank. In fact the banking panic of 1907 was stemmed by private bank interventions led by J. P. Morgan. However, Morgan realized that such private bailouts were very risky and presented a case of moral hazard; i.e., that bankers, confident of a bailout by the Morgan banking empire, might  book riskier, higher yielding loans. So rather than face the real cause of banking crises and lobby to outlaw fractional reserve banking, the Morgans, Rockefellers, etc.–who did not want to forego the financial benefits of lending demand deposits–lobbied instead for government to create a lender of last resort, a central bank, which we named the Federal Reserve Bank.

 

Fed Policy Causes Depressions and Then Prevents Recovery

Over time this entity, new to Americans, would expand its role in fruitless attempts to cure crises caused by ITSELF. The Fed caused and exacerbated crises by allowing, facilitating, and expanding the practice of fractional reserve banking. In the 1920’s the Fed began to expand the money supply to prevent prices from falling, justifying its new role as one of maintaining a stable price level. But printing money to prevent falling prices caused malinvestment in the structure of production and led to a depression by the end of the decade.

Rather than do nothing and allow the purging of bad investments and liquidation of malinvestment, which would re-establish a sustainable structure of production, as it had done at the beginning of the decade in the depression that no one remembers, the Fed intervened monetarily to pump up reserves while the Hoover administration intervened fiscally to prevent price deflation and maintain high spending levels. All this is well documented in Murray N. Rothbard’s America’s Great Depression.

Yet even an interventionist Fed could not prevent the massive bank failures of the 1930’s, due to many factors which included restrictive bank branching laws. But the primary cause of the bank failures was *again* the banks’ adherence to fractional reserve banking practices which resulted in  their inability to honor all demand deposit redemption requests for specie and/or cash.

In the Roaring Twenties fractional reserve banking had expanded the money supply well beyond the ability of banks to stem all the runs. Again the banks and the politicians refused to dig deeper into the real cause of the problem. Rather than separate banking into deposit and loan functions–the former would require one hundred percent reserves and the latter would require strict asset-liability management to ensure that loans matured on the same schedule as time deposits, what is commonly known as funding loans out of savings–the government suspended specie redemption and eventually formed the FDIC to “ensure” bank deposits.

However, the FDIC’s “insurance” program was nothing more than an explicit promise that the Fed would print enough money to redeem all ensured deposits, thus insuring the continuation of fractional reserved banking, the very problem that was used as the excuse to establish the Fed; the very problem–bank instability–the Fed was sold to the public to solve. So, once again, a solution to cure a problem caused by the Fed itself resulted in even more power for the increasingly government run banking system.

 

The Monetary Genie Was Out of the Bottle

Once the politicians realized that the Fed could print money at will, the genie was out of the bottle. Money growth did expanded at a modest rate for a few decades, due mainly to the efforts of prudent men such as Fed Chairman William McChesney Martin (1951 to 1970) and fiscally conservative politicians such as President Dwight Eisenhower (1953 to 1961). However, it was inevitable that less prudent men, such as President Lyndon Johnson and all Fed chairman with the exception of Paul Volcker, would rise to power on their promises to fund all manner of government programs with what was now seen to be unlimited money.

This was the key revelation!

Money printed in unlimited quantities could cure all ills, or so it was claimed, and to its everlasting shame the economics profession provided sufficient “academic” cover to support these spurious assertions. Now everyone understood that the Fed could monetize–i.e., purchase government debt itself–any amount of government spending. The economics profession refused to consider the inevitable consequences of these irresponsible monetary policies. Instead it cherry picks historic price data to prove them to be non-inflationary and endorses changes to unemployment calculations to prove them to be fiscally sound, too. These whores, these house economists have their eyes glued to the rear view mirror of spurious government statistics as the race car of state hurtles toward an economic cliff of depression and perhaps even hyperinflation.

 

Money Production and Banking Subject to Commercial and Criminal Law

It matters not who is in charge of the Fed or what rules Congress may insist that it adopts. Once money printing, via fiat or fractional reserve credit creation, is seen to be both feasible, justified, and legal nothing and no one can stop it. The political pressure to fund government programs will be irresistible. Everyone knows that the Fed seemingly has the ability to solve their problem by monetizing the federal debt. Should it refuse to do so, we would see riots in the streets similar to what is happening in Europe as protesters target the European Central Bank.

The only solution is to destroy the monster that makes it all possible, the Fed. Without the ability to sell its debt to its own central bank, government would be forced to live within the means set by the will of the people through their elected representatives. The scales would eventually fall from the eyes of both politicians and public as its becomes clear that what government spends comes at the expense of the private economy. The public would no longer be fooled by government propaganda that its spending spurs the private economy, when it is clear that the only way government can spend is to tax the people or suffer the crowding out effect of private investment by government borrowing. Money production must be moved to private hands that are subject to normal commercial and criminal law, where money printing is nothing more than counterfeiting. Banks, too, must be subject to normal commercial and criminal law, which requires them to treat a demand deposit as a bailment for which they must keep one hundred percent reserves. Loan banking would be subject to the normal principles and well understood practices of sound asset-liability management, whereby loans are funded by real savings and the maturities of both loans and deposits must be coordinated in order for lending banks to honor their liquidity commitments. The path to the destruction of our nation through endless wars and welfare would end with the destruction of the Fed.

Delanda est in Susidium Foederatum Bank!
Title: Baffle 'em with Bullshit: CBs running out of Ammo
Post by: RE on April 19, 2015, 10:55:53 AM
Sublimly Ridiculous.

RE

http://www.zerohedge.com/news/2015-04-19/central-bankers-next-test-omnipotence-may-be-coming (http://www.zerohedge.com/news/2015-04-19/central-bankers-next-test-omnipotence-may-be-coming)

Central Bankers Next Test Of Omnipotence May Be Coming

Tyler Durden's picture



 

Submitted by Mark St.Cyr,

Here we are, just barely into our first earnings season without the incessantly added fuel provided by QE and the markets are stumbling. At times on Friday the indexes were hovering near the possibility of posting 2% losses going into the weekend. In today’s media mindset of “everything is awesome.” That’s near – unthinkable.

Personally I watched for the now requisite headlines to cross the airwaves at any moment announcing “Federal Reserve member _____________________(fill in the blank) says: The Fed. can, may, will, or won’t do this, that, or the other thing. Just remember: it’s not the economy that’s important. It’s us. We decide for the economy – whether it needs us or not. Never forget: We’re all Keynesian’s now so – trust in us.”

Usually without fail this is followed with what now seems mandatory: The unleashing of HFT fueled, algorithmic stop running, hunt and seek programs to wipe out all that red on the screens turning them into a sea of tranquil green by close. But alas not this time. This just seemed a little odd since every other time precisely such a scenario has unfolded. Yet this Friday? (Insert crickets here.)

Earlier during the week we had the release of the FOMC Beige Book. Here once again so as to make sure there was no misunderstandings in any presumed messaging that you may think to understand. Members both voting and non-voting gave conflicting speeches, interviews, or press releases that made sure what ever you thought you knew or understood – you don’t.

I believe this latest policy tool of dueling scenario Fed. speak in the eyes of the Ivory Tower is still being looked upon as “brilliant.” In my estimation it may quite possibly be the only one they have left. The layman’s term for this is “Baffle’m with bullsh*t.” Because if you can’t decide if they are even on the same page – how can you be sure as to what they will do? Let alone what you should.

So you better not sell – you better just buy more. After all JBTFD (just buy the dip) is today’s Fed. speak for “Mission Accomplished.” No Beige, blue, green, or kaleidoscope colored book needed. So why the deafening silence on Friday? Did CNBC™ finally go dark? There could be another reason and if accurate is very disconcerting.

Maybe it’s because all ammo (and there has been no silver bullet more powerful of late than a Central Banker press conference) is being reserved for a much larger crisis looming on the horizon. i.e. Greece and all its tenuous implications calling for an “All hands on printing presses deck, battle stations” response.

Yes, like you I also tire when I hear another analysis of what will, won’t, or might take place when it comes to the now oversubscribed moniker of a Grexit. Nonetheless, this rolling drama that has taken on attributes worthy of gaining its own syndication for a reality TV show is in its final stages with implications far more reaching than the markets are currently prepared for.

Experts can jawbone ad nauseam how any event is small in “relativity” and sound correct. Yet, have that small event happen at the wrong time when no one’s prepared? And inconvenience can turn into catastrophe in a nanosecond. And it doesn’t take a rocket scientist to conclude after looking at any so-called “fear gauge” within the markets: This market is not prepared in the least. What’s possibly far more scarier? It appears: unconcerned.

To use the “reality show” thesis for an analogy: This is either going to end in another season ending episode (as in – to be continued.) Or, a series ending finality (as in “That’s all folks!”) If it’s the latter; contagion has the aspect of taking down the whole network (e.g., the EU) And that reality isn’t based in some scripted “reality show.” That script is quite possibly – all too real. And the bankers know it.

Over in Europe the banks are huffing and puffing believing they have the upper hand. The banks and bankers (such as Germany’s Mr. Schäuble) continually jawbone implied threats or repercussions unless Greece does X, Y, or Z according to their implicit mandates.

Yet, if one steps back and looks at the bigger picture (i.e., How Greece along with all the other distressed entities will be watching): Exactly what is the all too visible response Mr. Schäuble and his likes within the ECB are going to do as to fix the now failing (again) of their own previously failed bank? e.g., Hype Alpe Andria/Heta Asset Resolution and its calamitous effects to the likes of Duesseldorfer Hypthekenbank AG. Along with the other billions of €uro exposure to Heta that the German Bundesbank recently commented was at risk to other German banks?

Here you have a scenario playing out in my opinion just made for television. The EC, The ECB, the IMF, (aka The Troika) playing hardball calling for this, that, and the other thing while being vocalized by Mr. Schäuble harkening tones of the famous SNL skit “No soup for you!” unless exacting conditions are met, forming what can only be looked upon by the Greek government and people (whether it’s accurate or not) as – bold face hypocrisy.

Think about it: (using generalized examples for a construct) A previously rescued bank turned into a “bad bank,” once again goes belly up, needing to be rescued again for not doing what it should have done, both during, and after, its first rescue. Sound familiar?

This in turn is putting other German banks at risk and causing the ECB itself to call for more “detailed exposure information” from the effected parties. But (and it’s a very big but) the implied willingness for the EU, ECB, or IMF to jump in with its own version of “what ever it takes” while simultaneously demanding Greece to pay up, and shut up? Add to this the perplexing quandary this leaves in not just Greece; but other EU countries when reports are the ECB is having a hard time placing all its newly printed €60 billion monthly QE program. i.e., Need help spending all that money? Why aren’t you spending here with us?

Remember, all this is made possible by money printed ex nihilo to keep everyone (i.e., those chosen to be worthy within the EZ) content and happy. All the while Greece is bludgeoned into submitting to sell, raid, pilfer, what ever it takes of its hard assets  to be loaned “money” made via a keystroke to pay back money – that was also generated via – a keystroke.

Yes, I understand how money and such works in the economy of today. Regardless of any of that, is the fact; no matter how one thinks or believes, or, has been taught what should and shouldn’t take place. (i.e., what you’ll be taught as gospel in the Ivy League business schools only to find out in the real world its meaningless if not outright foolish) People, businesses, countries, and more (especially desperate one’s) will do things almost cavalierly what others will contemplate or regard as unthinkable when backed into a corner.

With the above all too real example made prevalent by the Central Banks around the globe. What they’ve created is a premise, that will be exploited, in which monetary moral authority coming from a Central Bank is no longer contemplated within the constructs of debt policy. (regardless if it was sound or not to begin with) i.e., If today a Central Bank can print whatever money it wants via a keystroke out of thin air – then why can’t it print whatever I need? It’s not tied to anything more than – a decision. And the realization of this premise is gaining ground and rushing towards critical mass to any (and all) party feeling financially “oppressed.” Regardless if brought to bear by their own actions or inaction.

So all arguments as to why this, that, or the other thing are irrelevant. For it’s proven ipso facto: if you can save this or that entity via a keystroke – why not us? If I were Greece along with the next inline country to implode financially within the EU – that would be my never-ending argument of defense. Rightly, or wrongly.

Once this Pandora’s Box is opened publicly (as in an accusatory declaration of fact by one party to another) there’s no turning back. And, if you’ve been paying attention to the increasing conflicting reports coming out of the invested parties; there’s anything but an atmosphere of conciliation let alone respect for the other.

All “weapons” are on the table – by both sides. Just who’ll blink is the only unknown. Because no matter which one does – chaos will follow. The only response from the central banks will be in what measured degrees are needed (as well as will work) to deal with it.

This is why it’s quite possible the reason as to why we didn’t hear the now requisite Fed. official taking to airwaves, spouting monetary platitudes, regardless if they were a voting member or not. They may have concluded they’ll need all the “ammo” or “bag of tricks” they can muster if things really begin to show distress with implied global contagion . Rather, than merely running ahead to answer this weeks version of a 1+% decline; and fuel the headline seeking algo-ignition to “front run” any and all HFT fueled stop running programs.

After all, maybe it’s just me, but isn’t it just a little too coincidental that the former master of monetary mumbo-jumbo Ben Bernanke, is hired nearly to the day by what is reported to be the working HFT arm of the Federal Reserve: Citadel™. Precisely at a time when communiques spilling out of the Fed. are leaving everyone scratching their heads as to what it all means, and what they might do, except for, just maybe – the former head who honed this style of policy delivery to an art form?

What better person to suddenly “bring on your team” as to help your company front run discern what the Fed. is, or is not going to do next? Again, “precisely” at the same time, almost to the day, both the markets as well as Greece and more are showing real signs of distress with possible calamitous effects? Funny how serendipitous that whole coincidence thing can get – no?

As always, who knows what will or won’t happen next. It’s all conjecture or speculation on my part. However just a couple of other signs that may add further context to this discussion also happened on Friday with little fanfare as well as reporting by the main stream press.

Mr. Schäuble has been reported to state: “Greece free to seek Russian aid, may not get much.” Only to have it later announced that Russia indeed has made a €5 Billion deal with Greece. And right on the heels of it Alexis Tsipiris announced he was meeting over the weekend with every sound money and fiscally responsible antithetical spokesperson and adviser – Paul Krugman.

I hope Mr. Schäuble can enjoy the irony of such an example of Schadenfreude the rest of us can see.

Title: Re: Da Fed: Central Banking According to RE
Post by: RE on June 08, 2015, 06:15:35 AM
Nothing here Diners don't already know, but some GR8 Cartoons!

RE

http://www.zerohedge.com/news/2015-06-07/thats-uncanny-102-years-later-wall-street-turned-out-just-man-predicted (http://www.zerohedge.com/news/2015-06-07/thats-uncanny-102-years-later-wall-street-turned-out-just-man-predicted)

103 Years Later, Wall Street Turned Out Just As One Man Predicted

Tyler Durden's picture



 

In 1910, three years before the US Federal Reserve was founded, Senator Nelson Aldrich, Frank Vanderlip of National City (Citibank), Henry Davison of Morgan Bank, and Paul Warburg of the Kuhn, Loeb Investment House met secretly at Jekyll Island in Georgia to formulate a plan for a US central bank just years ahead of World War I.

The result of their work was the so-called Aldrich Plan which called for a system of fifteen regional central banks, i.e., National Reserve Associations, whose actions would be coordinated by a national board of commercial bankers. The Reserve Association would make emergency loans to member banks, and would create money to provide an elastic currency that could be exchanged equally for demand deposits, and would act as a fiscal agent for the federal government.

In other words, the Aldrich Plan proposed a "central bank" that would be openly and directly controlled by Wall Street commercial banks on whose behalf it would solely operate, instead of doing so indirectly, behind closed doors and the need for criminal probe of Yellen's Fed seeking to find who leaked what to whom.

The Aldrich Plan was defeated in the House in 1912 but its outline became the model for the bill that eventually was adopted as the Federal Reserve Act of 1913 whose passage not only unleashed the Fed as we know it now, but the entire shape of modern finance.

In 1912, one person who warned against the passage of the Aldrich Plan, was Alfred Owen Crozier: a man who saw how it would all play out, and even wrote a book titled "U.S. Money vs Corporation Currency" (costing 25 cents) explaining and predicting everything that would ultimately happen, even adding some 30 illustrations for those readers who were visual learners. 

The book, which is attached at the end of this post, is a must read, but even those pressed for time are urged to skim the following illustrations all of which were created in 1912, and all of which predicted just what the current financial system would look like.

Or, in the words of Overstock's CEO Patrick Byrne, "that's uncanny"

From "U.S. Money vs Corporation Currency" (which can and should be read for free on Google), here are the selected illustrations:

 

None of this was rocket science: should the power to create money fall into the hands of a private few, or an entity working purely on their behalf (and lest there is any confusion, a multi-trillion bailout of the US financial system and the ongoing ZIRP/QE regime has benefited almost entirely that handful of people who stood to lose trillions in paper wealth should US banking as we know it end), it would "inaugurate a financial and industrial reign of terror." It was clear as day 103 years ago.

 

Fast forward 103 years when who should end up with that power? A group of central banking career academics, currently in the midst of a criminal probe what and how much information they leaked to a select group of private Wall Street interests and commercial bankers.

Why? Simple.

 

The country now knows: "Democracy" forgot.

* * *

Full book below (link for free ebook):

Title: CBs are Outta Ammo: G20 Summit 2015
Post by: RE on September 08, 2015, 11:24:33 PM
Many important stats in this article.

One is that China's Growth Rate is nowhere near the 7% reported, but more like 4%.  Which means even if they could keep that up, in 5 years even with compounding, you're nowhere near 40% increase in GDP.

More important though is that clearly, nobody has a Plan A, B or C here that has any chance of working, and numerous nations are at loggerheads.  The Drumbeat of War grows louder.

Pension Plans in Illinois are collapsing, so is SSDI.  Even the Hedge Funds of the .01% are losing money.  They're running out of bigger fools with any money to steal from.

We're getting there folks.  The Faith Collapse Event is on the Horizon.

RE

The G20 Summit: A Spectacle of Political Bankruptcy (http://www.globalresearch.ca/the-g20-summit-a-spectacle-of-political-bankruptcy/5474646)

By Nick Beams
Global Research, September 08, 2015
World Socialist Web Site
7 September 2015
Theme: Global Economy, Politics and Religion

(http://www.globalresearch.ca/wp-content/uploads/2015/09/G20-countries-400x205.png)
The meeting of G20 finance ministers and central bankers held in Ankara, Turkey over the weekend underscored the inability of the major capitalist powers to initiate any measures to halt the recessionary forces overtaking the world economy. Rather than a proposal for concerted action, the official communique was a public relations exercise aimed at masking the acuteness of the crisis and the impotence of the economic and financial authorities.

The meeting was held in the midst of turbulence on global financial markets fuelled by growing fears that the efforts of central banks to prop up the economy with injections of money are being swamped by deflationary trends.

Despite an admission that “global growth falls short of our expectations” and warnings of the impact of financial turmoil and slowing growth in China on emerging markets and more broadly, the communique declared that the G20 had taken “decisive action to keep the recovery on track” and was “confident the global economic recovery will gain speed.”

There is, in fact, no global economic recovery. In a note published in preparation for the G20 meeting, the International Monetary Fund (IMF) acknowledged that its forecasts for the world economy, made only last July, were already out of date. Growth had fallen below predictions in the US, the euro zone, Japan and most poorer countries.

The predicted boost from lower oil prices had failed to materialise, the IMF acknowledged, risks to the world economy had risen, and “a simultaneous materialisation of some of these risks would imply a much weaker outlook.” The IMF is expected to again revise downward its forecasts for global growth, already at their lowest level since the immediate aftermath of the financial crisis of 2008–2009, at its next meeting scheduled for October. “After six years of demand weakness, the likelihood of damage to potential output is increasingly a concern,” it said.

Another indication of the real state of the global economy is the data on world trade released last month, showing that trade contracted in the first half of 2015 more sharply than at any time since the height of the financial crisis in early 2009.

A pointed comment published on the CNBC web site on the eve of the G20 meeting predicted that whatever came out of the gathering, global leaders would “undoubtedly try to give the impression they have a plan, no matter how far-fetched it is, because if the world markets get a sniff that there is no plan, that things are being made up on the hoof and that things are slipping out of control,” there will be increased turbulence.

This was an apt preview of the communique that emerged from the meeting.

As a result of the financial turbulence in China and mounting concerns over its growth rate—with expectations that real growth will be closer to 4 percent than the official target of 7 percent—there was undoubtedly discussion of the state of the world’s second largest economy behind the scenes.

But the comments from financial officials sought to promote an upbeat message. German Finance Minister Wolfgang Schäuble said the G20 had agreed there was no reason to fear slower Chinese growth, while Pierre Moscovici, the European Union commissioner for economic affairs, praised “the absolute determination of the [Chinese] authorities to sustain growth.” IMF Managing Director Christine Lagarde said there had been a very open dialogue with China and it was “extremely comforting to have that level of understanding.”

However, the underlying reality broke through the façade of contrived statements on one decisive question, revealing growing divergences among the major powers. The official line of the meeting was to accept the Chinese explanation that last month’s currency devaluation was not aimed at bolstering Beijing’s export position at the expense of its rivals, but was a move towards a market-based currency. The communique included a hollow pledge that members would “refrain from competitive devaluation” and “avoid persistent exchange rate misalignments,” even as it is acknowledged that such commitments are being honoured mostly in the breach.

But in a pointed departure from normal procedure at such meetings, Japan, which stands to lose heavily as a result of a major fall in the Chinese currency, did not adhere to the official line. Speaking to reporters, Japanese Finance Minister Taro Aso said Chinese representatives had given an incomplete explanation of their motives. “They may have tried to be constructive, but they weren’t detailed enough,” he said.

Another area of divergence, which was also largely covered over, was on the issue of monetary policy. The United States is officially committed to an increase in its official interest rate, even if only a very small one, in the coming period. But the European Central Bank and the Bank of Japan are both committed to continuing the policy of quantitative easing, with ECB President Mario Draghi indicating on the eve of the meeting that he might extend the present asset-purchasing operation beyond the scheduled completion date of September 2016.

The IMF has urged the US Federal Reserve not to begin interest rate increases until well into next year, a position that was repeated by Managing Director Lagarde. The Fed had not raised interest rates for such a long time (nine years), that it should make a move only when there was no uncertainty and should not give it a try and then have to reverse its decision, she said.

Lagarde and others fear that any interest rate increase in the US will impact heavily on the financial position of emerging markets and spark a major outflow of capital, exceeding that which took place during the so-called “taper tantrum” of 2013, when the Fed first indicated it would wind back its asset-purchasing program.

Emerging markets are already feeling the effects of the slowdown in China, their major export market, with currency values in some South East Asian countries down to levels not seen since the Asian financial crisis of 1997–98. If a rise in US interest rates sparks a rush for the exit by major investors, it could set off a major financial crisis.

According to Troy Gayseki, a senior portfolio manager as Skybridge, a firm that specialises in hedge fund investing, several emerging market hedge fund managers suffered losses of between 3 and 35 percent in August. “There is a lot of chaos and carnage out there,” he told the Financial Times.

In all of the reports by economic authorities on the state of the world economy, including the IMF and the Organisation for Economic Cooperation and Development (OECD), the lack of investment, now 25 percent below where it was in 2007 in some cases, is cited as the major cause of economic stagnation. There was an attempt to address this issue at the G20 heads of government meeting in Brisbane, Australia last November, at which participants committed themselves to the target of a two percent increase in growth over the next five years, much of it to be achieved through infrastructure projects. Less than a year on, the goals of the Brisbane meeting are regarded as a dead letter.

This decline in productive investment is a product of the colossal growth of financial speculation and parasitism in the world capitalist economy, with resources increasingly diverted away from investment in the material productive forces and into financial manipulations and swindles that account for an ever greater share of the income of the world’s billionaires. The policy of central banks and capitalist governments of continuing to pump vast sums into the financial markets only fuels the growth of financial parasitism.

Seven years after the Wall Street crash of September 2008, the inability of the major capitalist powers and their economic and financial authorities to devise any coordinated solution to the crisis is the expression not of some intellectual incapacity, but of something much more fundamental. It is the outcome of the irresolvable contradiction under capitalism between the global economy and the national state system, which generates trade and currency conflicts and economic and political rivalries leading ultimately to war. All of these tendencies will be intensified by the gathering world slump.

Copyright © Nick Beams, World Socialist Web Site, 2015
Title: Banks seriously discussing negative interest rates for normal people's savings
Post by: RE on October 24, 2015, 08:25:47 PM
If normal people had savings, this might bring in some money.

RE

Banks are seriously discussing negative interest rates for normal people's savings

http://www.businessinsider.com/banks-discussing-negative-interest-rates-for-consumers-2015-10?r=UK&IR=T (http://www.businessinsider.com/banks-discussing-negative-interest-rates-for-consumers-2015-10?r=UK&IR=T)

(http://static4.businessinsider.com/image/562b7829dd0895a8388b4601-1200-799/rtx9bs8.jpg)
The concept of earning interest on money in the bank is so deeply ingrained into economic life that few people even know that the opposite can happen too: Banks can take a percentage of cash from your account in the form of negative interest rates, under certain conditions.

Normally, this doesn't happen. Banks want your cash, and pay you interest on it, because the more deposits they have, the more they can lend it to others who pay them even more on their investments.

But interest rates in Europe are so close to zero — and economic activity is so sluggish — that some central bankers are seriously discussing whether they should drive interest rates into negative territory in the future, as a sort of economic punishment for not spending money. The theory is that if you are deterred from keeping cash in the bank you'll withdraw it and spend some of it, thus creating economic growth.

Europe's central banks and the US Federal Reserve have kept interest rates near zero for years now in the hopes of making money cheap to borrow. The intent is that because it costs next to nothing to borrow money, you'll take advantage of that and invest it in anything that pays more than a 0% return. That usually creates inflation too, as the influx of cheap, new cash devalues the existing stock.

But inflation is nowhere to be seen. The price of oil has fallen dramatically, making anything that requires fuel cheaper. And with prices falling, people hold off on spending today because they know their money will be worth more tomorrow. That lack of economic activity despite the cheapness of lending is exactly what is holding the economy back.
'We also expect the ECB to remove the lower bound, leaving the door open to go more negative.'

In an attempt to break this deadlock, four European central banks (the ECB, SNB, Riksbank, and Denmark’s Nationalbank) have already imposed negative "policy" interest rates. These are nominal negative rates they charge in their direct dealings with other banks. None of those negative rates have passed through into the consumer banking system — yet.

But now bankers are talking about whether it's time to do just that, in order to force you to make cash withdrawals. In a note to investors this week, Credit Suisse analyst Christel Aranda-Hassel says she expects the European Central Bank to cut its "deposit rate" for banks even further into negative territory, from -0.2% to -0.3% in December. "Crucially, we also expect the ECB to remove the lower bound, leaving the door open to go more negative if needed," she wrote.

With negative institutional lending rates forming a de facto tax on banks that store money with other banks, those banks will become increasingly incentivised to pass costs on to consumers.

A radical alternative: 'Impose controls on cash withdrawals.'

(http://static6.businessinsider.com/image/562b7829dd0895a8388b4602-720-576/alice_-_mad_tea_party.jpg)
Deutsche Bank analysts Abhisek Singhania and Oliver Harvey discussed the same thing, in a separate note to investors: "It may be that the direct cost to banks is not yet sufficiently high to justify passing it on to depositors. The direct costs of negative rates to the Swiss banking system amount to around USD 1bn per year."

As those costs mount, they need somewhere else to go. Consumers are at the end of the banking chain, and negative interest costs can ultimately be passed to them if banks choose. That might flush money out of banks and into the economy where it's needed, but it would also create an "Alice in Wonderland" situation, in which banks suddenly start discouraging consumers from depositing cash with them.

The problem then becomes whether consumers would actually spend their withdrawn cash or hoard it physically. Hoarding would have several weird distorting effects on society, including a new incentive for burglars to loot houses looking for piles of money under mattresses. So further harsh policies that would restrict consumer access to cash might need to be imposed, Singhania and Harvey wrote:

Bank of England policymaker Andrew Haldane has recently discussed the opportunities provided by digital currency to overcome the zero lower bound problem. If central banks were faced by deposit withdrawals, a less radical alternative could be to impose controls on cash withdrawals. Given the potential social and political problems arising from such a policy, thresholds could be set sufficiently high to encompass only very high net worth individuals. Some European nations have already announced restrictions on large cash purchases and monitoring of cash withdrawals to combat illegal economic activity.
'Tax currency holding ... or abolish it altogether.'

That sounds extreme. But Haldane is not the only central banker wondering whether it might be the next step. In a speech in May, titled "How binding is the zero lower bound?," Benoît Cœuré of the ECB said banks may either have to tax physical cash or ban it:

... perhaps the most prominent proposal is to either to tax currency holding à la Gesell [an economist who invented the idea of negative interest] or abolish it altogether, and hence to remove the arbitrage between bonds and cash. One can indeed imagine several advantages associated with such a policy, on top of pushing the lower bound further into negative territory. For example, tax on cash can act like a tax on illegal activities and would foster greater transparency. In addition, we could economise on the costs of storage and use of currency, which are not insignificant.

The mere fact that bankers are even discussing negative rates for consumers is scary. Of course, Cœuré was not suggesting that should happen right now. It would be deeply politically unpopular, since most people regard saving and thrift as virtues, and not an activity that should be punished. Cœuré concluded:

Savers already perceive a negative nominal interest rate on deposits as an unfair wealth tax and extending it to cash would deepen this perception and affect even more vulnerable members of our society.

So don't expect negative savings rates anytime soon.

But one thing you might want to look for, however, is disguised negative rates. As costs for institutional lending go up under negative policy rates, banks might pass on some of those costs to consumers in the form of one-off charges or commissions, and everyone knows what those look like on a bank statement.
Title: Who Owns the Federal Reserve Bank—and Why is It Shrouded in Myths and Mysteries?
Post by: RE on December 21, 2015, 01:12:20 AM
http://www.globalresearch.ca/who-owns-the-federal-reserve-bank-and-why-is-it-shrouded-in-myths-and-mysteries/5496873 (http://www.globalresearch.ca/who-owns-the-federal-reserve-bank-and-why-is-it-shrouded-in-myths-and-mysteries/5496873)


Who Owns the Federal Reserve Bank—and Why is It Shrouded in Myths and Mysteries?

By Prof. Ismael Hossein-Zadeh
Global Research, December 19, 2015
Region: USA
Theme: Global Economy

It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning. (Henry Ford)

Give me control of a Nation’s money supply, and I care not who makes its laws. (M. A. Rothschild)


(http://www.globalresearch.ca/wp-content/uploads/2015/12/la-reserve-federale-americaine-400x300.jpg)
The Federal Reserve Bank (or simply the Fed), is shrouded in a number of myths and mysteries. These include its name, its ownership, its purported independence form external influences, and its presumed commitment to market stability, economic growth and public interest.

The first MAJOR MYTH, accepted by most people in and outside of the United States, is that the Fed is owned by the Federal government, as implied by its name: the Federal Reserve Bank. In reality, however, it is a private institution whose shareholders are commercial banks; it is the “bankers’ bank.” Like other corporations, it is guided by and committed to the interests of its shareholders—pro forma supervision of the Congress notwithstanding.

The choice of the word “Federal” in the name of the bank thus seems to be a deliberate misnomer—designed to create the impression that it is a public entity. Indeed, misrepresentation of its ownership is not merely by implication or impression created by its name. More importantly, it is also officially and explicitly stated on its Website: “The Federal Reserve System fulfills its public mission as an independent entity within government. It is not owned by anyone and is not a private, profit-making institution” [1].

To unmask this blatant misrepresentation, the late Congressman Louis McFadden, Chairman of the House Banking and Currency Committee in the 1930s, described the Fed in the following words:

    Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders.

The fact that the Fed is committed, first and foremost, to the interests of its shareholders, the commercial banks, explains why its monetary policies are increasingly catered to the benefits of the banking industry and, more generally, the financial oligarchy. Extensive deregulations that led to the 2008 financial crisis, the scandalous bank bailouts in response to the crisis, the continued showering of the “too-big-to-fail” financial institutions with interest-free money, the failure to impose effective restraints on these institutions after the crisis, the brutal neoliberal cuts in social safety net programs in order to pay for the gambling losses of high finance, and other similarly cruel austerity policies—can all be traced to the political and economic power of the financial oligarchy, exerted largely through monetary policies of the Fed.

It also explains why many of the earlier U.S. policymakers resisted entrusting the profit-driven private banks with the critical task of money supply and credit creation:

    The [private] Central Bank is an institution of the most deadly hostility existing against the principles and form of our constitution . . . . If the American people allow private banks to control the issuance of their currency . . ., the banks and corporations that will grow up around them will deprive the people of all their property until their children will wake up homeless on the continent their fathers conquered (Thomas Jefferson, 3rd U.S. President).

In 1836, Andrew Jackson abolished the Bank of the United States, arguing that it exerted undue and unhealthy influence over the course of the national economy. From then until 1913, the United States did not allow the formation of a private central bank. During that period of nearly three quarters of a century, monetary policies were carried out, more or less, according to the U.S. Constitution: Only the “Congress shall have power . . . to coin money, regulate the value thereof” (Article 1, Section 8, U.S. Constitution). Not long before the establishment of the Federal Reserve Bank in 1913, President William Taft (1909-1913) pledged to veto any legislation that included the formation of a private central bank.

Soon after Woodrow Wilson replaced William Taft as president, however, the Federal Reserve Bank was founded (December 23, 1913), thereby centralizing the power of U.S. banks into a privately owned entity that controlled interest rate, money supply, credit creation, inflation, and (in roundabout ways) employment. It could also lend money to the government and earn interest, or a fee—money that the government could create free of charge. This ushered in the beginning of the gradual rise of national debt, as the government henceforth relied more on borrowing from banks than self-financing, as it had done prior to granting the power of money-creation to the private banking system. Three years after signing the Federal Reserve Act into law, however, Wilson is quoted as having stated:

    I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world. No longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men [2].

While many independent thinkers and policy makers of times past thus viewed the unchecked power of private central banks as a vice not to be permitted to interfere with a nation’s monetary/economic policies, most economists and policy makers of today view the independence of central banks from the people and the elected bodies of government as a virtue!

And herein lies ANOTHER MYTH that is created around the Fed: that it is an independent, purely technocratic or disinterested policy-making entity that is solely devoted to national interests, free of all external influences. Indeed, a section or chapter in every college or high school textbook on macroeconomics, money and banking or finance is devoted to the “advantages” of the “independence” of private central banks to determine the “proper” level of money supply, of inflation or of the volume of credit that an economy may need—always equating independence from elected authorities and citizens with independence in general. In reality, however, central bank independence means independence from the people and the elected bodies of government—not from the powerful financial interests.

    Independence has really come to mean a central bank that has been captured by Wall Street interests, very large banking interests. It might be independent of the politicians, but it doesn’t mean it is a neutral arbiter. During the Great Depression and coming out of it, the Fed took its cues from Congress. Throughout the entire 1940s, the Federal Reserve as a practical matter was not independent. It took its marching orders from the White House and the Treasury—and it was the most successful decade in American economic history [3].

Another MAJOR MYTH associated with the Fed is its purported commitment to national and/or public interest. This presumed mission is allegedly accomplished through monetary policies that would mitigate financial bubbles, adjust credit or money supply to commercial and manufacturing needs, and inject buying power into the economy through large scale investment in infrastructural projects, thereby fostering market stability and economic expansion.

Such was indeed the case in the immediate aftermath of the Great Depression and WW II when the Fed had to follow the guidelines of the Congress, the White House and the Treasury Department. As the regulatory framework of the New Deal economic policies restricted the role of commercial banks to financial intermediation between savers and investors, finance capital moved in tandem with industrial capital, as it essentially greased the wheels of industry, or production. Under those circumstances, where financial institutions served largely as conduits that aggregated and funneled national savings to productive investment, financial bubbles were rare, temporary and small.

Not so in the age of finance capital. Freed from the regulatory constraints of the immediate post-WW II period (which determined the types, quantities and spheres of its investments), the financial sector has effectively turned into a giant casino. Accordingly, the Fed has turned monetary policy (since the days of Alan Greenspan) into an instrument of further enriching the rich by creating and safeguarding asset-price bubbles. In other words, the Fed’s monetary policy has effectively turned into a means of redistribution from the bottom up.

This is no speculation or conspiracy theory: redistributive effects of the Fed policies in favor of the financial oligarchy are backed by undeniable facts and figures. For example, a recent study by the Pew Research Center of income/wealth distribution (published on December 9, 2015) shows that the systematic and escalating socio-economic polarization has led to a sharp decline in the number of middle-income Americans.

The study reveals that, for the first time, middle-income households no longer constitute the majority of American house-holds: “Once in the clear majority, adults in middle-income households in 2015 were matched in number by those in lower- and upper-income households combined.” Specifically, while adults in middle-income households constituted 60.1 percent of total adult population in 1971, they now constitute only 49.9 percent.

According to the Pew report, the share of the national income accruing to middle-income households declined from 62 percent in 1970 to 43 percent in 2014. Over the same period of time, the share of income going to upper-income households rose from 29 percent to 49 percent.

A number of critics have argued that, using its proxies at the heads of the Fed and the Treasury, the financial oligarchy used the financial crisis of 2008 as a shock therapy to transfer trillions of taxpayer dollars to its deep pockets, thereby further aggravating the already lopsided distribution of resources. The Pew study unambiguously confirms this expropriation of national resource by the financial elites. It shows that the pace of the rising inequality has accelerated in the aftermath of the 2008 market implosion, as asset re-inflation since then has gone almost exclusively to oligarchic financial interests.

Proxies of the financial oligarchy at the helm of economic policy making no longer seem to be averse to the destabilizing bubbles they help create. They seem to believe (or hope) that the likely disturbances from the bursting of one bubble could be offset by creating another bubble! Thus, after dot-com bubble, came the housing bubble; after that, energy-price and emerging markets bubble, after that, the junk bond market bubble, and so on. By the same token as the Fed re-inflates one bubble after another, it also systematically redistributes wealth and income from the bottom up.

This is an extremely ominous trend because, aside from issues of social justice and economic insecurity for the masses of the people, the policy of creating and protecting asset bubbles on a regular basis is also unsustainable in the long run. No matter how long or how much they may expand financial bubbles—like taxes and rents under feudalism—are ultimately limited by the amount of real values produced in an economy.

*******

Is there a solution to the ravages wrought to the economies/societies of the core capitalist countries by the accumulation needs of parasitic finance capital—largely fostered or facilitated by the privately-owned central banks of these countries?

Yes, there is indeed a solution. The solution is ultimately political. It requires different politics and/or policies: politics of serving the interests of the overwhelming majority of the people, instead of a cabal of financial oligarchs.

The fact that profit-driven commercial banks and other financial intermediaries are major sources of financial instability is hardly disputed. It is equally well-known that, due to their economic and political influence, powerful financial interests easily subvert government regulations, thereby periodically reproducing financial instability and economic turbulence. By contrast, public-sector banks can better reassure depositors of the security of their savings, as well as help direct those savings toward socially-beneficial credit allocation and productive investment.

Therefore, ending the recurring crises of financial markets requires placing the destabilizing financial intermediaries under public ownership and democratic control. It is only logical that the public, not private, authority should manage people’s money and their savings, or economic surplus. As the late German Economist Rudolf Hilferding argued long time ago, the system of centralizing people’s savings and placing them at the disposal of profit-driven private banks is a perverse kind of socialism, that is, socialism in favor of the few:

    In this sense a fully developed credit system is the antithesis of capitalism, and represents organization and control as opposed to anarchy. It has its source in socialism, but has been adapted to capitalist society; it is a fraudulent kind of socialism, modified to suit the needs of capitalism. It socializes other people’s money for use by the few [4].

There are compelling reasons not only for higher degrees of reliability but also higher levels of efficacy of public-sector banking and credit system when compared with private banking—both on conceptual and empirical grounds. Nineteenth century neighborhood savings banks, Credit Unions, and Savings and Loan associations in the United States, Jusen companies in Japan, Trustee Savings banks in the UK, and the Commonwealth Bank of Australia all served the housing and other credit needs of their communities well. Perhaps a most interesting and instructive example is the case of the Bank of North Dakota, which continues to be owned by the state for nearly a century—widely credited for the state’s budget surplus and its robust economy in the midst of the harrowing economic woes in many other states.

The idea of bringing the banking industry, national savings and credit allocation under public control or supervision is not necessarily socialistic or ideological. In the same manner that many infrastructural facilities such as public roads, school systems and health facilities are provided and operated as essential public services, so can the supply of credit and financial services be provided on a basic public utility model for both day-to-day business transactions and long-term industrial projects.

Provision of financial services and/or credit facilities after the model of public utilities would allow for lower financial costs to both producers and consumers. Today, between 35 percent and 40 percent of all consumer spending is appropriated by the financial sector: bankers, insurance companies, non-bank lenders/financiers, bondholders, and the like [5]. By freeing consumers and producers from what can properly be called the financial overhead, or rent, similar to land rent under feudalism, the public option credit and/or banking system can revive many stagnant economies that are depressed under the crushing burden of never-ending debt-servicing obligations.

References

[1] “Who owns the Federal Reserve?” < http://www.federalreserve.gov/faqs/about_14986.htm (http://www.federalreserve.gov/faqs/about_14986.htm)>.

[2] This statement of President Wilson is quoted in numerous places. A number of commentators have argued that some of the damning words used in this much-quoted statement are either not Wilson’s own, or taken out of context. Nobody denies, however, that regardless of the exact words used, he had serious reservations about the formation of the Federal Reserve Bank, and the misguided policy of delegating the nation’s money supply and/or monetary policy to a cabal of private bankers.

[3]. Ellen Brown, “How the Fed Could Fix the Economy—and Why It Hasn’t,” <http://www.webofdebt.com/articles/fedfixeconomy.php>.

[4] Hilferding’s book, Finance Capital: A Study of the Latest Phase of Capitalist Development, has gone through a number of prints/reprints. This quotation is from Chapter 10 of an online version of the book, which is available at: <http://www.marxists.org/archive/hilferding/1910/finkap/ch10.htm>.

[5]. Margrit Kennedy, Occupy Money: Creating an Economy Where Everybody Wins, Gabriola Island, BC (Canada): New Society Publishers, 2012.

Ismael Hossein-zadeh is Professor Emeritus of Economics (Drake University). He is the author of Beyond Mainstream Explanations of the Financial Crisis (Routledge 2014), The Political Economy of U.S. Militarism (Palgrave–Macmillan 2007), and the Soviet Non-capitalist Development: The Case of Nasser’s Egypt (Praeger Publishers 1989). He is also a contributor to Hopeless: Barack Obama and the Politics of Illusion.
The original source of this article is Global Research
Copyright © Prof. Ismael Hossein-Zadeh, Global Research, 2015
Title: Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears
Post by: RE on January 16, 2016, 02:33:09 PM
Explains why we haven't seen more of the frackers go belly up or their bankster codependents either.  YET.  ::)

This will be something to behold when it finally blows.

(http://www.doomsteaddiner.net/blog/wp-content/uploads/2015/04/Debt_Volcano.jpg)

RE

http://www.zerohedge.com/news/2016-01-16/exclusive-dallas-fed-quietly-suspends-energy-mark-market-tells-banks-not-force-shale (http://www.zerohedge.com/news/2016-01-16/exclusive-dallas-fed-quietly-suspends-energy-mark-market-tells-banks-not-force-shale)

Exclusive: Dallas Fed Quietly Suspends Energy Mark-To-Market On Default Contagion Fears

Submitted by Tyler Durden on 01/16/2016 14:21 -0500

    Dallas Fed default goldman sachs Goldman Sachs Jamie Dimon Reflexivity Regional Banks Regions Financial Warren Buffett Wells Fargo
 

Earlier this week, before first JPM and then Wells Fargo revealed that not all is well when it comes to bank energy loan exposure, a small Tulsa-based lender, BOK Financial, said that its fourth-quarter earnings would miss analysts’ expectations because its loan-loss provisions would be higher than expected as a result of a single unidentified energy-industry borrower. This is what the bank said:

    “A single borrower reported steeper than expected production declines and higher lease operating expenses, leading to an impairment on the loan. In addition, as we noted at the start of the commodities downturn in late 2014, we expected credit migration in the energy portfolio throughout the cycle and an increased risk of loss if commodity prices did not recover to a normalized level within one year. As we are now into the second year of the downturn, during the fourth quarter we continued to see credit grade migration and increased impairment in our energy portfolio. The combination of factors necessitated a higher level of provision expense."

Another bank, this time the far larger Regions Financial, said its fourth-quarter charge-offs jumped $18 million from the prior quarter to $78 million, largely because of problems with a single unspecified energy borrower. More than one-quarter of Regions’ energy loans were classified as “criticized” at the end of the fourth quarter.

It didn't stop there and and as the WSJ added, "It’s starting to spread" according to William Demchak, chief executive of PNC Financial Services Group Inc. on a conference call after the bank’s earnings were announced. Credit issues from low energy prices are affecting "anybody who was in the game as the oil boom started,” he said. PNC said charge-offs rose in the fourth quarter from the prior quarter but didn’t specify whether that was due to issues in its relatively small $2.6 billion oil-and-gas portfolio.

Then, on Friday, U.S. Bancorp disclosed the specific level of reserves it holds against its $3.2 billion energy portfolio for the first time. "The reason we did that is that oil is under $30" said Andrew Cecere, the bank’s chief operating officer. What else will Bancorp disclose if oil drops below $20... or $10?

It wasn't just the small or regional banks either: as we first reported, on Thursday JPMorgan did something it hasn't done in 22 quarter: its net loan loss reserve increased as a result of a jump in energy loss reserves. On the earnings call, Jamie Dimon said that while he is not worried about big oil companies, his bank has started to increase provisions against smaller energy firms.

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/01/JPM%20reserve%20release_1_0.jpg)

Then yesterday it was the turn of the one bank everyone had been waiting for, the one which according to many has the greatest exposure toward energy: Wells Fargo. To be sure, in order not to spook its investors, among whom most famously one Warren Buffett can be found, for Wells it was mostly "roses", although even Wells had no choice but to set aside $831 million for bad loans in the period, almost double the amount a year ago and the largest since the first quarter of 2013.

What was laughable is that the losses included $118 million from the bank’s oil and gas portfolio, an increase of $90 million from the third quarter. Why laughable? Because that $90 million in higher oil-and-gas loan losses was on a total of $17 billion in oil and gas loans, suggesting the bank has seen a roughly 0.5% impairment across its loan book in the past quarter.

How could this be? Needless to say, this struck us as very suspicious because it clearly suggests that something is going on for Wells (and all of its other peer banks), to rep and warrant a pristine balance sheet, at least until a "digital" moment arrives when just like BOK Financial, banks can no longer hide the accruing losses and has to charge them off, leading to a stock price collapse.

Which brings us to the focus of this post: earlier this week, before the start of bank earnings season, before BOK's startling announcement, we reported we had heard of a rumor that Dallas Fed members had met with banks in Houston and explicitly "told them not to force energy bankruptcies" and to demand asset sales instead.

We can now make it official, because moments ago we got confirmation from a second source who reports that according to an energy analyst who had recently met Houston funds to give his 1H16e update, one of his clients indicated that his firm was invited to a lunch attended by the Dallas Fed, which had previously instructed lenders to open up their entire loan books for Fed oversight; the Fed was shocked by with it had found in the non-public facing records. The lunch was also confirmed by employees at a reputable Swiss investment bank operating in Houston.

This is what took place: the Dallas Fed met with the banks a week ago and effectively suspended mark-to-market on energy debts and as a result no impairments are being written down. Furthermore, as we reported earlier this week, the Fed indicated "under the table" that banks were to work with the energy companies on delivering without a markdown on worry that a backstop, or bail-in, was needed after reviewing loan losses which would exceed the current tier 1 capital tranches.

In other words, the Fed has advised banks to cover up major energy-related losses.

 Why the reason for such unprecedented measures by the Dallas Fed? Our source notes that having run the numbers, it looks like at least 18% of some banks commercial loan book are impaired, and that’s based on just applying the 3Q marks for public debt to their syndicate sums.

In other words, the ridiculously low increase in loss provisions by the likes of Wells and JPM suggest two things: i) the real losses are vastly higher, and ii) it is the Fed's involvement that is pressuring banks to not disclose the true state of their energy "books."

Naturally, once this becomes public, the Fed risks a stampeded out of energy exposure because for the Fed to intervene in such a dramatic fashion it suggests that the US energy industry is on the verge of a subprime-like blow up.

Putting this all together, a source who wishes to remain anonymous, adds that equity has been levitating only because energy funds are confident the syndicates will remain in size to meet net working capital deficits. Which is a big gamble considering that as we firsst showed ten days ago, over the past several weeks banks have already quietly reduced their credit facility exposure to at least 25 deeply distressed (and soon to be even deeper distressed) names.

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/01/yanked%20revolvers_0.jpg)

However, the big wildcard here is the Fed: what we do not know is whether as part of the Fed's latest "intervention", it has also promised to backstop bank loan losses. Keep in mind that according to Wolfe Research and many other prominent investors, as many as one-third of American oil-and-gas producers face bankruptcy and restructuring by mid-2017 unless oil rebounds dramatically from current levels.

However, the reflexivity paradox embedded in this problem was laid out yesterday by Goldman who explained that oil could well soar from here but only if massive excess supply is first taken out of the market, aka the "inflection phase."  In other words, for oil prices to surge, there would have to be a default wave across the US shale space, which would mean massive energy loan book losses, which may or may not mean another Fed-funded bailout of US and international banks with exposure to shale.

What does it all mean? Here is the conclusion courtesy of our source:

    If revolvers are not being marked anymore, then it's basically early days of subprime when mbs payback schedules started to fall behind. My question for bank eps is if you issued terms in 2013 (2012 reserves) at 110/bbl, and redetermined that revolver in 2014 ‎at 86, how can you be still in compliance with that same rating and estimate in 2016 (knowing 2015 ffo and shutins have led to mechanically 40pc ffo decreases year over year and at least 20pc rebooting of pud and pdnp to 2p via suspended or cancelled programs). At what point in next 12 months does interest payments to that syndicate start to unmask the fact that tranch is never being recovered, which I think is what pva and mhr was all about.

Beyond just the immediate cash flow and stock price implications and fears that the situation with US energy is much more serious if it merits such an intimate involvement by the Fed, a far bigger question is why is the Fed once again in the a la carte bank bailout game, and how does it once again select which banks should mark their energy books to market (and suffer major losses), and which ones are allowed to squeeze by with fabricated marks and no impairment at all? Wasn't the purpose behind Yellen's rate hike to burst a bubble? Or is the Fed less than "macroprudential" when it realizes that pulling away the curtain on of the biggest bubbles it has created would result in another major financial crisis?

The Dallas Fed, whose new president Robert Steven Kaplan previously worked at Goldman Sachs for 22 years rising to the rank of vice chairman of investment banking, has not responded to our request for a comment as of this writing.
Title: Re: Da Fed: Central Banking According to RE
Post by: g on January 16, 2016, 02:53:25 PM
Quote
The Dallas Fed, whose new president Robert Steven Kaplan previously worked at Goldman Sachs SUCHS for 22 years rising to the rank of vice chairman of investment banking, has not responded to our request for a comment as of this writing.

This is all one has to know RE. We have been overrun by an Evil Corrupt Presence that has destroyed and rotted out our society.

It is awfully difficult to not be a doomer of some degree.  :-\
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on January 16, 2016, 05:22:41 PM
It is awfully difficult to not be a doomer of some degree.  :-\

Agreed there too.

However, Professor Moriarty manages to avoid it by ignoring everything that contradicts his cornucopian spin.  Sticking your head up your ass works for some people.  ::)

(http://eviestewartsfunnybone.com/wp-content/uploads/2013/09/head-up-ass.jpg)

RE
Title: Dammit Janet Smellin' Yellen Under Fire
Post by: RE on February 11, 2016, 01:38:45 AM
If she refused to comply with a subpoena, why not lock her up for contempt of congress?

RE

Here Is The Exchange That Left A Stunned Janet Yellen Looking Like A Deer In Headlights

Submitted by Tyler Durden on 02/10/2016 21:18 -0500

    George Soros House Financial Services Committee Janet Yellen Monetary Policy Prison Time Recession



inShare23
 

For nearly one year, Wisconsin Rep. Sean Duffy has been Janet Yellen's nemesis over the ongoing  probe into Fed leakage of material inside information via Medley Global and any other undisclosed channels, one which has seen subpoeans be lobbed at the Fed which has been doing everything in its power to stall said probe, and which cost Pedro da Costa his job when he dared to ask questions at a Fed presser that were not precleared by his WSJ "Fed mouthpiece" peers.

Today, during Yellen's appearance before the House Financial Services committee, Duffy finally had enough, and in a heated exchange asked Yellen what on legal authority is the Fed exerting privilege to ignore a Congressional probe into what is clearly a criminal leak, one which has nothing to do with monetary policy and everything to do with the Fed providing material, market moving information to its favorite media and financial outlets.

The exchange highlights are below:

    DUFFY: We sent a letter in the Medley investigation, in our oversight of the Fed, asking you for information regarding communication. No compliance. Then we sent you a subpoena in May, you did not comply with that.

     

    We had partial compliance in October. We're now a year after my initial letter. I've asked you for excerpts of the FOMC transcripts in regard to the discussion -- in regard to the internal investigation on Medley. You have not provided those to me. Is it your intent today to promise that I will have those, if not this afternoon, tomorrow?

     

    YELLEN: Well, congressman, I discussed this matter with Chairman Hensarling and indicated we have some concern about providing these transcripts... given their importance in monetary policy.

     

     

    DUFFY: So let me just...

     

    YELLEN: And I received a note back from Chairman Hensarling last night, quite late, indicating your response to that. And we will consider it and get back to you as soon as we can.

     

    DUFFY: Oh no, no. I don't want you to consider it and I think the chairman would agree with me, that this is a conversation, not about monetary policy. This is not market-moving stuff. This is about the investigation and the conversation of a leak inside of your organization. So this institution is entitled to those documents, wouldn't you agree?

     

    YELLEN: I will get back to you with the formal answer.

     

    DUFFY: No, no, listen.

     

    YELLEN: I believe that we have provided you with all the relevant information.

     

    DUFFY: That's not my question for you Chair Yellen. If I'm not entitled to it, can you give me the privilege that you're going exert that's going to let me know why I'm not entitled to those documents?

     

    YELLEN: I said we received well after the close of business yesterday a letter explaining your reasoning and I will need some time to discuss this matter with my staff.

     

    DUFFY: I don't want -- listen. I sent you a letter a year ago on February 5th. I had to send you a subpoena. You knew that I'm looking for these documents, you knew I was going to ask you about this today. So if you're not going to give me the documents, exert your privilege, tell me your legal authority, why you're not going to provide this to us.

And while a video of the exchange can be watched below (we will substitute a higher quality version when we can find one)...


The end result was this:

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/yellen deer in headlights.jpg)

... which after just one more push by a few good men in authority, will be the same as another picture very familiar to regular Zero Hedge readers.

(http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2016/02/09/deer headlights.jpg)

We just wonder if there are still a "few good men" left, daring to challenge the head of the Fed on what any other mere mortal would have been in prison for, long ago.

As for the "deer in headlights" look, and why Yellen is so adamantly refusing to comply with subpoenas and provide the US population and Rep. Duffy with the requested information regarding how it was that the Fed leaked critical information to Medley Global's (founded by Richard Medley, former chief political strategist to George Soros) Regina Schleiger, the answer as Yellen explained last May...

... is simple: Yellen herself was the source, only there is no definitive proof... yet, as confirmation that the Chairwoman herself leaked the information in question would be grounds for prison time.

And since we doubt that Janet would chose a legacy of being the first Fed Chairman thrown in jail, even if it is not that far below a legacy of totally mangling the Fed's attempt at renormalizing rates at a time when the entire world was careening into a recession, we expect absolutely no cooperation by the Fed in this ongoing criminal matter.
Title: Stop the Fed Before it Kills Again
Post by: RE on September 10, 2016, 02:02:12 PM
http://www.counterpunch.org/2016/09/09/stop-the-fed-before-it-kills-again/ (http://www.counterpunch.org/2016/09/09/stop-the-fed-before-it-kills-again/)

September 9, 2016
Stop the Fed Before it Kills Again

by Mike Whitney


(http://uziiw38pmyg1ai60732c4011.wpengine.netdna-cdn.com/wp-content/dropzone/2016/09/shutterstock_417681448.jpg)

Why has the Fed created incentives for US corporations to loot their companies and drive them deeper into debt?

Despite four consecutive quarters of negative earnings, weak demand and anemic sales, US corporations continue to load up on debt, buy back their own shares and hand out cash to their shareholders that greatly exceeds the amount of profits they are currently taking in. According to the Wall Street Journal: “SandP 500 companies through the first two quarters of the year collectively returned 112% of their earnings through buybacks and dividends.”

You read that right, US corporations are presently giving back more than they are taking in, which is the moral equivalent of devouring one’s offspring.

These companies have all but abandoned the traditional practice of recycling earnings into factories, productivity or research and development. Instead, they’re engaged in a protracted liquidation process where the creditworthiness of their companies is used to borrow as much money as possible from the bond market which is then divvied up among insatiable CEOs and their shareholders. This destructive behavior can be traced back to the perennial low rates and easy money that the Fed has created to enhance capital accumulation during a period when the economy is still mired in stagnation. The widening chasm that has emerged between the uber-wealthy and everyone else since the end of the financial crisis in 2008, attests to the fact that the Fed’s plan has succeeded beyond anyone’s wildest imagination. The rich continue to get richer while the middle class drowns in an ocean of red ink. This is from CNBC:

    “Corporate debt is projected to swell over the next several years, thanks to cheap money from global central banks, according to a report Wednesday that warns of a potential crisis from all that new, borrowed cash floating around.

    By 2020, business debt likely will climb to $75 trillion from its current $51 trillion level, according to SandP Global Ratings. Under normal conditions, that wouldn’t be a major problem so long as credit quality stays high, interest rates and inflation remain low, and there are economic growth persists.

    However…should interest rates rise and economic conditions worsen, corporate America could be facing a major problem as it seeks to manage that debt. Rolling over bonds would become more difficult should inflation gain and rates raise, while a slowing economy would worsen business conditions and make paying off the debt more difficult. …

    Central banks remain in thrall to the idea that credit-fueled growth is healthy for the global economy,” SandP said. “In fact, our research highlights that monetary policy easing has thus far contributed to increased financial risk, with the growth of corporate borrowing far outpacing that of the global economy…” (Corporate debt seen ballooning to $75 trillion: SandP says, CNBC)

Well, if the risks are so great, then why is the Fed encouraging the bad behavior by perpetuating its low rates and super accommodative monetary policies?

Could it be that the Fed is not really the “independent” institution its proponents claim it to be, but the policymaking arm of the big Wall Street investment banks and the mega-corporations that arbitrarily impose the policies that best serve their own profit-making ambitions?

It sure looks that way to me, after all, how many jobs were actually created by the Fed’s $3 trillion in QE?

How about zero. In contrast, stock prices have more than tripled during the same period increasing the net-worth of US plutocrats by many orders of magnitude. Bottom line: Fed policy has been a windfall for the moocher class, but a bust for everyone else.

But there are risks associated with the Fed’s trickle up policies. For example, check out this blurb from an article in last week’s Wall Street Journal on dividends:

    “The data highlight the stampede into dividend-paying stocks in response to the plunge of interest rates in recent years. Many investors now are supplementing slumping fixed-income payouts with high-yielding shares, a strategy that some analysts warn could expose buyers to the risk of large capital losses that could wipe out years of income.

    That risk appears particularly acute in part because earnings, historically the strongest driver of stock-price gains, are in retreat and valuations are above long-term averages. Many companies are paying more in dividends than they are earning, a practice that analysts view as unsustainable for the long term…

    The problem: There is only so much that companies can raise their payouts to shareholders if their profits aren’t keeping pace. And right now, U.S. corporations are struggling to boost profits….” (Dividends are what matter now, Wall Street Journal)

What does that mean in plain English? It means that Mom and Pop investors are increasingly rolling the dice with their meager retirement nest-eggs by moving their money from ultra-safe fixed-income investments (like US Treasuries) to volatile equities (that could crash in the blink of an eye) because the Fed’s perennial low rates have prevented them from getting a decent return on their savings. Zero rates are the equivalent of putting a gun to Pop’s head and frog-marching him back into the stock market. Does that make sense? Here’s more from the same article:

    “With dividends up and earnings down, companies are handing out an increasing amount of their earnings in such payouts to investors. During the second quarter, that measure was at its highest since 2009, according to SandP.

    “I tend to think that there will come a point when dividend growth will be slowed if earnings and sales don’t improve,” said Sam Stovall, U.S. equity strategist at SandP Global Market Intelligence.” (WSJ)

Good call, Sam. Companies can’t keep boosting dividends if earnings continue to shrivel. And earnings WILL continue to shrivel unless the government increases its (deficit) spending enough to rev up growth. And that’s not going to happen anytime soon, so don’t hold your breath.

The only thing that’s keeping this Ponzi scam afloat is the fact that companies are borrowing hundreds of billions of dollars in the bond market from yield-starved investors who honestly believe the CEOs are investing the money in their company’s future. But that’s not what they’re doing. They’re taking the money and putting it in their pockets so they can add another Lamborghini or Marc Chagall to their collection. That’s where the dough is really going, into a big black hole created by our friends at the Federal Reserve.

And the same is true of stock buybacks, another swindle that persists due to the Fed’s suicidal interest rate policy. The surge in buybacks during a period when the economy is dramatically underperforming, is due entirely to the ridiculous availability of credit at rock-bottom prices. So, even though consumers and households are not borrowing in numbers great enough to put the economy back on track, CEO’s are piling on the debt to purchase their own shares thus destroying their own prospects for future growth. It’s what you call corporate hara kiri. Take a look at this clip from an article at Barron’s:

    “Corporate debt is now near record levels, due in part to borrowing to buy back stock. It isn’t a situation that can last.

    The bond market should be concerned about stock buybacks, but not because of their bullish effect on share prices. Instead, bondholders should be anxious about where the cash to pay for them comes from. It isn’t widely appreciated that the money has been borrowed in the credit markets, and that the borrowers have taken on a large amount of debt to support the buybacks. That’s cause for worry on several fronts.

    The first is simply that outstanding corporate debt is now at a record high. … According to the Federal Reserve’s flow of funds data, outstanding nonfinancial corporate debt is 45.3% of GDP. That nearly matches the level seen in the first quarter of 2009 (45.4%) and exceeds the prior peak of 44.9% achieved in the third quarter of 2001…

    In the first quarter, nonfinancial corporate borrowing hit $724 billion. That’s the second-highest on record and is surpassed only by, again, the third quarter of 2007 with $807 billion. The similarities should give pause.” (Stock Buybacks Are Driving Companies Into Debt, Barron’s)

Of course, the Fed has all this data at its fingertips, but it persists with the same lethal policies in spite of it all because the objectives of its rich constituents far outweigh the dangers to the general public. That’s just the nature of the beast.

It’s beyond me how anyone can watch the way this treacherous, double-dealing organization works and not support the movement to see it dismantled once and for all.

End the Fed more than an empty slogan, it’s a fight for survival.
Join the debate on Facebook

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.
Title: Re: Stop the Fed Before it Kills Again
Post by: monsta666 on September 10, 2016, 02:21:51 PM
http://www.counterpunch.org/2016/09/09/stop-the-fed-before-it-kills-again/ (http://www.counterpunch.org/2016/09/09/stop-the-fed-before-it-kills-again/)

September 9, 2016
Stop the Fed Before it Kills Again

It is articles like this that make me a bit peeved when people describe debt as merely a problem of government or consumers. Whilst I am not arguing that the government or average Joe is sensible with their finances the arguments made often suggest that the private sector are more financially response than the lazy incompetent government. This is false. At the very least they are as bad as each other but I would argue that the private sector (focusing on the largest corporations) is worse due to the fact it is less accountable and transparent to the general public. In England they often go on about deficit spending and government reaching 100% GDP but did you know corporate and financial debt total over 500% GDP in England? If government are irresponsible then corporations are suicide bombers or at least holders of weapons of mass financial destruction.
Title: Re: Stop the Fed Before it Kills Again
Post by: RE on September 10, 2016, 04:01:33 PM
http://www.counterpunch.org/2016/09/09/stop-the-fed-before-it-kills-again/ (http://www.counterpunch.org/2016/09/09/stop-the-fed-before-it-kills-again/)

September 9, 2016
Stop the Fed Before it Kills Again

It is articles like this that make me a bit peeved when people describe debt as merely a problem of government or consumers. Whilst I am not arguing that the government or average Joe is sensible with their finances the arguments made often suggest that the private sector are more financially response than the lazy incompetent government. This is false. At the very least they are as bad as each other but I would argue that the private sector (focusing on the largest corporations) is worse due to the fact it is less accountable and transparent to the general public. In England they often go on about deficit spending and government reaching 100% GDP but did you know corporate and financial debt total over 500% GDP in England? If government are irresponsible then corporations are suicide bombers or at least holders of weapons of mass financial destruction.

This bizness of loading companies up with debt and paying high salaries to board directors and dividends to stockholders until the company goes bankrupt goes back to the robber barons and railroads at least. Capitalism is a total con game, always has been.  The trick is to take out as much debt as you can, then get somebody else to pay it off.

RE
Title: Da Fed: To shit or go blind, that is the question?
Post by: RE on September 10, 2016, 04:12:12 PM
http://www.zerohedge.com/news/2016-09-10/incompetent-not-weak-fed-doesnt-know-whether-shit-or-go-blind (http://www.zerohedge.com/news/2016-09-10/incompetent-not-weak-fed-doesnt-know-whether-shit-or-go-blind)

Incompetent But Not Weak: "The Fed Doesn't Know Whether To Shit Or Go Blind"

Tyler Durden's picture

The outlook for the US economy is deteriorating, yet the Fed is trying to raise overnight rates to keep unseen inflation from rising. Success in its strategy could force consumption lower, unemployment higher, and exacerbate real output contraction. But, as Macro-Allocation.com 's Paul Brodsky explains, we should not mistake apparent incompetence for weakness.

The August Purchasing Managers Index (PMI) came in at 49.4 last week, a level that signals contraction, not just slower growth. Within the PMI, new orders fell 7.8%, production fell 5.8%, and employment dropped 1.1% from July. Only six of eighteen industries reported an increase in new orders while only eight reported an increase in production. The report followed PMI plunges in Chicago (to 51.5 from 55.8), Richmond (to a 3-year low of -11.0 from 10.0), Dallas (to -6.2 from a 19 month high of -1.3), and New York (to -4.21 from 0.55). The weak manufacturing report follows a weaker than expected service sector report in August, which now hovers only slightly above the level of contraction.

August US auto sales were also reported last week and appear to be rolling over. They declined 4% from the same month last year, the first reversal after three years of increasing demand among consumers and fleet operators needing to replace their cars following the financial crisis.

Meanwhile, ZeroHedge posted the graph at right to argue that the US soon fell into recession each of the seven times since 1970 when US construction spending rolled over, which it is doing now.

 

These data points go hand-in-hand with struggling output growth. Real GDP has labored over the last three quarters to break above a 1% annual growth rate, and the most recent data lend credence to our view that a secular slowdown is now upon us.

Indeed, the Bureau of Economic Analysis (BEA), which calculates GDP and dates recessions, noted last week: “Real Gross Domestic Income (GDI) increased 0.2 percent in the second quarter, compared with an increase of 0.8 percent in the first. The average of real GDP and GDI, a supplemental measure of US economic activity that equally weights GDP and GDI, increased 0.6 percent in the second quarter, compared with an increase of 0.8 percent in the first.”

Despite generally sunny narratives and strong equity indexes, economic data have had a bad run relative to expectations recently, as illustrated by the Citi surprise index graph abov. Economists’ dispositions remain hopeful, however, due to expectations of increased government spending in the second half, which would boost GDP.

All is not copacetic. How long would government spending boost output, and at what cost? Would the marketplace and markets be fooled as budget deficits soar? Right on cue, veteran bond strategist, David Ader, declared recently in Barron’s that “the federal budget deficit is about to explode”. The US debt-to-GDP ratio has been over 90% since 2010, and federal debt held by the public will be about 77% of GDP in 2016, the highest since 1950 according to the Congressional Budget Office (CBO). The CBO thinks the budget deficit will begin to grow again in 2016 by about 30% to $592 billion, and move higher from there, all else equal.

Even if government spending can be increased in coming years (infrastructure stimulus from the next White House?), the overall impact is bound to be negligible or negative. Lacy Hunt from Hoisington has cited Fed studies showing that government spending actually reduces private sector output growth. Mandatory spending for things like entitlements already comprise almost 70% of total government outlays. While in the past this boosted contemporaneous income for many, it merely pushed irreconcilable obligations forward.

The impact is now obvious. “Real GDP expansion averaged 3.2% annually from 1970 to 2000, 1.8% from 2000 to 2016, and 1.4% since 2006”, notes Ader. How can we conclude anything else but the trend Ader cites is on track to turn negative (along with interest rates)?

The Fed

The Fed has very few plays left when it comes to stimulating the economy and so it is punting. Indeed, output is not even in the Fed’s formal jurisdiction. Its dual objectives are stable prices and full employment. We may agree or disagree with its mandate, method and execution, but we cannot run from the reality that the expansion or restriction of credit is the Fed’s only means of trying to tweak GDP. It cannot stimulate economic activity when funding rates are already near zero percent and QE is currently off the table.

So why is the Fed so determined to hike rates? Like all politically motivated bodies, it is an institution that believes motion is progress. Perhaps the Fed would like keep wage and price inflation low, which in turn would minimize the impact of declining real output growth? The lower inflation, the higher real GDP. Or, perhaps the Fed is interested in widening net interest margins for banks, especially large ones, which have been forced to rely more and more on lending? Or maybe it feels “normalizing rates” would provide comfort to the public that the Fed could again step into the breach should another financial crisis arise?

Fed activity recently reminds one of a Rube Goldberg rhetoric machine. Between meetings its regional presidents peck the media with knowing hints an innuendo, only to have their cryptic wisdom swatted away by the markets. Nothing obvious in its current policy and operations seem able to affect output, prices or employment. In fact, there is a bit of illusion. The market should not underestimate the Fed’s power based on its apparent incompetence.

Raising the Fed Funds rate would restrict credit issued from non-bank lenders (i.e., bond buyers), but not from banks, which are more sensitive to Interest on Excess Reserves (IEOR). The Fed has been paying banks the IOER rate on $3+ trillion of reserves they keep at the Fed. This is providing banks with an easy source of revenue – the risk free spread between IOER and deposit rates. It is also ensuring banks do not lend out their excess reserves to the public, where it would be at risk of loss.

The Fed could easily stimulate credit issuance by lowering the IOER rate so that the risk-free arbitrage that banks are enjoying goes away, pressuring them to lend their excess reserves. The Fed does not seem to want to do this, but rather wants to raise the Fed Funds rate. We do not know if the Fed would raise the IOER rate if/when it raises the Fed Funds rate. If it does, then banks might enjoy an even wider net interest margin if they do not pass on higher rates to depositors.

Though a hike in the Fed Funds rate would increase bank profitability, it would also threaten the shadow banking system (fixed income markets). Investors borrowing to hold bonds would likely be charged more by banks to carry positions as Fed Funds rise. And, if the yield curve were to move higher in sympathy with Fed Fund hike, bond prices would depreciate. Alas, bond market losses from rising rates would also threaten the collateral behind loans made by the banking system.

The Fed is boxed with the financial economy it wrought, and so it has made it a point to communicate that it is focused on its mandate - inflation and jobs – and not on output growth.

As it stands, the run rate of inflation has been very stable just below 2% since 2012...

 

...and inflation expectations remain mostly quiescent, but have begun to experience more volatility as energy prices have distorted headline inflation in both directions:

 

As energy prices stabilize, producing less inflationary or deflationary impacts, attention naturally turns to potential wage inflation, which can greatly affect core inflation and, in turn, have a negative impact on real output growth.

Many economists believe wage inflation is the primary cause of overall goods and service inflation, which may help explain why the Fed is choosing to focus its attention on jobs.

With real GDP already struggling to climb above 1%, there is nothing else the Fed can do except try to lessen the economic blow it sees ahead. The Fed would never communicate that its policy is to raise the level of unemployment, but that is effectively what its policy seems to be.

The graph below shows a truer measure of America’s productive unemployment rate...

...while the graph below shows labor participation as a percent of eligible workers before, during and after America’s secular leveraging phase, from 1982 to 2007:

Meanwhile, those Americans still working have very recently begun to work less each week...

...which makes sense given the incredible productivity-enhancing innovations introduced over the last ten years, but runs counter to the Fed’s fear of higher wage and price inflation. The Fed’s fear of inflation is curious in light of goods and service prices that have increased less than its 2%/year target over the last ten years, and did not even keep pace with wage inflation, which increased about 27% in that time.

The US economy on a stable low growth or even modestly contracting path would not be a problem if it were not for the over-abundance of debt remaining as assets and liabilities on public and private sector balance sheets – debt that needs to be serviced and repaid by inflationary output growth. The graph below shows debt we can count today. It does not include: 1) past promises made that have to be met, such as social security and other entitlements, 2) off balance sheet obligations made by banks and other entities and 3) compounding interest on this and all other debt balances that naturally raise debt levels.

Against the $63 trillion in outstanding debt portrayed on the graph above, there is a relative paucity of dollars to service and repay it, only $13 trillion in M2 and only $4 trillion in base money.

Since balance sheet leverage is defined by the ratio of obligations over money (credit is simply a claim on money, not a claim on goods, services or production), GDP is coming under increasing pressure to expand. Further, GDP growth must be real (inflation adjusted). Otherwise, the growth of debt would continue to outpace production growth, which would make the leverage problem worse.

When we look at past debt growth vs. GDP growth (below), we can infer that without the leverage build up since 1982, production growth would have been far lower. The graph implies that for every dollar of debt created in 1982, one dollar of GDP was also created. Today, $1.00 of debt creates $0.38 of GDP.

And when we consider that overnight funding rates have fallen from over 20% in 1981 to 0.25% today (graph below), we can further infer that past growth cannot be repeated...not even close. Since interest rates are at the zero bound and credit spreads are very tight, there can be no more refinancing waves that would help pull future revenues forward, or that would create a leverage-led increase in asset prices.

 

As we have noted, the US economy is under increasing pressure to undergo structural change. The global economy and capital markets will be brought along with it. We cannot know when such worrisome macroeconomic fundamentals will rise to the level of broad public consciousness, and cannot know how the Fed will react when it does. We suspect the Fed will pull the trigger – perhaps explicitly, perhaps not.

It is with utmost erudition that our current read on the Fed is that until it summons the political gumption (post US election?), it does not know whether to sh*t or go blind, so it is closing one eye and f*rting. It is responding to an untenable situation as powerful institutions tend to do – by doubling down on the strategy that got it into trouble in the first place, in this case the rhetorical reliance on rigid models to produce a reasonable strategy. Its models will fail to work because systemic leverage is accelerating faster than output growth, which is compounding the problem.

The de-leveraging process, through debt deflation, currency inflation or some mix of both, is necessary and inevitable. We have speculated that the Fed and other monetary authorities will greatly devalue their currencies, which would diminish the burden of debt service and repayment while not sacrificing debt covenants. We stand by this position and will continue to allocate capital in our model portfolios (and elsewhere) accordingly.

Title: What Would it Cost a Country to Leave the Euro?
Post by: RE on February 08, 2017, 07:14:25 AM
A crack in the door of the Hotel California?

If I was leaving the Euro, I wouldn't pay a fucking penny of what I owed in Target 2.  Fuck you Banksters!  Here, take my NEW Toilet Paper and wipe your ass with it!

RE

http://wolfstreet.com/2017/02/07/what-would-it-cost-a-country-to-leave-the-euro-thats-what-everyone-suddenly-wants-to-know/ (http://wolfstreet.com/2017/02/07/what-would-it-cost-a-country-to-leave-the-euro-thats-what-everyone-suddenly-wants-to-know/)


What Would it Cost a Country to Leave the Euro? That’s What Everyone Suddenly Wants to Know

by Wolf Richter • Feb 7, 2017 • 15 Comments   
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It’s the closest the Eurozone has come to falling apart.

Marine Le Pen, the leader of the National Front, will get enough votes in April during the first round of the French presidential election but will be defeated in the second-round runoff in May, according to the polls. So at least hopes the French political class, and by extension the European establishment.

They’re hoping Le Pen would be defeated because she is campaigning on taking France out of the euro (after holding a referendum) and re-denominating the entire €2.4 trillion pile of French government debt into new franc. Then the government can just print the money it wants to spend.

There are some complications with her plan, including that the diverse and bickering French political class will unite into a slick monolithic bloc against her during the second round. And if she still wins, her government will face that bloc in parliament. But hey. And now people are seriously thinking about it.

Greece was on the verge of leaving the euro, but then within a millimeter of actually taking the step, it blinked and inched back from the precipice in the hot summer of 2015. And so for now still no one knows what the cost would be to leave… they can only grapple with the costs of staying.

In Italy, the Five Star Movement, which has been gaining momentum, is making noises about a referendum on euro membership. Italy has a special set of problems: It wants to bail out its banks but doesn’t have the money to do it; and it needs to devalue its currency as it had done so many times before it joined the euro, but has no currency it can devalue.

So the question of what it would cost to leave the euro is uncomfortably on everyone’s mind and lips – that’s how far this has gone.

One thing is clear: If a country leaves the euro and devalues its new currency, it practically must re-denominate all its existing government debt into the new currency because it would be impossible to service the euro debt with a devalued new currency.

The ratings agencies, with their eyes on those euro bonds, have already spoken up. Moritz Kraemer, S&P’s head of sovereign ratings, wrote in a letter published in the Economist on February 4 that Le Pen’s plan of re-denominating French debt into new francs would constitute a sovereign default:

    There is no ambiguity here: it would. If an issuer does not adhere to the contractual obligations to its creditors, including payment in the currency stipulated, S&P Global Ratings would declare a default. Our current AA rating on France suggests, however, that such a turn of events is highly unlikely.




In other words, S&P doesn’t believe that Le Pen will get that far, and so they have not yet slapped a “D” for default on French government debt.

Moody’s too declared a few weeks ago that a re-denomination of French government bonds into new francs “might technically count as a default.”

Bondholders don’t like the idea of not getting “their” money – the euro – back when the bond matures, and they despise watching the purchasing power of their principal get watered down, as such a plan would do. They bought these bonds with ultra-low yields that had assumed that there wouldn’t be any of these risks.

Hence the “Le Pen premium,” a new term in the financial vernacular to describe the spiking yield spreads between German and French government bonds.

Now ECB President Mario Draghi is stumbling into the fray.

“The euro is irrevocable,” he told the European Parliament on Monday, to counter the populist rejection of the euro. “This is the treaty,” he said.

Which evoked memories of the good ol’ days of the sovereign debt crisis, when, to put an end to it in July 2012, Draghi said that the euro was “irreversible” and that the ECB was “ready to do whatever it takes to preserve the euro.” At the time, the Spanish 10-year yield was above 7% and the Italian 10-year yield was above 6%.

So now, same tune, different scenario. It’s not a debt crisis. It’s just a question of whether or not it’s possible to leave the euro, and if yes, how much it would cost.

And that question has already been raised officially. On January 18, Draghi had sent a letter to European Union lawmakers Marco Valli and Marco Zanni, telling them: “If a country were to leave the Eurosystem, its national central bank’s claims on or liabilities to the ECB would need to be settled in full.”

That was the opening – the IF. “If a country were to leave…” It meant that a country could leave! It was the first official admission that this was actually possible. It was just a matter of cost. That’s how Zani saw Draghi’s response. Bloomberg:

    “I wanted to bring up the issue of exit from the euro and how it can happen,” he said in an interview before the testimony. “Draghi has now clearly admitted that such an exit is possible and now there is need to have more clarity about the cost. I’m sure that in case of Italy’s exit from the euro, benefits exceed costs.”

Alas, in his testimony before the European Parliament, Draghi refused to put a price tag on leaving the euro.

Valli asked him whether the “liabilities” Draghi had referred to that would “need to be settled in full” were the so-called Target2 imbalances. These are a result of payment settlements within the European System of Central Banks. They’d soared during the debt crisis to hundreds of billions of euros, a sign of the underlying financial tensions between debtor and creditor countries.

But Draghi dodged the question: “I cannot answer a question that is based on hypotheses, on assumptions which are not foreseen” by the European treaties, he said. “What I could do is send you a written answer which compares our Target2 system with the Federal Reserve-based system.”

Which was very helpful.

But even though he refused to put a price tag on leaving the euro, the whole exchange confirmed that it’s possible to leave the euro, though there is nothing in the treaties that mentions leaving the euro.

Other Eurozone central bankers are also trying to stem the tide, evoking soaring borrowing costs for France, if it chose to leave, and outright “impoverishment,” as ECB Executive Board member Benoit Coeure put it.

Whatever the ultimate costs of leaving the euro – they may be greatest for the holders of affected euro debt – for the Eurozone’s second- and third-largest economies, it has come down to just doing the math and making a decision. That’s the closest the Eurozone has ever come to falling apart.

Bonds are already falling, yields are rising, and NIRP is dying. Read…  Markets Smell a Rat as Central Banks Dither
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 08, 2017, 07:45:13 AM
Everybody wants new money.
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 08, 2017, 07:47:11 AM
Everybody wants new money.

Not True Gold Bugs want the old REAL one. That's a fact.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 08, 2017, 08:20:32 AM
Goldbugs already have the real one.  :icon_sunny: :icon_sunny:

Not going to help bankrupt countries though. I think they will keep trying to restructure and restructure until finally the bondholders have to eat it. There isn't enough future left to borrow against. What can't be paid won't be paid. I look for a chaotic failure of the Euro, finally, in less than four years.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 08, 2017, 08:26:15 AM
Goldbugs already have the real one.  :icon_sunny: :icon_sunny:

Not going to help bankrupt countries though. I think they will keep trying to restructure and restructure until finally the bondholders have to eat it. There isn't enough future left to borrow against. What can't be paid won't be paid. I look for a chaotic failure of the Euro, finally, in less than four years.

4 years to Euro Collapse?  That's FAST COLLAPSE Eddie.

Euro Fails, then Dollar Fails shortly thereafter.  Too many counterparty obligations amongst the TBTF Banks.

Euro fails, the Monetary System is finished.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 08, 2017, 08:38:29 AM
For the Euro not to fail, the bondholders will have to take massive haircuts. The reason I look for failure is NOT because the can can't be kicked down a the road a bit further, but because the banks are so overconfident that they can manage anything, and make governments and taxpayers agree to any amount of austerity. They'll stick to their current game plan a little too long, and it will all come unwound.

Not sure that takes the USD down, at least not right away. Trump (or whoever is Emperor of the FSA at that point) could repudiate the national debt and declare a gold backed dollar. Not gold-redeemable, because that would require actual gold to be on hand, and if it were on hand (which it probably isn't) the new money would be all swapped for gold quicker than India swapped 1000 rupee notes for 2000 rupee notes. Can't have that.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 08, 2017, 08:46:34 AM
For the Euro not to fail, the bondholders will have to take massive haircuts. The reason I look for failure is NOT because the can can't be kicked down a the road a bit further, but because the banks are so overconfident that they can manage anything, and make governments and taxpayers agree to any amount of austerity. They'll stick to their current game plan a little too long, and it will all come unwound.

Not sure that takes the USD down, at least not right away. Trump (or whoever is Emperor of the FSA at that point) could repudiate the national debt and declare a gold backed dollar. Not gold-redeemable, because that would require actual gold to be on hand, and if it were on hand (which it probably isn't) the new money would be all swapped for gold quicker than India swapped 1000 rupee notes for 2000 rupee notes. Can't have that.

If it's not redeemable in Gold, it's not a Gold Standard.  It's Fiat by another name.

The banking system is a system of credit which enables international trade.  The Euro goes down, all of Europe will be like Brasil is right now.  Cops not getting paid in any money that works. Debts not serviced in any agreeable credit instrument. And on and on.

RE
Title: Clarke & Dawe on Taxes
Post by: RE on April 17, 2017, 12:58:49 PM
http://www.youtube.com/v/1W4sq-Eeglo
Title: Ruskies do a Bailout
Post by: RE on September 03, 2017, 06:27:54 AM
Magically, New Roubles Appear!  ::)

How long does this shit work for? ???  :icon_scratch:

(http://www.smithandwessonforums.com/forum/attachments/s-w-revolvers-1945-present/121265d1482222042-has-anyone-seen-my-magic-act-magicthumb.jpg)

RE

https://wolfstreet.com/2017/08/30/fearing-contagion-russia-bails-out-bondholders-in-its-biggest-bank-collapse-yet/ (https://wolfstreet.com/2017/08/30/fearing-contagion-russia-bails-out-bondholders-in-its-biggest-bank-collapse-yet/)

Fearing Contagion, Russia Bails Out Bondholders in its Biggest Bank Collapse Yet
by Wolf Richter • Aug 30, 2017 • 55 Comments   

“The panicky mood has been dampened down,” as other banks are rumored to be teetering.

True to the playbook of bank bailouts, the Central Bank of Russia (CBR) decided to bail out Bank Otkritie Financial Corporation, the largest privately owned bank in the country, and the seventh largest bank behind six state-owned banks.

The Central Bank put in an undisclosed amount of money in return for at least a 75% stake. This is likely to be Russia’s biggest bank bailout ever, well ahead of the current record holder, the $6.7 billion bailout of the Bank of Moscow in 2011.

Otkritie and its businesses would operate as usual, the Central Bank said. The banks obligations to creditors and bondholders, which include other Russian banks, would be honored to avoid contagion.

The controlling shareholder of Otkritie bank is Otkritie Holding, with a 65% stake. The bank had grown by wild acquisitions, grabbing other banks, insurers, non-pension funds, and the diamond business of Russia’s second largest oil producer Lukoil. Otkritie Holding is owned by executives of Lukoil, state-owned VTB bank, Otkritie, and other companies. So clearly, this bank is too big to fail.

Lukoil is also one of Otkritie’s largest clients. So Lukoil CEO Vagit Alekperov said in a statement that he saw no risks for Lukoil associated with the bail out, and that Lukoil supported the Central Bank’s decision.

In July, according to Reuters, Kremlin-backed rating agency ACRA downgraded Otkritie to a BBB- rating, citing the “low quality of its loan portfolio.”

On August 17, Moody’s placed Otkritie on review for possible downgrade, citing two big issues:

    “The recent elevated volatility of the bank’s customer deposits, which puts pressure on its liquidity position and negatively affects its funding costs”
    The bank’s “increased involvement in financing the large financial and industrial assets of its controlling shareholder Otkritie Holding.”

Since 2013, the Central Bank, which is also the banking regulator, has shut down over 300 Russian banks, trying to clean up the banking sector. In July, it revoked the banking licence of Yugra (or Jugra) Bank, stating that it had falsified its accounts.

On August 18, Fitch Ratings warned about Russian banks in general and about Otkritie in particular:

    A flight to quality triggered by depositors’ concerns following the withdrawal of Jugra Bank’s licence could intensify as the clean-up of Russia’s banking sector continues, Fitch Ratings says. This would put some weaker privately owned banks’ liquidity at risk.

    The clean-up is likely to highlight further problem banks, adding to concerns about weak solvency positions at certain private lenders and uncertainty about how the Central Bank of Russia (CBR) may address these issues.

    Otkritie, B&N Bank, Promsvyazbank and Credit Bank of Moscow (CBOM, BB-/Stable) are among the banks that have been subject to Russian media speculation in recent weeks, regarding the liquidity position of some and the potential knock-on effect on others.

The run on deposits was in full swing, and the bank was in collapse mode. In June and July, according to Moody’s, Otkritie’s depositors yanked out 435 billion rubles ($7.4 billion), or 18% of the bank’s total liabilities. According to the Central Bank, between July 3 and August 24, corporate clients yanked out 389 billion rubles, and retail clients yanked out 139 billion. Where were they putting their rubles? State-owned banks and precious metals? In early July, the gold price started taking off.

Reuters notes that ruble liquidity “in the Russian interbank market rose unexpectedly this month as the banking sector started borrowing more from the central bank, seen as a symptom of deteriorating trust in the interbank lending market.”

The Central Bank’s first deputy chairman, Dmitry Tulin, told reporters that Otkritie’s expansion “was financed via borrowing and key risks were taken. The bank’s operations are connected to high risks and need to be seriously changed.”

The CBR will now assess Otkritie’s loan loss provisions and capital, which could take three months. If the capital is “deemed to be in the red,” as Reuters put it, Otkritie shareholders would lose all their ownership rights.

On paper the bank didn’t looked too bad. For 2016, it had a non-performing loan ratio of 7.5% and Tier 1 capital of 12.3% under Russian accounting standards. This is above the CBR’s requirements. But that’s on paper. And in reality?

“The capital disclosed in (the previous) reports seems to have been significantly higher than in reality,” Tulin said. “At a certain point, the bank owners realized they couldn’t solve the issue with capital on their own and turned to the central bank with a proposal to start discussing financial rehabilitation measures.”

“Everyone is breathing a sigh of relief,” Maxim Ryabov, a trader with Russian brokerage BCS, told the Irish Times. “The panicky mood has been dampened down.”

But “the overall situation and the central bank’s action raises questions about the quality of the central bank’s supervision of one of Russia’s largest systemically important lenders,” lamented Dmitry Polevoy, chief economist at ING Bank in Moscow.

“The central bank cannot really allow to create an aura of vulnerability around a major bank because there are other banks that are rumored to be in trouble,” Lubomir Mitov, chief economist for Central and Eastern Europe at UniCredit, told the Irish Times. “So they basically took the step to ensure that nobody loses their money,” he said. “The whole idea is to create some sense of stability in the banking system.”

A bank bailout – privatizing profits and socializing losses – solves all problems. According to Tradeweb data, Otkritie’s bonds jumped, including its $500 million bond, maturing in April 2019, which soared 34 cents on the dollar – now that the Central Bank declared that bondholders will be made whole, and that bank bondholders are sacred.

“These things can go on for a long time — until they can’t…” Enjoy the video… The US and the World: Wolf Richter on the Keiser Report
Title: Is the Fed Getting Cold Feet about the QE Unwind?
Post by: RE on October 21, 2017, 02:02:43 AM
https://wolfstreet.com/2017/10/20/is-the-fed-getting-cold-feet-about-the-qe-unwind/ (https://wolfstreet.com/2017/10/20/is-the-fed-getting-cold-feet-about-the-qe-unwind/)

Is the Fed Getting Cold Feet about the QE Unwind?
by Wolf Richter • Oct 20, 2017 • 75 Comments   

(http://www.whatamimissinghere.com/wp-content/uploads/2013/07/Federal-Reserve-Buys-Treasuries-as-Part-of-QE-Graph.jpg)

Curious things are happening on its balance sheet.

The last Fed meeting ended on September 20 with a momentous announcement, confirming what had been telegraphed for months: the QE unwind would begin October 1.

The unwind would proceed at the pace announced at its June 14 meeting. It would shrink the Fed’s balance sheet – “balance sheet normalization” it calls that – and undo what serial bouts of QE have done: gradually destroying some of the money that had been created out of nothing during QE.

The pace of the shrinkage would be $10 billion a month for the first three months, and then it would accelerate every three months until it hits $50 billion a month at this time next year. That was the announcement.
Reality Check

Thursday afternoon, the Fed released its weekly balance sheet for the week ending October 18. We’re now two and half weeks and three weekly balance-sheet releases into the QE unwind period. How much has the Fed actually reduced its balances sheet?

    Total assets on Oct 4:  $4.460 trillion
    Total assets on Oct 11: $4.459 trillion
    Total assets on Oct 18: $4.470 trillion

You read correctly: Since October 4, the balance sheet gained $10 billion, all of it in the week ending October 18.

The Fed is supposed to unload $10 billion in October. But curiously, so far, it has done the opposite. This chart shows the balance sheet movements so far this year. Note the jump in the last week:

The chart below shows the Fed’s total assets over the entire QE period from before the Financial Crisis through the currently missing QE unwind. There was a mini-unwind after QE-1 and that was about it:

As part of the $10 billion that the Fed said it would shrink its balance sheet in October, it is supposed to unload $6 billion in Treasury securities and $4 billion in mortgage backed securities. How did that go so far?

Since October 4, the Fed has in fact added $176 million in Treasury securities and now holds $2,465.6 billion of Treasury securities of all maturities, a new all-time record high, and there is no sign of any unwind:

And even crasser: Since October 4, the Fed has piled on $9.8 billion in mortgage-backed securities, and there is no sign of any unwind either:

In fact, looking at the Fed’s Open Market Operations (OMO), the Fed’s “Trading Desk,” as it calls this entity, was very busy nearly every day in the MBS market, buying between $400 million to over $2 billion of MBS per day.



The Fed has done this since the end of QE in order to keep the MBS on its balance sheet about even. MBS securities constantly forward principal payments to their holders (as underlying mortgages get paid down or off), and unlike regular bonds, they shrink until they’re redeemed at maturity. To keep the MBS balance steady, the Fed has to constantly buy MBS. So this just continues its routine.

But clearly, there is no sign that the Fed has backed off from its purchasing activity – which leaves several possible conclusions:

    The whole QE-unwind announcement was a hoax to test how stupid everyone is. But I doubt this.
    The people running the OMO are on vacation and have been replaced by algos or interns, and they just keep doing what the folks now on vacation have been doing for years. I doubt this too.
    The FOMC told the public what it wants to have done but forgot to tell its own people at the Trading Desk. I doubt that too.
    There is willfulness in it – a sign that they’re not ready, or that they want to give the markets more time to get used to the idea of it, etc. And this could be the case.
    They’re seeing something that worries them, and they’re holding off for now to get a clearer picture. But I doubt this because their decision to commence the QE-unwind on October 1 was unanimous, and since then nothing of enough enormity has changed.

Whatever the reason, the announced “balance sheet normalization” is not taking place. The opposite is taking place.

By contrast, when QE was started in late 2008, the Fed kicked it off with an explosive vengeance. The folks at the Trading Desk didn’t dillydally around. In the 10 weeks between September 3, 2008 and November 12, 2008, they purchased $1.3 trillion of securities, ballooning the balance sheet by 144%.

Sure, some people may say that a few weeks are not enough time to judge the Fed on its QE unwind. But this is not something we’re going to ignore. And so far, the Fed is doing the opposite of what it said it would do.

Pricing of risk kicks the bucket in record central-bank absurdity. Read…  This is What it Looks Like When Credit Markets Go Nuts
Title: Re: Da Fed: Central Banking According to RE
Post by: moniker on October 21, 2017, 08:26:19 AM
To begin with, I do not believe any financial numbers reported by the fed or the govt. Whatever they say they are gonna do is rubbish as well.

We are being subjected to deliberate misinformation and contradictions to make us feel powerless.

We are in the endgame now.
Title: Re: Da Fed: Central Banking According to RE
Post by: moniker on November 01, 2017, 06:11:32 AM
To begin with, I do not believe any financial numbers reported by the fed or the govt. Whatever they say they are gonna do is rubbish as well.

We are being subjected to deliberate misinformation and contradictions to make us feel powerless.

We are in the endgame now.

I finally get it. da fed and the neocons are just a bunch of wild and crazy guys. If I had realized this 16 years ado I would be a gazillionaire now!
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on November 01, 2017, 07:13:49 AM
http://www.youtube.com/v/WqzZ3jxx650&fs=1
Title: Re: Da Fed: Central Banking According to RE
Post by: moniker on November 01, 2017, 08:11:11 AM
http://www.youtube.com/v/WqzZ3jxx650&fs=1

Thanks Eddie. Comic relief helps.

Unfortunately the game they are playing is way more serious and the technology exponentially more powerful.
Title: The End Of Money.
Post by: RE on November 02, 2017, 06:46:09 PM
https://heisenbergreport.com/2017/11/02/the-end-of-money/

The End Of Money.

(https://i.ytimg.com/vi/PYuzqNSPDsI/maxresdefault.jpg)

The End Of Money.

 
 

Ok so recently, Deutsche Bank’s Jim Reid decided it was about time someone sat down and penned a 94-page epic tome on the history of financial crises. So that’s what he did.

And as part of that War & Peace-ish manifesto, Reid also made a list of the “possible candidates” for the next crisis.

That note was easily one of the better pieces of research we’ve seen this year and although it’s impossible to do it justice with blog posts, we did endeavor to pen two missives based on short excerpts. Those two posts can be found here:

In that latter post, we talked at length about the extent to which an unanchored system (i.e. a regime not tethered to a universally accepted, finite store of value like a precious metal) is a double-edged sword. It provides the flexibility to respond to crises, but that flexibility involves adopting polices that will invariably sow the seeds for the next meltdown. The entire thing hinges on the extent to which the response to the previous crisis can be unwound (i.e. the countercyclical ammo replenished) by the time the excesses (the “boom”) that response created lead to the next bust.

But there’s a problem with that. It can’t work forever because implicit in the arrangement is that the booms and busts will get larger over time. At some point the bust will be so large that it overwhelms our ability to lean against it with the tools afforded us by an untethered system. Or, perhaps more accurately, it ensures that our attempts to counter busts will become increasingly absurd until we’re forced to resort to some iteration of helicopter money. Allow us to excerpt a few passages from our previous piece, because dammit, that post was pretty well-written. Here’s what we said:

While we can observe an increased frequency of crises in a world that’s abandoned the gold standard and while we can draw common sense conclusions from that observation, there’s still the old “correlation doesn’t always equal causation” problem to contend with. That is, “yes” it is likely that the lack of discipline which invariably accompanies an unanchored system contributes directly to the incidence of busts. But it is certain that a constrained system lacks the flexibility to respond to busts when they occur. So if even one crisis out of a dozen isn’t attributable to the adoption of an unanchored system (i.e. a system not based on gold), then by tethering our fate to an archaic concept we may be unnecessarily ensuring a complete collapse from which there is no recovery. Hence Deutsche’s “double edged sword” metaphor.

The worry now however, is that in this latest iteration of responding to a crisis with intervention and money creation, we have exhausted our capacity to leverage (figuratively and literally) the flexibility afforded by an unanchored system to rescue us from the abyss. There’s a cruel irony inherent in that. Each time we respond to a panic with the tools afforded us by a system based not on some finite store of value, but rather based solely on the “full faith and credit” of governments and their printing presses, we almost always exacerbate (in one way or another) the imbalances that led to the very crisis to which we’re responding. The inevitable result: a rolling boom-bust cycle that snowballs with each turn, ensuring that each new crisis and each crisis response is even more spectacular than the last.

The only way this can go on in perpetuity is if we assume there is no limit on the extent to which we can leverage (again, both figuratively and literally) the flexibility inherent in an unanchored (i.e. a fiat-based) system. If the busts keep getting bigger, it will of course be painful and harrowing, but if the capacity of the fiat system to respond with ever larger money printing programs is limitless, then theoretically we will just boom-bust our way along forever until finally we’re all losing everything once every six months only to have central bankers make us all millionaires the very next day by topping up our bank accounts with newly-created money.

There’s something conspicuously missing from our analysis as presented in those excerpts. Specifically, a mention of the impact structural disinflation has on the ability of an unanchored system to respond.

“The basic premise is that a fiat currency system – the likes of which we’ve had since 1971 – is inherently unstable and prone to high inflation all other things being equal,” the above-mentioned Jim Reid writes, in a brand new piece expanding on his original work. He continues: “However, for the current system to have survived this long perhaps we’ve needed a huge offsetting disinflationary shock.

And there it is. The missing piece of the puzzle that allows an inherently ridiculous system to persist. A disinflationary shock serves to short-circuit the mechanism that, in the absence of a countervailing force, would invariably translate unchecked credit creation and thin-air-money-printing into hyperinflation.

To be sure, Reid brings this up in his original post, but the argument is the backbone of the new piece. Here’s Jim:

In “The Next Financial Crisis” we suggested how China’s fairly sudden integration into the global economy at the end of the 1970s and a very favourable once-in-a-lifetime shift in demographics from around 1980 onwards could have contributed to the modern boom/bust culture that has made financial crises more regular in recent decades. The argument is based around a view that a positive labour supply shock from China and developed countries’ demographics between 1980-2015 has allowed inflation to be controlled externally as the surge in the global labour supply at a time of rapid globalisation has suppressed wages. With inflation controlled externally it has allowed governments and central banks the luxury of responding to every crisis and shock with more leverage, loose policy and latterly more and more money printing. Its not usually this easy as inflation would have normally increased with such stimulus and credit creation. It could be argued that this external disinflation shock has perhaps ‘saved’ fiat currencies after the runaway inflation of the 1970s in the immediate aftermath of the collapse of the Bretton Woods quasi Gold Standard from 1971 onwards.

What’s implicit there is that if the dynamics that “saved” the fiat regime were to reverse course, well then the untethered system could face an existential crisis.

But before he gets to that, Reid reminds you that contrary to the popular narrative, inflation is not “low” by historical standards. To wit:

Figure 1 shows our global median inflation index back over 800 years and then isolates the period post 1900 where inflation exploded relative to long-term history.

Inflation

Figure 2 then shows this in year-on-year terms and as can be seen, in the 700 years before the twentieth century inflation and deflation were near equal bedfellows with only a gradual upward creep in inflation as new precious metals were mined or governments periodically punched holes in existing coins and thus slightly debasing the currency.

Inflation2

The message: this is relative. “As someone that has studied economic history it always amuses me to hear that we live in times of extremely low inflation when history would suggest these are relatively high inflation times,” Reid writes, delivering what is probably an uncomfortable reality check to anyone who isn’t steeped in eight centuries of econ data. Here’s how Reid explains our current situation:

What has happened though is that we saw a 35 year disinflationary period start in 1980 that took inflation down from the extremes at the start of that decade to what we think will be the secular lows around the middle of this decade.

Ok, so getting back to the question of whether we can continue to depend on the disinflationary shock that’s allowed the current system to persist (and that gives us the flexibility to respond to crises with inflationary policies), Reid’s answer is “perhaps not.”

“We think that the effective global labour force exploded from around 1980 due to natural global demographics and China opening up its economy to the outside world at the end of the 1970s,” Reid writes, adding that “in the two decades we have data for prior to 1980, real wage growth was much higher than the post 1980-period.”

Inflation3

Hopefully you can see where this is going. The idea here is that if the supply of labor falls and growth stays on trend, wage pressures rise. And while that’s great for workers in terms of helping to mitigate the disparity between capital and labor, it could imperil the fiat system. Here’s Reid:

The problem for the current global monetary system is that over the last 45 years it has relied on governments and central banks being able to turn on the stimulus spigots at the drop of a hat when a crisis has come. This has enabled each crisis to be dealt with via increasing leverage rather than creative destruction type policies. For this to be possible you’ve needed an offset to such stimulus to prevent such policies being inflationary. Fortunately (or unfortunately if you believe it’s an inherently unstable equilibrium) the external global downward pressure on labour costs ensured that this has happened. So what would happen to the global monetary system if labour costs started to reverse their 35 year trend? If central banks had their current mandates of keeping inflation around 2% then they would be duty bound to tighten policy more often regardless of the external environment. However, such an outcome is probably unrealistic given how much debt there is at a global level.

And so, inevitably, central banks would need to act to ensure that yields didn’t skyrocket (do quote Donald Trump: “DO SOMETHING!”). That would mean still more QE, and around we go until all vestiges of control are lost.

Then comes the end game:

Eventually, it’s possible that inflation becomes more and more uncontrollable and the era of fiat currencies looks vulnerable as people lose faith in paper money. Once the value of debt has been eroded the debate would likely be live as to what replaces fiat currencies as surely the backlash would be severe against the system that allowed us to get to such a situation.

Reid goes further to lay out the counter arguments, not the least of which is of course that technology represents a powerful source of structural deflation. That entire argument can be summed up in one visual:

d69b354fb831ef222c7f7f6af61931d9

But at the end of the day, the question for us is this: what does it say about a system when the feasibility of that system rests entirely on there being a disinflationary offset that allows something inherently dubious (fiat money) to remain some semblance of viable?

Something to think about.

Money

And no, this post should not be seen as an endorsement of Bitcoin or as a call to buy physical gold, because although everything said above might leave you inclined to think that we’re believers in cryptocurrencies and shiny yellow metal as “stores of value”, regular readers know that’s not our position.

 

Title: All of the World’s Money and Markets in One Visualization
Post by: RE on November 04, 2017, 10:55:51 AM
http://www.visualcapitalist.com/worlds-money-markets-one-visualization-2017/ (http://www.visualcapitalist.com/worlds-money-markets-one-visualization-2017/)

All of the World’s Money and Markets in One Visualization

(http://2oqz471sa19h3vbwa53m33yj.wpengine.netdna-cdn.com/wp-content/uploads/2017/10/all-the-worlds-money-infographic.png)

Title: Re: Da Fed: Central Banking According to RE
Post by: Surly1 on November 04, 2017, 11:00:00 AM
Great find. Love infographics anyhow, but this is exceptional.
Title: Re: All of the World’s Money and Markets in One Visualization
Post by: moniker on November 04, 2017, 12:46:37 PM
http://www.visualcapitalist.com/worlds-money-markets-one-visualization-2017/ (http://www.visualcapitalist.com/worlds-money-markets-one-visualization-2017/)

All of the World’s Money and Markets in One Visualization

(http://2oqz471sa19h3vbwa53m33yj.wpengine.netdna-cdn.com/wp-content/uploads/2017/10/all-the-worlds-money-infographic.png)
Nice visualization, but the amount of derivatives is usually stated in notional value. The amount of money that will actually be transacted is a small fraction of notional value.
Title: Re: All of the World’s Money and Markets in One Visualization
Post by: RE on November 04, 2017, 01:29:38 PM
Nice visualization, but the amount of derivatives is usually stated in notional value. The amount of money that will actually be transacted is a small fraction of notional value.

That is irrelevant.  The derivatives represent assts on the bank balance sheets that serve as collateral for other loans.  Once you net out the derivatives, there is no longer sufficient notional capital for the bank to support the loans, and it becomes insolvent.  Other banks call in those loans, because they too are in trouble with their balance sheets.  It's a classic cascade failure of a Ponzi.

RE
Title: Re: All of the World’s Money and Markets in One Visualization
Post by: moniker on November 04, 2017, 03:00:41 PM
Nice visualization, but the amount of derivatives is usually stated in notional value. The amount of money that will actually be transacted is a small fraction of notional value.

That is irrelevant.  The derivatives represent assts on the bank balance sheets that serve as collateral for other loans.  Once you net out the derivatives, there is no longer sufficient notional capital for the bank to support the loans, and it becomes insolvent.  Other banks call in those loans, because they too are in trouble with their balance sheets.  It's a classic cascade failure of a Ponzi.

RE

The following is from fasb.org,

Accounting for Derivative Instruments and Hedging Activities (Issued 6/98)
Summary

This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction.


The fair value of a derivative will be less than its notional value.
Title: Re: All of the World’s Money and Markets in One Visualization
Post by: RE on November 04, 2017, 05:46:13 PM
Nice visualization, but the amount of derivatives is usually stated in notional value. The amount of money that will actually be transacted is a small fraction of notional value.

That is irrelevant.  The derivatives represent assts on the bank balance sheets that serve as collateral for other loans.  Once you net out the derivatives, there is no longer sufficient notional capital for the bank to support the loans, and it becomes insolvent.  Other banks call in those loans, because they too are in trouble with their balance sheets.  It's a classic cascade failure of a Ponzi.

RE

The following is from fasb.org,

Accounting for Derivative Instruments and Hedging Activities (Issued 6/98)
Summary

This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency-denominated forecasted transaction.


The fair value of a derivative will be less than its notional value.

Obviously, but once they net out they have ZERO value.

RE
Title: ECB Spawned Mass Culture of Financial Dependency that’s Now Very Hard to Undo
Post by: RE on January 10, 2018, 02:09:33 AM
https://wolfstreet.com/2018/01/09/ecb-spawns-mass-culture-of-financial-dependency-thats-now-very-hard-to-undo/

ECB Spawned Mass Culture of Financial Dependency that’s Now Very Hard to Undo

(https://leavonomics.files.wordpress.com/2015/01/deflation_cartoon_01-21-2015_normal.png)

by Don Quijones • Jan 9, 2018 • 9 Comments   
Right at the front of the monetary welfare queue is the government of Italy.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

As the Eurozone economy continues to grow, pressure is rising on Europe’s biggest bond buyer, the ECB, to withdraw from the market, a process it has already begun. No one believes that more than the head of Germany’s Bundesbank, Jens Weidmann, who recently told Spanish newspaper El Mundo that the ECB should soon set a date to end its multi-trillion euro asset-buying program.

”The prospects for the evolution of prices correspond to a return of inflation to a level sufficient to maintain the stability of prices,” he said. “For this reason, in my opinion, it would be justifiable to put a clear end to the buying of bonds by establishing a concrete date (for ending the program).”

Weidmann, who is hotly tipped to replace Draghi in 2019, has been one of the most vocal critics of the ECB’s QE program.

“Central banks have become the largest creditors of nation states,” Weidmann noted. “With our program of bond purchases, the financing conditions of Member States depend much more directly on monetary policy than in normal times. This could lead to political pressure on the ECB board to maintain lax monetary policy for longer than would in fact be justified from the perspective of price stability.”

Though it has lowered its asset purchases to €30 billion a month, the ECB has pledged to keep buying until at least September. But with the Eurozone economy growing faster than it has since the crisis and inflation comfortably above 1%, the ECB is widely expected to wind down the program thereafter. “If the economy continues to do so well, we could let the program run out in 2018,” ECB rate-setter Ewald Nowotny told Sueddeutsche Zeitung.

But what would that mean for the countries, companies, and banks that have grown to depend so much on the ECB’s extraordinary largesse?

Right at the front of the monetary welfare queue is the government of Italy, which is saddled with one of the biggest public debt mountains on the planet. The ECB now holds €326 billion of Italian bonds, an amount that far exceeds the €246 billion increase of Italy’s gross national debt since 2012, when this program started. The ECB’s binge buying of Italian debt has enabled just about every other investor in the market, including Italian, French and German banks, to offload some of their holdings.

As the ECB cuts its purchases of Italian bonds, those investors will have to come back into the market in a big way; otherwise the yields on Italian bonds will begin soaring, driving up the costs of funding for the government. This will be a huge, perhaps even insurmountable, problem for a country whose economy is still 6% smaller than it had been before the global financial crisis of 2008.

But the problem of mass financial dependency in Europe created by the ECB’s unconventional monetary programs extends far beyond national governments. As the IMF warned in its latest note on Spain’s financial system, Spanish banks have also grown dangerously dependent on ECB liquidity in recent years, with 6% of their total funding now coming directly from the central bank’s coffers

In this case it’s not the ECB’s QE programs but rather its myriad TLTRO programs, clocking in at almost one trillion euros, that have fuelled the dependency. Many banks used the virtually free loans the ECB offered them for carry-trade purposes, acquiring 2-3% yielding Spanish bonds and pocketing the difference. According to the IMF, by the close of 2016, one entity (whose identity it refuses to disclose, for obvious reasons) relied on ECB funding for 17% of its liquidity needs.

Although the report’s authors acknowledge that overall Spanish banks’ finances have improved in recent years, they have serious reservations about the banks’ capacity to access sufficient funds in an adverse market scenario. They also believe that replacing ECB financing, which is virtually free of charge, with funds provided by the more expensive wholesale market could be “detrimental” to the stability of Spanish banks. There could even be “liquidity tensions” if the ECB opts to cut off the liquidity tap too fast.

Also at risk of a drastic draw down in ECB funds are the hordes of zombie companies for whom the ECB’s buying of corporate bonds and the artificial regime of low or even negative interest rates have provided a desperate lifeline. According to research by Bank of America, about 9% of Europe’s biggest companies could be classified as the walking dead — that is, companies with interest-coverage ratios at 1 or less and that risk collapse if the support dries up.

In other words, rather than helping to address the myriad systemic issues plaguing Eurozone banks, the ECB’s multi-trillion euro monetary policy measures have merely delayed the inevitable while creating a mass culture of monetary dependency at the very top of Europe’s shaky economic edifice. By Don Quijones.

Did someone say “referendum?” Read…  Switzerland too Falls Out of Love with the EU
Title: Bye-Bye Dammit Janet
Post by: RE on January 31, 2018, 12:43:49 PM
http://www.youtube.com/v/MZtavHAsQCM

RE

https://www.bloomberg.com/news/articles/2018-01-31/fed-leaves-rate-unchanged-as-yellen-departs-sets-up-march-hike (https://www.bloomberg.com/news/articles/2018-01-31/fed-leaves-rate-unchanged-as-yellen-departs-sets-up-march-hike)


Janet Yellen’s Fed Era Ends With Unanimous Vote of No Rate Hike

By Craig Torres
and Christopher Condon
January 31, 2018, 10:00 AM AKST Updated on January 31, 2018, 11:00 AM AKST

(https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iucyaRDGUPps/v2/800x-1.png)

    Adds ‘further’ for emphasis in outlook for gradual hikes
    Inflation ‘is expected to move up this year,’ FOMC says

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FBI Director Wray Said to Oppose Release of GOP Memo on Russia Probe
The Fed keeps borrowing rates unchanged. Bloomberg’s Chris Condon reports.

Federal Reserve officials, meeting for the last time under Chair Janet Yellen, left borrowing costs unchanged while adding emphasis to their plan for more hikes, setting the stage for an increase in March under her successor Jerome Powell.

“The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate,” the policy-setting Federal Open Market Committee said in a statement Wednesday in Washington, adding the word “further” twice to previous language.

(https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iBLv4vDYoHos/v2/800x-1.png)

The changes to the statement, collectively acknowledging stronger growth and more confidence that inflation will rise to their 2 percent target, may spur speculation that the Fed will pick up the pace of interest-rate increases. Officials also said inflation “is expected to move up this year and to stabilize” around the goal, in phrasing that marked an upgrade from their statement in December.

At the same time, the Fed repeated language saying that “near-term risks to the economic outlook appear roughly balanced.”

“It opens the door to four hikes for them, but I don’t think they have walked through it,” said Michael Gapen, chief U.S. economist at Barclays Plc in New York. “It closes the door to two hikes.” Fed officials penciled in three rate moves this year in quarterly forecasts they updated last month, according to their median projection.

With her term ending later this week after President Donald Trump chose to replace her, Yellen is handing the reins to Powell, who has backed her gradual approach and is widely expected to raise interest rates at the FOMC’s next meeting for the sixth time since late 2015. Fed officials are hoping to keep a tight labor market from overheating without raising borrowing costs so fast that it would stifle the economy.

“Gains in employment, household spending and business fixed investment have been solid, and the unemployment rate has stayed low,” the Fed said, removing previous references to disruptions from hurricanes. “Market-based measures of inflation compensation have increased in recent months but remain low.”

With a gradual pace of rate increases, policy makers want to nudge inflation back up to their 2 percent target, a goal they have mostly missed for more than five years. Even with a brightening outlook for global growth and Fed tightening, financial conditions continue to ease.
What Our Economists Say
The FOMC is more confident in the inflation outlook, but is not looking to deviate from its gradual path of policy normalization. The economic assessment acknowledged straightforward improvements in economic conditions, but the tone in no way hints of concerns about the economy overheating.

The Fed is on track to raise rates in March.

-- Carl Riccadonna and Yelena Shulyatyeva, Bloomberg Economics

The vote by U.S. central bankers to keep the benchmark overnight lending rate in a 1.25 percent to 1.5 percent target range was unanimous. Fed officials also voted to continue with their program to reduce the central bank’s balance sheet, which began in October.

The FOMC said in a separate statement Wednesday that it elected Powell as its chairman, effective Feb. 3. He will be sworn in as chairman of the Board of Governors on Feb. 5.

“On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2 percent,” the FOMC said, removing a previous reference to declines in inflation in 2017.

Inflation has picked up slightly since the middle of 2017 while remaining short of the central bank’s 2 percent goal. The Fed’s preferred price gauge, a Commerce Department index linked to consumer spending, rose 1.7 percent in the 12 months through December. Excluding volatile food and energy costs, inflation was 1.5 percent.

Yellen isn’t scheduled to hold a press conference after this meeting; her final such event was in December. Fed policy makers will update their economic projections in March, when Powell is also expected to hold his first press briefing as chairman.
New Members

An annual rotation among the 12 regional Fed presidents who vote on the FOMC saw Loretta Mester of Cleveland, Thomas Barkin of Richmond, Raphael Bostic of Atlanta, and John Williams of San Francisco join as members at this meeting. Barkin and Bostic are voting for the first time since taking their posts.

The committee also reviewed its long-run policy goals statement at the January meeting and reiterated its support for the 2 percent inflation target, approving a statement that updated the long-run normal rate of unemployment to 4.6 percent -- the median in projections from December.

Several Fed officials have called for a rethink of the central bank’s policy framework, which could include aiming for a higher inflation target, or allowing prices to rise faster to make up for the time that they were too low.

During Yellen’s four years at the helm, U.S. unemployment has fallen to 4.1 percent, the lowest since 2000, as she navigated the Fed away from its crisis-era emergency policies and inched interest rates away from zero. Yellen exploited low inflation to maintain low interest rates that helped pull millions of more Americans back into jobs, and the Fed under her leadership began to pay more attention to labor-market inequality.

“She is going out on a high note,” Diane Swonk, chief economist for Grant Thornton LLP in Chicago, said before Wednesday’s decision.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on January 31, 2018, 01:21:05 PM
Another weasel slips out before the chickens come home to roost.  What's the over/under for Powell making it out alive?
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on January 31, 2018, 01:26:38 PM
Another weasel slips out before the chickens come home to roost.  What's the over/under for Powell making it out alive?

Term is 4 years, right?  I give it 65-35 Odds we have a major crash before 4 years is up.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on January 31, 2018, 10:38:23 PM
Another weasel slips out before the chickens come home to roost.  What's the over/under for Powell making it out alive?

Term is 4 years, right?  I give it 65-35 Odds we have a major crash before 4 years is up.

RE

Amazed at your optimism RE.

Put me down for 6 months to a year,"At Most."
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 01, 2018, 01:15:42 AM
Another weasel slips out before the chickens come home to roost.  What's the over/under for Powell making it out alive?

Term is 4 years, right?  I give it 65-35 Odds we have a major crash before 4 years is up.

RE

It could come in 6mo-1yr, however I would put the odds on the at about 1:5.

RE

Amazed at your optimism RE.

Put me down for 6 months to a year,"At Most."
Title: 🏦 Bridgewater Bets Big against Largest Banks in Spain & Italy
Post by: RE on February 11, 2018, 03:10:16 AM
https://wolfstreet.com/2018/02/10/bridgewater-bets-big-against-largest-banks-in-spain-italy/

Bridgewater Bets Big against Largest Banks in Spain & Italy
by Don Quijones • Feb 10, 2018 • 10 Comments   
World’s largest hedge fund puts down $13 billion to profit from trouble in Europe.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.

(https://southcarolina1670.files.wordpress.com/2010/08/bank-closed.jpg)

A lot of people have lost a lot of money in the recent financial market convulsions, but there’s still plenty of money to be made by betting against the companies, as the world’s largest hedge fund, Bridgewater Associates, showed this week. It bet heavily against four of Spain’s biggest corporate hitters. The fund took up short positions worth €1.2 billion, or 0.5% of total shares at Banco Santander, BBVA, Telefónica and Iberdrola.

The gamble has already reaped dividends. Shares of Iberdrola, Spain’s biggest utilities company, Telefonica, Spain’s struggling telecoms giant, and Santander, Spain’s biggest bank ended the week around 5% lower, while BBVA tumbled 4%. Bridgewater placed its best against the two large Spanish banks last week, just as they presented annual results that largely disappointed the market. Since then, both banks have lost close to 10% of their market cap.

These short bets are part of the firm’s $13.1 billion in shorts against 44 European companies, according to EU regulatory filings, reported by Bloomberg. Among the notable short positions, in addition to the Spanish banks, are Total, Airbus, BNP Paribas, ING, Intesa Sanpaolo, Eni, Sanofi, and Axa.

At the beginning of the week, Ray Dalio, founder of Bridgewater Associates, made light of the recent rout in global stock markets saying in a blog post on LinkedIn that “this is classic late-cycle behavior,” adding: “These big declines are just minor corrections in the scope of things . . . There is a lot of cash on the side to buy on the break, and what comes next will be most important.”

Investors will nonetheless be wondering why the world’s biggest hedge fund is shorting Spain’s two biggest banks, whose shares had been on an 18-month roll. Until last week that is. As we warned in December, 2018 could prove to be a stressful year for Spanish banks, for three reasons:

Painful new rules. The introduction in January of a new accounting rule, known as IFRS 9, will force banks in Europe to provision for souring loans much sooner than at present. One direct result will be that banks will have to hold more capital on their books, and that will have a detrimental impact on their profits. BBVA calculated that as a result Spanish banks will have to increase their provisions by 21% — around €5.2 billion — to comply with the new requirements. This amount may be manageable for the industry as a whole, though some lenders, in particular the smaller banks, will suffer more stress than others.

Potential indigestion from Popular take-over. The decline and fall last year of Spain’s sixth biggest bank, Banco Popular, served as a reminder (a painful one for the bank’s 300,000 shareholders) that Spain’s banking system is far from fixed, despite the tens of billions of euros thrown at it. Now, the attention shifts to just how well Santander will be able to digest the collapsed bank it bought for €1

Exposure to high-risk markets. As the IMF warned in a report last year, BBVA’s largest international exposures by financial assets are concentrated in the UK, the US, Brazil, Mexico, Turkey and Chile. At least four of those six markets — Brazil, Mexico, Turkey and the UK — are likely to face headwinds in 2018. In the US, Santander’s subsidiary, Santander Consumer USA, is dangerously exposed to the subprime auto-loan sector, which is already taking a toll on global profits. So great is both banks’ exposure to Latin America’s two largest economies — Mexico (which accounted for 40% of BBVA’s global profits) and Brazil (which provides 26% of Santander’s) — that if things deteriorate in either or both of these key emerging markets, the spillover effects will be felt almost immediately in Spain’s banking system.

There could also be another reason for Bridgewater’s bet: the continued systemic weakness of the Eurozone’s periphery.

After all, Spain is not the only Eurozone economy that Dalio has massively shorted. In the last three months his fund has tripled its short bets against Italy, the Eurozone’s third largest economy and arguably weakest link, to €2.45 billion, up from €900 million in October. A total of 18 firms have been targeted including Italy’s main utility, Enel, the national oil and gas company Eni and the pan-European insurer Generali. Like Telefonica and Iberdrola, Enel and Eni are among the largest beneficiaries of the ECB’s massive corporate bond purchase program which could come to an end as early as September this year. The firm’s funding costs could rise sharply thereafter.

Most of Dalio’s short bets in Italy are targeting its still fragile financial sector. His biggest short is against Italy’s second largest bank by assets, Intesa Sanpaolo, which is widely viewed as Italy’s most stable bank. In fact, it was the only bank in the country that was big enough and in sound enough health to absorb the two ailing mid-size Veneto based banks Banca Popolare di Vicenza and Veneto Banca in June 2017.

The bank will win the battle, CEO Carlo Messina confidently predicted in a Bloomberg Television interview on Thursday. The bank has seen its shares slump 4% over the last three days but they are still 45% higher than they were this time last year.

“When [Dalio and I] had a conversation in October, he was short Intesa Sanpaolo and Italy,” Messina, who leads Italy’s biggest bank by market value, said in the interview. “I told him he could lose money on our position and in the end I think he lost money. Again, increasing the position, I think he’s losing money again.”

Whoever wins this financial duel, the stakes are high. Even for a firm the size of Bridgewater Associates, with an estimated €122 billion of assets under management, short positions of €13 billion concentrated in the Eurozone represent a lot of risk. For the Eurozone, the financial stability of its third and fourth largest economies, both of which are still very fragile, well, that’s priceless. By Don Quijones.

“Not another Carillion,” said the UK government to soothe frazzled nerves, as an entire industry is teetering. Read…  Crash of Outsourcing Giant with 70,000 Employees Globally Sparks New Panic
Title: Central Banks will Just Let the 2018 Crash Happen
Post by: azozeo on February 25, 2018, 12:25:14 PM
https://politicalvelcraft.org/2018/02/20/deep-state-central-bank-cartel-previously-bailed-out-now-they-will-just-let-the-crash-happen-nullify-the-debt/


(https://rasica.files.wordpress.com/2012/09/lottery-winners348402.jpg)
                                                                                                                                           


Central Banks will Just Let the 2018 Crash Happen

If you have been following the public commentary from central banks around the world the past few months, you know that there has been a considerable change in tone compared to the last several years.

For example,

    officials at the European Central Bank are hinting at a taper of stimulus measures by September of this year and
    some EU economists are expecting a rate hike by December.
    The Bank of England has already started its own rate hike program and has warned of more hikes to come in the near term.
    The Bank of Canada is continuing with interest rate hikes and signaled more to come over the course of this year.
    The Bank of Japan has been cutting bond purchases, launching rumors that governor Haruhiko Kuroda will oversee the long overdue taper of Japan’s seemingly endless stimulus measures, which have now amounted to an official balance sheet of around $5 trillion.

        When $10 Trillion In Fiat Debt Plus $80 Trillion In Global Debt Is Created In A Decade

This global trend of “fiscal tightening” is yet another piece of evidence indicating that central banks are NOT governed independently from one another, but that they act in concert with each other based on the same marching orders. That said, none of the trend reversals in other central banks compares to the vast shift in policy direction shown by the Federal Reserve.

First came the taper of QE, which almost no one thought would happen. Then came the interest rate hikes, which most analysts both mainstream and alternative said were impossible, and now the Fed is also unwinding its balance sheet of around $4 trillion, and it is unwinding faster than anyone expected.

Now, mainstream economists will say a number of things on this issue — they will point out that many investors simply do not believe the Fed will follow through with this tightening program. They will also say that even if the Fed does continue cutting off the easy money to banks and corporations, there is no doubt that the central banks will intervene in markets once again if the effects are negative.  I would say that this is rather delusional thinking based on a dangerous assumption; the assumption that the Fed wants to save markets.

When mainstream economists argue that the Federal Reserve could conceivably keep low interest rates and stimulus going for decades if necessary, they often use the example of the Bank of Japan as some kind of qualifier.

Of course, what they fail to mention is that yes, the BOJ has spent decades increasing its balance sheet which now sits at around $4.7 trillion (U.S.), but the Fed exploded its balance sheet to around $4.5 trillion in only eight years. That is to say, the Fed inflated a bubble as large if not larger than the Bank of Japan in less than half the time.

Frankly, the comparison is idiotic. And clearly according to their own admissions, the Fed is not going to be continuing stimulus measures anyway. People cling to this fantasy because they WANT to believe that the easy money party will never end.  They are sorely mistaken.

    I have been battling this delusion for quite some time.  When I predicted that the Fed would taper QE, I received a predominantly negative reaction.
    The same thing occurred when I predicted the Fed would begin hiking interest rates.
    Now, I’m finding it rather difficult to break through the narrative that the Fed will intervene before the next crash takes place.


intoxicating about the notion that central banks will stop at nothing to prop up stock markets and bond markets. It generates an almost crazed cult-like fervor in the investment world; a psychedelic high that makes financial participants think they can fly.

Of course, what has really happened is that these people have jumped off the roof of their overpriced condo; they think they are flying but they are really falling like a brick weighted down with stupidity.

Former Fed chairman Janet Yellen upon exiting her position stated:

    “If stock prices or asset prices more generally were to fall, what would that mean for the economy as a whole?”

    “I think our overall judgment is that, if there were to be a decline in asset valuations, it would not damage unduly the core of our financial system.”

Yellen also said when asked about high stock prices:

“Well, I don’t want to say too high. But I do want to say high. Price/earnings ratios are near the high end of their historical ranges…”

“Now, is that a bubble or is too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high.”

        Everything Is Awesome Right Before The Entire Economy Collapses: No Problem For Iceland As They Jailed The Bankers & Nullified The Debt.

Since the middle of last year, the Fed has been calling the stock market overpriced and “vulnerable.” This rhetoric has only become bolder over the past several months. Dallas Fed president Robert Kaplan dismissed concerns over the affect rate hikes might have on markets and hinted at the potential for MORE than the three hikes planned for 2018. The Dow fell 666 points that same day.

New York Fed’s Bill Dudley shrugged off concerns over recent volatility, saying that an equity rout like the one that occurred in recent days “has virtually no consequence for the economic outlook.”

Jerome Powell, the new Fed chairman, has said while taking the chair position that he will continue with the current Fed policy of rate hikes and balance sheet reductions,  and reiterated his support for more rate hikes this past week (while the mainstream media hyperfocused on his lip service promise to watch stock behavior closely).

This indicates once again that it does not matter who is at the wheel of the Fed, its course has already been set, and the Chairman is simply there to act as the ship’s parrot mascot. The Fed is expected to raise interest rates yet again in March.

Now, all the evidence including the Fed’s surprise balance sheet reduction of $18 billion in January shows that at least for now, the central bank no longer cares about stocks and bonds.

In the meantime, 10 year Treasury Yields are spiking to the ever present danger level of 3% after a hotter than expected inflation report, and the dollar index is plunging.  Showing us perhaps the first signs of a potential stagflationary crisis.  Bottom line – markets are not long for this world if yields pass 3% and the falling dollar provides yet another excuse for faster interest rate hikes.  More rate hikes means eventually cheap loans will become expensive loans.

My question is, if the Fed is not going to feed cheap fiat into banks and corporations to fuel stock buybacks, then WHO is going to buy equities now?

What about corporations? Nope, not going to happen. With corporate debt skyrocketing to levels far beyond that seen just before the 2008 crash, there is no chance that they will be able to sustain stock buybacks without aid from the Fed.

What about retail investors? I doubt it.  Retail investors are the primary pillar boosting stocks at this stage in the game, but as we saw during the panic last week, it is unlikely that retail investors will maintain hands strong enough to refrain from selling at the first sign of trouble. They do tend to hastily jump back into markets to buy every dip because for many years this simplistic strategy has worked, but if the Fed continues to back away from stimulus and we seen a few more incidences like the 1,000+ point drops of recent days, investor conditioning will be broken, and blind faith will be replaced by doubt.

What about the American consumer?  Will consumer profits boost companies and give them and they stock shares a solid foundation? I can barely write that question without laughing out loud. There was a time (it seems like so long ago) when company innovation and solid business strategies actually meant something when it comes to equities. Those days are over. Now, everything is based on the assumption of central bank intervention, and as I already noted, central banks are pulling the plug on life support.

Beyond that, U.S. consumers are now buried in historic levels of personal debt.

What about the Trump administration’s latest $1.5 trillion infrastructure plan? Will this act as a kind of indirect stimulus program picking up where the Fed left off? Unlikely.

Perhaps if such a plan had been implemented eight years ago in place of the useless bank bailouts and TARP, it might have made a difference. Though, a similar strategy did not work out very well for Herbert Hoover. In fact, many of the Hoover-era infrastructure projects were not paid off for decades after initial construction. Hoover was also a one term Republican president that oversaw the beginning of the Great Depression.

The system is too far into debt and too far gone for infrastructure spending to make any difference in the economic outcome. Add to that the fact that Treasury yields are liable to continue their upward trajectory due to the increased deficit spending, putting more pressure on stocks.

Interestingly, Trump’s budget director has even admitted that the plan will lead to even faster increases in interest rates, and Fed officials have been using this as a partial rationale for why they plan to continue cutting off stimulus measures.

I think anyone with any sense can see the narrative that is building here. The Federal Reserve is going to let markets crumble in 2018. They are going to continue raising interest rates and reducing their balance sheet faster than originally expected. They will not step in when equities crash. And, they don’t really need to. Trump continues to set himself up as the perfect scapegoat for a bubble implosion that had to happen eventually anyway. Now, the central banks can sufficiently avoid any blame.

– Brandon Smith
Title: Re: Central Banks will Just Let the 2018 Crash Happen
Post by: Eddie on February 25, 2018, 01:05:50 PM
https://politicalvelcraft.org/2018/02/20/deep-state-central-bank-cartel-previously-bailed-out-now-they-will-just-let-the-crash-happen-nullify-the-debt/


(https://rasica.files.wordpress.com/2012/09/lottery-winners348402.jpg)
                                                                                                                                           


Central Banks will Just Let the 2018 Crash Happen

If you have been following the public commentary from central banks around the world the past few months, you know that there has been a considerable change in tone compared to the last several years.

For example,

    officials at the European Central Bank are hinting at a taper of stimulus measures by September of this year and
    some EU economists are expecting a rate hike by December.
    The Bank of England has already started its own rate hike program and has warned of more hikes to come in the near term.
    The Bank of Canada is continuing with interest rate hikes and signaled more to come over the course of this year.
    The Bank of Japan has been cutting bond purchases, launching rumors that governor Haruhiko Kuroda will oversee the long overdue taper of Japan’s seemingly endless stimulus measures, which have now amounted to an official balance sheet of around $5 trillion.

        When $10 Trillion In Fiat Debt Plus $80 Trillion In Global Debt Is Created In A Decade

This global trend of “fiscal tightening” is yet another piece of evidence indicating that central banks are NOT governed independently from one another, but that they act in concert with each other based on the same marching orders. That said, none of the trend reversals in other central banks compares to the vast shift in policy direction shown by the Federal Reserve.

First came the taper of QE, which almost no one thought would happen. Then came the interest rate hikes, which most analysts both mainstream and alternative said were impossible, and now the Fed is also unwinding its balance sheet of around $4 trillion, and it is unwinding faster than anyone expected.

Now, mainstream economists will say a number of things on this issue — they will point out that many investors simply do not believe the Fed will follow through with this tightening program. They will also say that even if the Fed does continue cutting off the easy money to banks and corporations, there is no doubt that the central banks will intervene in markets once again if the effects are negative.  I would say that this is rather delusional thinking based on a dangerous assumption; the assumption that the Fed wants to save markets.

When mainstream economists argue that the Federal Reserve could conceivably keep low interest rates and stimulus going for decades if necessary, they often use the example of the Bank of Japan as some kind of qualifier.

Of course, what they fail to mention is that yes, the BOJ has spent decades increasing its balance sheet which now sits at around $4.7 trillion (U.S.), but the Fed exploded its balance sheet to around $4.5 trillion in only eight years. That is to say, the Fed inflated a bubble as large if not larger than the Bank of Japan in less than half the time.

Frankly, the comparison is idiotic. And clearly according to their own admissions, the Fed is not going to be continuing stimulus measures anyway. People cling to this fantasy because they WANT to believe that the easy money party will never end.  They are sorely mistaken.

    I have been battling this delusion for quite some time.  When I predicted that the Fed would taper QE, I received a predominantly negative reaction.
    The same thing occurred when I predicted the Fed would begin hiking interest rates.
    Now, I’m finding it rather difficult to break through the narrative that the Fed will intervene before the next crash takes place.


intoxicating about the notion that central banks will stop at nothing to prop up stock markets and bond markets. It generates an almost crazed cult-like fervor in the investment world; a psychedelic high that makes financial participants think they can fly.

Of course, what has really happened is that these people have jumped off the roof of their overpriced condo; they think they are flying but they are really falling like a brick weighted down with stupidity.

Former Fed chairman Janet Yellen upon exiting her position stated:

    “If stock prices or asset prices more generally were to fall, what would that mean for the economy as a whole?”

    “I think our overall judgment is that, if there were to be a decline in asset valuations, it would not damage unduly the core of our financial system.”

Yellen also said when asked about high stock prices:

“Well, I don’t want to say too high. But I do want to say high. Price/earnings ratios are near the high end of their historical ranges…”

“Now, is that a bubble or is too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high.”

        Everything Is Awesome Right Before The Entire Economy Collapses: No Problem For Iceland As They Jailed The Bankers & Nullified The Debt.

Since the middle of last year, the Fed has been calling the stock market overpriced and “vulnerable.” This rhetoric has only become bolder over the past several months. Dallas Fed president Robert Kaplan dismissed concerns over the affect rate hikes might have on markets and hinted at the potential for MORE than the three hikes planned for 2018. The Dow fell 666 points that same day.

New York Fed’s Bill Dudley shrugged off concerns over recent volatility, saying that an equity rout like the one that occurred in recent days “has virtually no consequence for the economic outlook.”

Jerome Powell, the new Fed chairman, has said while taking the chair position that he will continue with the current Fed policy of rate hikes and balance sheet reductions,  and reiterated his support for more rate hikes this past week (while the mainstream media hyperfocused on his lip service promise to watch stock behavior closely).

This indicates once again that it does not matter who is at the wheel of the Fed, its course has already been set, and the Chairman is simply there to act as the ship’s parrot mascot. The Fed is expected to raise interest rates yet again in March.

Now, all the evidence including the Fed’s surprise balance sheet reduction of $18 billion in January shows that at least for now, the central bank no longer cares about stocks and bonds.

In the meantime, 10 year Treasury Yields are spiking to the ever present danger level of 3% after a hotter than expected inflation report, and the dollar index is plunging.  Showing us perhaps the first signs of a potential stagflationary crisis.  Bottom line – markets are not long for this world if yields pass 3% and the falling dollar provides yet another excuse for faster interest rate hikes.  More rate hikes means eventually cheap loans will become expensive loans.

My question is, if the Fed is not going to feed cheap fiat into banks and corporations to fuel stock buybacks, then WHO is going to buy equities now?

What about corporations? Nope, not going to happen. With corporate debt skyrocketing to levels far beyond that seen just before the 2008 crash, there is no chance that they will be able to sustain stock buybacks without aid from the Fed.

What about retail investors? I doubt it.  Retail investors are the primary pillar boosting stocks at this stage in the game, but as we saw during the panic last week, it is unlikely that retail investors will maintain hands strong enough to refrain from selling at the first sign of trouble. They do tend to hastily jump back into markets to buy every dip because for many years this simplistic strategy has worked, but if the Fed continues to back away from stimulus and we seen a few more incidences like the 1,000+ point drops of recent days, investor conditioning will be broken, and blind faith will be replaced by doubt.

What about the American consumer?  Will consumer profits boost companies and give them and they stock shares a solid foundation? I can barely write that question without laughing out loud. There was a time (it seems like so long ago) when company innovation and solid business strategies actually meant something when it comes to equities. Those days are over. Now, everything is based on the assumption of central bank intervention, and as I already noted, central banks are pulling the plug on life support.

Beyond that, U.S. consumers are now buried in historic levels of personal debt.

What about the Trump administration’s latest $1.5 trillion infrastructure plan? Will this act as a kind of indirect stimulus program picking up where the Fed left off? Unlikely.

Perhaps if such a plan had been implemented eight years ago in place of the useless bank bailouts and TARP, it might have made a difference. Though, a similar strategy did not work out very well for Herbert Hoover. In fact, many of the Hoover-era infrastructure projects were not paid off for decades after initial construction. Hoover was also a one term Republican president that oversaw the beginning of the Great Depression.

The system is too far into debt and too far gone for infrastructure spending to make any difference in the economic outcome. Add to that the fact that Treasury yields are liable to continue their upward trajectory due to the increased deficit spending, putting more pressure on stocks.

Interestingly, Trump’s budget director has even admitted that the plan will lead to even faster increases in interest rates, and Fed officials have been using this as a partial rationale for why they plan to continue cutting off stimulus measures.

I think anyone with any sense can see the narrative that is building here. The Federal Reserve is going to let markets crumble in 2018. They are going to continue raising interest rates and reducing their balance sheet faster than originally expected. They will not step in when equities crash. And, they don’t really need to. Trump continues to set himself up as the perfect scapegoat for a bubble implosion that had to happen eventually anyway. Now, the central banks can sufficiently avoid any blame.

– Brandon Smith

News Flash. There will be no 2018 crash.

The NASDAQ and the Russell have both confirmed a resumption of their uptrends and the Dow and the S&P are on verge of following suit. The crash was a bump in the road, disappearing now in the rearview mirror.

Brandon Smith, like Palloy and all who wish for fast collapse, are going to be disappointed again, for the umpteenth time.

Which is the real reason the Diner forum has turned into a place for old regulars to shoot the shit. All the Chicken Littles of Collapse got bored with the pace of collapse, and went elsewhere to waste their time in pursuit of some other temporary distraction. Short attention spans.

It takes real perspective to see collapse as it really is and not as it has been prophesied by various pundits.
Title: Re: Central Banks will Just Let the 2018 Crash Happen
Post by: RE on February 25, 2018, 01:19:54 PM
News Flash. There will be no 2018 crash.

The NASDAQ and the Russell have both confirmed a resumption of their uptrends and the Dow and the S&P are on verge of following suit. The crash was a bump in the road, disappearing now in the rearview mirror.

Brandon Smith, like Palloy and all who wish for fast collapse, are going to be disappointed again, for the umpteenth time.

Which is the real reason the Diner forum has turned into a place for old regulars to shoot the shit. All the Chicken Littles of Collapse got bored with the pace of collapse, and went elsewhere to waste their time in pursuit of some other temporary distraction. Short attention spans.

It takes real perspective to see collapse as it really is and not as it has been prophesied by various pundits.

We have PERSPECTIVE on the Diner!  :icon_sunny:  Also Persistence and Patience, necessary qualities to make it through the Zero Point.  The 3 Ps of Collapse Blogging.  :icon_sunny:

Fast Collapse is in progress as we speak.  We are skiing on the downslope of the Seneca Cliff now, and we will get to the bottom a whole lot faster than it took the chair lift powered by electricity to get us up to the top of the mountain.

(http://3.bp.blogspot.com/-nOEca9xpf4U/VbIUL8Uym9I/AAAAAAAAOzs/710mCpGxK48/s640/SenecaBrite.png)

It's not a straight downhill though, it's more like the Giant Slalom.  Here's Mikaela Shiffrin skiing the GS for the Gold at the Olympics held in Nuke Central Korea:

http://www.youtube.com/v/s7JiyWfGIh8

RE
Title: Re: Central Banks will Just Let the 2018 Crash Happen
Post by: azozeo on February 25, 2018, 01:36:11 PM
https://politicalvelcraft.org/2018/02/20/deep-state-central-bank-cartel-previously-bailed-out-now-they-will-just-let-the-crash-happen-nullify-the-debt/


(https://rasica.files.wordpress.com/2012/09/lottery-winners348402.jpg)
                                                                                                                                           


Central Banks will Just Let the 2018 Crash Happen

If you have been following the public commentary from central banks around the world the past few months, you know that there has been a considerable change in tone compared to the last several years.

For example,

    officials at the European Central Bank are hinting at a taper of stimulus measures by September of this year and
    some EU economists are expecting a rate hike by December.
    The Bank of England has already started its own rate hike program and has warned of more hikes to come in the near term.
    The Bank of Canada is continuing with interest rate hikes and signaled more to come over the course of this year.
    The Bank of Japan has been cutting bond purchases, launching rumors that governor Haruhiko Kuroda will oversee the long overdue taper of Japan’s seemingly endless stimulus measures, which have now amounted to an official balance sheet of around $5 trillion.

        When $10 Trillion In Fiat Debt Plus $80 Trillion In Global Debt Is Created In A Decade

This global trend of “fiscal tightening” is yet another piece of evidence indicating that central banks are NOT governed independently from one another, but that they act in concert with each other based on the same marching orders. That said, none of the trend reversals in other central banks compares to the vast shift in policy direction shown by the Federal Reserve.

First came the taper of QE, which almost no one thought would happen. Then came the interest rate hikes, which most analysts both mainstream and alternative said were impossible, and now the Fed is also unwinding its balance sheet of around $4 trillion, and it is unwinding faster than anyone expected.

Now, mainstream economists will say a number of things on this issue — they will point out that many investors simply do not believe the Fed will follow through with this tightening program. They will also say that even if the Fed does continue cutting off the easy money to banks and corporations, there is no doubt that the central banks will intervene in markets once again if the effects are negative.  I would say that this is rather delusional thinking based on a dangerous assumption; the assumption that the Fed wants to save markets.

When mainstream economists argue that the Federal Reserve could conceivably keep low interest rates and stimulus going for decades if necessary, they often use the example of the Bank of Japan as some kind of qualifier.

Of course, what they fail to mention is that yes, the BOJ has spent decades increasing its balance sheet which now sits at around $4.7 trillion (U.S.), but the Fed exploded its balance sheet to around $4.5 trillion in only eight years. That is to say, the Fed inflated a bubble as large if not larger than the Bank of Japan in less than half the time.

Frankly, the comparison is idiotic. And clearly according to their own admissions, the Fed is not going to be continuing stimulus measures anyway. People cling to this fantasy because they WANT to believe that the easy money party will never end.  They are sorely mistaken.

    I have been battling this delusion for quite some time.  When I predicted that the Fed would taper QE, I received a predominantly negative reaction.
    The same thing occurred when I predicted the Fed would begin hiking interest rates.
    Now, I’m finding it rather difficult to break through the narrative that the Fed will intervene before the next crash takes place.


intoxicating about the notion that central banks will stop at nothing to prop up stock markets and bond markets. It generates an almost crazed cult-like fervor in the investment world; a psychedelic high that makes financial participants think they can fly.

Of course, what has really happened is that these people have jumped off the roof of their overpriced condo; they think they are flying but they are really falling like a brick weighted down with stupidity.

Former Fed chairman Janet Yellen upon exiting her position stated:

    “If stock prices or asset prices more generally were to fall, what would that mean for the economy as a whole?”

    “I think our overall judgment is that, if there were to be a decline in asset valuations, it would not damage unduly the core of our financial system.”

Yellen also said when asked about high stock prices:

“Well, I don’t want to say too high. But I do want to say high. Price/earnings ratios are near the high end of their historical ranges…”

“Now, is that a bubble or is too high? And there it’s very hard to tell. But it is a source of some concern that asset valuations are so high.”

        Everything Is Awesome Right Before The Entire Economy Collapses: No Problem For Iceland As They Jailed The Bankers & Nullified The Debt.

Since the middle of last year, the Fed has been calling the stock market overpriced and “vulnerable.” This rhetoric has only become bolder over the past several months. Dallas Fed president Robert Kaplan dismissed concerns over the affect rate hikes might have on markets and hinted at the potential for MORE than the three hikes planned for 2018. The Dow fell 666 points that same day.

New York Fed’s Bill Dudley shrugged off concerns over recent volatility, saying that an equity rout like the one that occurred in recent days “has virtually no consequence for the economic outlook.”

Jerome Powell, the new Fed chairman, has said while taking the chair position that he will continue with the current Fed policy of rate hikes and balance sheet reductions,  and reiterated his support for more rate hikes this past week (while the mainstream media hyperfocused on his lip service promise to watch stock behavior closely).

This indicates once again that it does not matter who is at the wheel of the Fed, its course has already been set, and the Chairman is simply there to act as the ship’s parrot mascot. The Fed is expected to raise interest rates yet again in March.

Now, all the evidence including the Fed’s surprise balance sheet reduction of $18 billion in January shows that at least for now, the central bank no longer cares about stocks and bonds.

In the meantime, 10 year Treasury Yields are spiking to the ever present danger level of 3% after a hotter than expected inflation report, and the dollar index is plunging.  Showing us perhaps the first signs of a potential stagflationary crisis.  Bottom line – markets are not long for this world if yields pass 3% and the falling dollar provides yet another excuse for faster interest rate hikes.  More rate hikes means eventually cheap loans will become expensive loans.

My question is, if the Fed is not going to feed cheap fiat into banks and corporations to fuel stock buybacks, then WHO is going to buy equities now?

What about corporations? Nope, not going to happen. With corporate debt skyrocketing to levels far beyond that seen just before the 2008 crash, there is no chance that they will be able to sustain stock buybacks without aid from the Fed.

What about retail investors? I doubt it.  Retail investors are the primary pillar boosting stocks at this stage in the game, but as we saw during the panic last week, it is unlikely that retail investors will maintain hands strong enough to refrain from selling at the first sign of trouble. They do tend to hastily jump back into markets to buy every dip because for many years this simplistic strategy has worked, but if the Fed continues to back away from stimulus and we seen a few more incidences like the 1,000+ point drops of recent days, investor conditioning will be broken, and blind faith will be replaced by doubt.

What about the American consumer?  Will consumer profits boost companies and give them and they stock shares a solid foundation? I can barely write that question without laughing out loud. There was a time (it seems like so long ago) when company innovation and solid business strategies actually meant something when it comes to equities. Those days are over. Now, everything is based on the assumption of central bank intervention, and as I already noted, central banks are pulling the plug on life support.

Beyond that, U.S. consumers are now buried in historic levels of personal debt.

What about the Trump administration’s latest $1.5 trillion infrastructure plan? Will this act as a kind of indirect stimulus program picking up where the Fed left off? Unlikely.

Perhaps if such a plan had been implemented eight years ago in place of the useless bank bailouts and TARP, it might have made a difference. Though, a similar strategy did not work out very well for Herbert Hoover. In fact, many of the Hoover-era infrastructure projects were not paid off for decades after initial construction. Hoover was also a one term Republican president that oversaw the beginning of the Great Depression.

The system is too far into debt and too far gone for infrastructure spending to make any difference in the economic outcome. Add to that the fact that Treasury yields are liable to continue their upward trajectory due to the increased deficit spending, putting more pressure on stocks.

Interestingly, Trump’s budget director has even admitted that the plan will lead to even faster increases in interest rates, and Fed officials have been using this as a partial rationale for why they plan to continue cutting off stimulus measures.

I think anyone with any sense can see the narrative that is building here. The Federal Reserve is going to let markets crumble in 2018. They are going to continue raising interest rates and reducing their balance sheet faster than originally expected. They will not step in when equities crash. And, they don’t really need to. Trump continues to set himself up as the perfect scapegoat for a bubble implosion that had to happen eventually anyway. Now, the central banks can sufficiently avoid any blame.

– Brandon Smith

News Flash. There will be no 2018 crash.

The NASDAQ and the Russell have both confirmed a resumption of their uptrends and the Dow and the S&P are on verge of following suit. The crash was a bump in the road, disappearing now in the rearview mirror.

Brandon Smith, like Palloy and all who wish for fast collapse, are going to be disappointed again, for the umpteenth time.

Which is the real reason the Diner forum has turned into a place for old regulars to shoot the shit. All the Chicken Littles of Collapse got bored with the pace of collapse, and went elsewhere to waste their time in pursuit of some other temporary distraction. Short attention spans.

It takes real perspective to see collapse as it really is and not as it has been prophesied by various pundits.


Since when have you gotten struck fat, dumb & happy as a pig in slop.

Did you have a session with your higher self & are now just getting around to sharing with the rest of us.
Or is it because suits are goin' to prison & the merry old land of Oz is a safe investment haven for the tooth fairy  :icon_mrgreen:
Title: Re: Central Banks will Just Let the 2018 Crash Happen
Post by: Surly1 on February 25, 2018, 01:42:23 PM
Brandon Smith, like Palloy and all who wish for fast collapse, are going to be disappointed again, for the umpteenth time.

It takes real perspective to see collapse as it really is and not as it has been prophesied by various pundits.[/color]

A real shame no one is keeping track of BS's failed predictions. His W-L record is probably as bad as the Washington Generals.
Title: Re: Da Fed: Central Banking According to RE
Post by: Palloy2 on February 25, 2018, 02:05:30 PM
Quote
It takes real perspective to see collapse as it really is

It takes more than just saying it to make it true.  There WILL be another sell-off, probably this week.  Everybody with "real perspective", including the central banks, will be surprised.  As usual.

In response the central banks will repeat the same tired old platitudes until some banking major goes down, and then they will invent a new term for QE and implement it to stop the other banks from going into a lending freeze.  USG will find no partners for their infrastructure upgrades, and the decay will carry on as before.  Manufacturing will continue with their buybacks - an open admission they can't think of anything to manufacture that will sell. The production rate of US Crude Oil will continue to fall.  The weather-driven aspects of global warming will continue to cause damage.  Social alienation will continue to increase - homelessness, drunkenness, drugs, suicides, domestic violence, gang rapes, school shootings, imprisonment, prison riots. USA! USA! USA!

If they don't fix any of these problems, how are they not going to matter?  How will letting the crash happen nullify the debt?
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 25, 2018, 02:30:17 PM
It takes more than just saying it to make it true.

I'm not just saying it. I'm tracking what's going on in real time. Every equity index has an intact uptrend.10 year treasury is making lower highs and lower lows. The USD is getting a bounce. It's risk off at the moment. Sorry..

There WILL be another sell-off, probably this week

Now it's your turn to show some evidence for what you're claiming. All the evidence I see says probably not.






Title: Re: Central Banks will Just Let the 2018 Crash Happen
Post by: moniker on February 25, 2018, 02:47:02 PM
https://politicalvelcraft.org/2018/02/20/deep-state-central-bank-cartel-previously-bailed-out-now-they-will-just-let-the-crash-happen-nullify-the-debt/


(https://rasica.files.wordpress.com/2012/09/lottery-winners348402.jpg)
                                                                                                                                           

This global trend of “fiscal tightening” is yet another piece of evidence indicating that central banks are NOT governed independently from one another, but that they act in concert with each other based on the same marching orders.

Duh
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 25, 2018, 02:54:46 PM
Since when have you gotten struck fat, dumb & happy as a pig in slop.

Look. Whatever happens, I''m about as ready as I can be. I have no axe to grind. I just call 'em like I see 'em. When I'm wrong, I promptly admit it. That's what sets me aside from most of the armchair experts around here.

Everybody wants to talk their book. I long ago got tired of shouting "here's the crash" every time the S&P makes a 10% dip. I've been patiently observing what's been happening, and the chances of another big down leg are going away fast. I'm looking at charts and data that have real impact on the markets.

I'm just trying to take a realistic look at the non-alternative real facts. The evidence does not support a crash in 2018. Maybe in a year or two. More likely in 3 or 4. Oh, it is coming. No doubt. The current situation is highly unstable. We can all agree on that much, I think.

I think Brandon Smith gets a few things right, but he (and many others, he's not alone) are wrong on the timing on this.

How will letting the crash happen nullify the debt?

It won't


I put to you that throughout history no debt has ever ended up unpaid. The reason is simple: when borrowers fail to pay, lenders end up picking up the tab. By default.

João Miguel Ejarque




Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on February 25, 2018, 03:12:11 PM
Since when have you gotten struck fat, dumb & happy as a pig in slop.

Look. Whatever happens, I''m about as ready as I can be. I have no axe to grind. I just call 'em like I see 'em. When I'm wrong, I promptly admit it. That's what sets me aside from most of the armchair experts around here.

Everybody wants to talk their book. I long ago got tired of shouting "here's the crash" every time the S&P makes a 10% dip. I've been patiently observing what's been happening, and the chances of another big down leg are going away fast. I'm looking at charts and data that have real impact on the markets.

I'm just trying to take a realistic look at the non-alternative real facts. The evidence does not support a crash in 2018. Maybe in a year or two. More likely in 3 or 4. Oh, it is coming. No doubt. The current situation is highly unstable. We can all agree on that much, I think.

I think Brandon Smith gets a few things right, but he (and many others, he's not alone) are wrong on the timing on this.

How will letting the crash happen nullify the debt?

It won't


I put to you that throughout history no debt has ever ended up unpaid. The reason is simple: when borrowers fail to pay, lenders end up picking up the tab. By default.

João Miguel Ejarque


I see your short term strategy.
I just got blind sided by your "the waters fine, jump right in" perspective. Didn't expect it.
Yeah, we're all as ready as can be, or we wouldn't be keeping this ship afloat, free of charge, I might add.
Labor of love indeed.

The world's currencies are a Chinese fire-drill.
The only currency that hasn't been created, cyber or otherwise are Dutch tulip bulb bit coin rounds minted in unobtainum  :icon_sunny:
Title: Re: The Albatross Of Debt
Post by: Palloy2 on February 25, 2018, 03:32:00 PM
http://davidstockmanscontracorner.com/the-albatross-of-debt-the-stock-markets-67-trillion-nightmare-part-1/ (http://davidstockmanscontracorner.com/the-albatross-of-debt-the-stock-markets-67-trillion-nightmare-part-1/)
The Albatross Of Debt: The Stock Market's $67 Trillion Nightmare, Part 1
David Stockman
02/25/2018

This is getting pretty ridiculous. For old times sake, we recently checked on the Federal debt level during the month we arrived in the Imperial City as a 24-year old eager beaver. That was June 1970 and the Federal debt held by the public was $275 billion.

Mind you, while that number wasn't exactly diminutive, it had taken all of 188 years to accumulate. That is to say, Uncle Sam had borrowed an average of $28,000 per week during the 9,776 weeks since George Washington was sworn in as the nation's first president.

We are ruminating about this seeming historical obscuranta because it just so happens that the US treasury this very week will be selling $258 billion of government debt.

That's right. Uncle Sam's scheduled debt emission this week will nearly equal his cumulative borrowing during the nation's first 188 years and its first 37 presidents!

And, yes, there has been some considerable inflation since June 1970. And not the least because exactly 13 months later Tricky Dick Nixon decided to pull the plug on Bretton Woods and the dollar's anchor to a fixed weight of gold.

Needless to say, the financial discipline of gold-backed money during that interval of guns and butter excess would most certainly have triggered a recession and a heap of inconvenience for Nixon's 1972 reelection prospects. As it happened, the American economy got a heap of inflation and destructive financialization over the next half century, instead.

Accordingly, the price level today is 5X higher as measured by the GDP deflator. So in today's dollars of purchasing power, the 1970 debt figure would be about $1.2 trillion.

This is by way of explaining that it hasn't been for nothing that we have labeled the Donald as the King of Debt and the Congressional Republicans as fiscal Benedict Arnolds. Their now enacted budget plan----which they have the gall to crow about from one end of the country to the other----is to borrow as much money in apples-to-apples dollars during the year ahead (FY 2019) as did the first 37 presidents of the United States!

Accordingly, Keynesians, beltway politicians of both parties and Wall Street punters, alike, know this: The US has a monumental debt problem, and it is most definitely not "priced-in".

So our purpose in this two-part series is to explain how it came to be not priced-in, and why that anomalous state of affairs is coming hard upon its sell-by date.

To be clear, we are not talking about just the $21 trillion of public debt that will be on the books after this week's borrowing binge, but the entire $67 trillion albatross of public and private debt that now strangles the US economy.

We refer to the latter as the lamentable outcome of the rolling national LBO that the US economy has undergone since June 1970.

The fact is, the $1.5 trillion of total public and private debt outstanding back then amounted to 150% of GDP. And that implicit 1.5X  national leverage ratio had essentially remained unchanged for the prior 100 years of robust economic growth and 25-fold rise in real income per capita.

By contrast, at $67 trillion of total debt today, the US leverage ratio stands at nearly 3.5X, and therein lies the giant financial skunk in the woodpile. Had the historically proven leverage ratio of 1.5X national income not been upended by Tricky Dick's perfidy, there would be $30 trillion of total debt on the US economy today, not $67 trillion.

So those two-extra turns of leverage amount to $37 trillion-----an economic millstone that is grinding capitalist growth steadily lower, and which has now put the main street and Wall Street economy alike in harm's way.

That's because the massive growth of central bank credit unleashed by the Camp David folly of 1971 has finally reached its limit---even by the lights of our overtly Keynesian central bankers. So they are now embarking upon an epochal balance sheet reversal that will drastically alter the fundamental dynamics of the financial system, and expose the vast falsification of financial asset values that are actually "priced-in" to today's Wall Street house of cards.

Indeed, it was today's Keynesian mind-frame that caused Nixon to jettison gold in the first place: He was advised by what we have called the "freshwater Keynesians" around Milton Friedman, who were every bit as statist on the matter of money and macro-economic management from Washington as were their "saltwater" compatriots in Cambridge, MA. They merely differed on technique as between monetary versus fiscal policy tools.

Alas, when practiced over a long enough time frame, however, Keynesians---and the politicians and apparatchiks who find it convenient to embrace their fatally flawed model---literally loose their minds. That is, insofar as historical memory is concerned.

Stated differently, they become incurably infected with "recency bias", and so doing end-up absolutely blind to the unsustainable errors and anomalies on which they whole debt-fueled scheme is predicted.

For instance, had your editor also checked in at the Eccles Building during his taxi ride from national airport to his new digs on Capitol Hill in June 1970, he would also have found that the Fed's balance sheet stood at a mere $55 billion. And that was after 56 years in the money printing business.

What happened during the next 48 years, of course, was nothing less than a monetary eruption----the very thing that Nixon's Camp David folly enabled. To wit, the Fed's balance sheet exploded by 82X or by nearly 10% per annum over the course of a half century.

It goes without saying that you could not have found one economist (or even layman) in Washington, Cambridge or Chicago in June 1970 who would have recommended or even imagined an 82X explosion of the central banks balance sheet during the next 50 years. Even the reining monetary populist and crackpot of the day, Congressman Wright Patman of Texas and Chairman of the House banking and currency committee, would have never countenanced such a thing.

The rest is history, of course, and it couldn't have been imagined, either.That is, the 82X explosion of central bank credit gave rise to the freakish chart below.

To wit, in June 1970 the GDP was $1.1 trillion and it has since expanded by 18X to $19.6 trillion. By contrast, total public and private debt outstanding was $1.58 trillion and has since expanded by 42X to $67 trillion.

Needless to say, to grow these unsustainably divergent trends for even another decade would lead to an outright absurdity. To wit, $35 trillion of nominal GDP and $150 trillion of total debt.

In fact, the ridiculousness of it perhaps explains why the Fed stopped publishing the total credit market debt figure in its quarterly "Flow of Funds" report in Q4 2015 when the number stood at $63.5 trillion. But the components are still there and they do add to $67 trillion.

Needless to say, this chart makes all the difference in the world for the impending era of interest rate normalization and quantitative tightening (QT). It is one thing to permit interest rates to rise by 200-300 basis points in a context when the economy is carrying $30 trillion of debt; it's an altogether different kettle of fish, of course, when the burden is $67 trillion.

In short, recency bias is going to prove to be the Achilles heel of the now ending era of Bubble Finance. The US economy has been borrowing and printing money so long that its position on the economic and financial map has been lost sight of---meaning that the impact of the coming epochal reversal at the central bank is not even remotely appreciated.

Take the matter of the Fed's balance sheet. Even had the US followed Milton Friedman's fixed money growth rule at approximately 3% per annum, the Fed's $55 billion balance sheet of June 1970 would stand at just $230 billion today.

Do we think that $4.2 trillion of extra central bank credit has changed everything?

Yes, we do---as we will amplify in Part 2.

(https://fred.stlouisfed.org/graph/fredgraph.png?g=iAwC)

In the interim, however, here is the singular chart that should scare the bejesus out of casino gamblers who remain drunk on the trading charts embedded in robo-machines and the fancy bespoke trades peddled by Wall Street brokers.

(https://www.zerohedge.com/sites/default/files/styles/inline_image_desktop/public/inline-images/2018-02-23_13-13-00_0.jpg?itok=3rhr4GFU)

Up to $2 trillion of central bank balance sheet shrinkage has never happened before. Nor has the impact been any more imagined at present than had been the 82X explosion of the Fed's balance sheet back in June 1970.
Title: Re: The Albatross Of Debt
Post by: RE on February 25, 2018, 03:46:29 PM
Needless to say, the financial discipline of gold-backed money during that interval of guns and butter excess would most certainly have triggered a recession and a heap of inconvenience for Nixon's 1972 reelection prospects. As it happened, the American economy got a heap of inflation and destructive financialization over the next half century, instead.

No, it would not have triggered a "recession"  It would have COLLAPSED Industrial Civilization then instead of now.  The pulling of the dollar off the Gold Standard was a Kick-the-Can, and it worked for almost 50 years now.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Palloy2 on February 25, 2018, 04:07:52 PM
Closing the Gold window was a DEFAULT, not a kick-the-can, a default that THEN nobody was able to press home.  NOW, the default will be so big, and felt worldwide, that the new superpower, China, will be forced to take action.  No need for them to conjure up a reason:

https://www.rt.com/news/419751-china-opposes-sanctions-north-korea/ (https://www.rt.com/news/419751-china-opposes-sanctions-north-korea/)
China slams new US sanctions ‘harming cooperation' on N. Korea
24 Feb, 2018

China has called on the US to “immediately stop” unilateral sanctions targeting North Korea. Beijing has been angered after a number of Chinese businesses were included on a new sanctions list.

"The Chinese side firmly opposes the US imposing unilateral sanctions and 'long-arm jurisdiction' on Chinese entities or individuals in accordance with its domestic laws," the Chinese Foreign Ministry said in a statement. "We have lodged stern representations with the US side over this, urging it to immediately stop such wrongdoings so as not to undermine bilateral cooperation on the relevant area."

It went on to state that Beijing has been "comprehensively and strictly implementing" UN Security Council resolutions on North Korea and "fulfilling its international obligations." It said that it "never allows any Chinese citizen or company to engage in activities in violation" of those resolutions.

Beijing has long spoken out against any sanctions imposed against North Korea that are not within the framework of the United Nations.

The US announced on Friday that it was imposing its largest round of sanctions aimed at getting North Korea to give up its nuclear and missile programs. Twenty-seven companies, 28 ships, and one person were sanctioned, according to the US Treasury.

Shipping and energy firms based in mainland China, Hong Kong, Taiwan, and Singapore were affected, along with a Taiwan passport-holder. The actions block assets held by the parties in the US and prohibit US citizens from dealing with them.

China is North Korea's biggest trading partner and sole major ally. However, in January their trade fell to its lowest level since at least June 2014 as a result of UN trade sanctions.

Trump, who took a hardline stance against North Korea even before becoming president, has long stressed that China should put pressure on Pyongyang as its sole economic lifeline. That rhetoric prompted Beijing to accuse the White House of shifting responsibility.

Both Russia and China have urged caution in response to North Korea. In January, Moscow and Beijing proposed a "double freeze" initiative that envisaged the US and its allies ceasing all major military exercises in the region in exchange for Pyongyang suspending its nuclear and ballistic missile program. The initiative was rejected by Washington.

Russia has previously warned that further sanctions could escalate the strained relations. Russian envoy to North Korea Alexander Matsegora advised in January that a total ban on oil exports to North Korea could be interpreted by Pyongyang as a declaration of war.
Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on February 25, 2018, 04:09:30 PM
When she pops it's 96 hours before truck to shelf is no more.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 25, 2018, 04:31:25 PM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on February 25, 2018, 04:45:46 PM
I could have sworn Eddie was of a head and shoulders collapse just a couple weeks ago.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 25, 2018, 05:03:35 PM
Anytime we have a market correction I pay attention. But no, I was not calling for collapse a couple of weeks ago. I was saying I didn't think it was time yet, and I'm still saying that.

Based on a lot of easily verifiable facts, not the least of which is that corporations have just been given a huge gift by Mr. Trump in the form of a tax break.

Another of which is that we are temporarily awash in oil, regardless of it being mispriced or not.

Another of which is that the 10 year treasury is stubbornly refusing to break its 37 year trend line.

Another of which is that tech stocks and the Nasdaq and the Russell are already off to the races again, and the technical damage to their charts has been erased.

But pay no attention to facts. People just believe whatever suits their belief system.
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 04:13:26 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.


                                       http://www.youtube.com/v/7_Xw5tWsOQo
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 07:46:24 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 07:59:27 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 08:16:12 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.

No, it would have made it impossible to continue to issue debt to continue pumping oil.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 08:24:33 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.

No, it would have made it impossible to continue to issue debt to continue pumping oil.

RE

No again, We would have only paid more for it, which happened anyway.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 08:30:55 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.

No, it would have made it impossible to continue to issue debt to continue pumping oil.

RE

No again, We would have only paid more for it, which happened anyway.

No beyond your no, the Oil companies would not have been able to get the credit to pump the oil up for you to buy for Happy Motoring.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 08:46:32 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.

No, it would have made it impossible to continue to issue debt to continue pumping oil.

RE

No again, We would have only paid more for it, which happened anyway.

No beyond your no, the Oil companies would not have been able to get the credit to pump the oil up for you to buy for Happy Motoring.

RE

That's obviously no true. The Saudi's continued to provide oil to the oil companies after the Dollar link to Gold had been completely severed.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 08:56:32 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.

No, it would have made it impossible to continue to issue debt to continue pumping oil.

RE

No again, We would have only paid more for it, which happened anyway.

No beyond your no, the Oil companies would not have been able to get the credit to pump the oil up for you to buy for Happy Motoring.

RE

That's obviously no true. The Saudi's continued to provide oil to the oil companies after the Dollar link to Gold had been completely severed.

That's WHY the Saudi's continued to provide the oil to the oil companies!  ::)  If we had to have gold to buy oil, we could not have done it.  That's WHY the Gold-Dollar connection was severed!

Jeezus, do you not understand economics at all? ???

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 09:09:36 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.

No, it would have made it impossible to continue to issue debt to continue pumping oil.

RE

No again, We would have only paid more for it, which happened anyway.

No beyond your no, the Oil companies would not have been able to get the credit to pump the oil up for you to buy for Happy Motoring.

RE

That's obviously no true. The Saudi's continued to provide oil to the oil companies after the Dollar link to Gold had been completely severed.

That's WHY the Saudi's continued to provide the oil to the oil companies!  ::)  If we had to have gold to buy oil, we could not have done it.  That's WHY the Gold-Dollar connection was severed!

Jeezus, do you not understand economics at all? ???

RE

Again your misinformed. The Link between Gold and the dollar was removed by Nixon because the French showed up and demanded gold for their dollars as was promised. They had been warned by De Gaulle that their dollars would loose their value from profligate US spending and printing and they had better redeem them while they could before the US defaulted on their promise and legal gold obligations.

That is of course exactly what we did. Defaulted.

The Saudis both before and after the Nixon declaration of bankruptcy accepted and still do accept dollars in exchange for oil. This is factual data, not opinion.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 09:24:12 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.

No, it would have made it impossible to continue to issue debt to continue pumping oil.

RE

No again, We would have only paid more for it, which happened anyway.

No beyond your no, the Oil companies would not have been able to get the credit to pump the oil up for you to buy for Happy Motoring.

RE

That's obviously no true. The Saudi's continued to provide oil to the oil companies after the Dollar link to Gold had been completely severed.

That's WHY the Saudi's continued to provide the oil to the oil companies!  ::)  If we had to have gold to buy oil, we could not have done it.  That's WHY the Gold-Dollar connection was severed!

Jeezus, do you not understand economics at all? ???

RE

Again your misinformed. The Link between Gold and the dollar was removed by Nixon because the French showed up and demanded gold for their dollars as was promised. They had been warned by De Gaulle that their dollars would loose their value from profligate US spending and printing and they had better redeem them while they could before the US defaulted on their promise and legal gold obligations.

That is of course exactly what we did. Defaulted.

The Saudis both before and after the Nixon declaration of bankruptcy accepted and still do accept dollars in exchange for oil. This is factual data, not opinion.

Again, you misconstrue the "facts".  Had we paid off the French with Gold, there would have been nothing left to buy Oil with from the Saudis without severing the Dollar-Gold connection.  Bye-Bye Happy Motoring.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 09:38:08 AM
Closing the Gold window was a DEFAULT, not a kick-the-can

Defaults are can-kicks.  The loss gets redistributed to the population.

RE

True RE, and the population is still paying DEARLY for this particular can kick. The most egregious one in modern Financial History.

Well, we would have crashed Industrial Civilization 40 years ago without that particular can-kick, so it depends on whether you think having electricity and carz around is a good or bad thing.  ???

Also, turning on the spigot of QE-Infinity was pretty egregious also.

RE

No, We would have merely turned over our Gold to the French.

No, it would have made it impossible to continue to issue debt to continue pumping oil.

RE

No again, We would have only paid more for it, which happened anyway.

No beyond your no, the Oil companies would not have been able to get the credit to pump the oil up for you to buy for Happy Motoring.

RE

That's obviously no true. The Saudi's continued to provide oil to the oil companies after the Dollar link to Gold had been completely severed.

That's WHY the Saudi's continued to provide the oil to the oil companies!  ::)  If we had to have gold to buy oil, we could not have done it.  That's WHY the Gold-Dollar connection was severed!

Jeezus, do you not understand economics at all? ???

RE

Again your misinformed. The Link between Gold and the dollar was removed by Nixon because the French showed up and demanded gold for their dollars as was promised. They had been warned by De Gaulle that their dollars would loose their value from profligate US spending and printing and they had better redeem them while they could before the US defaulted on their promise and legal gold obligations.

That is of course exactly what we did. Defaulted.

The Saudis both before and after the Nixon declaration of bankruptcy accepted and still do accept dollars in exchange for oil. This is factual data, not opinion.

Again, you misconstrue the "facts".  Had we paid off the French with Gold, there would have been nothing left to buy Oil with from the Saudis without severing the Dollar-Gold connection.  Bye-Bye Happy Motoring.

RE

Stupid me! I feel so foolish. just noticed the title of this thread is "DA FED: Central Banking according to RE"

Silly me, I have been discussing the history of such matters. So embarrassed.

Forgive me my indiscretion kind sir, it was a careless error. I am going to print and file this discussion in our favorite receptacle for such matters as a testament to my carelessness.

Thanks for your explanation of these matters according to you. Most Appreciated.  :emthup: :icon_sunny:

 Placing my idiocy where it belongs.          (http://www.doomsteaddiner.net/blog/wp-content/uploads/2013/08/trash.gif)
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 09:51:47 AM
Silly me, I have been discussing the history of such matters. So embarrassed.

Forgive me my indiscretion kind sir, it was a careless error. I am going to print and file this discussion in our favorite receptacle for such matters as a testament to my carelessness.

Thanks for your explanation of these matters according to you. Most Appreciated.  :emthup: :icon_sunny:

 Placing my idiocy where it belongs.          (http://www.doomsteaddiner.net/blog/wp-content/uploads/2013/08/trash.gif)

Passive-Aggressive Attack.  ::)  Usually only women resort to this method.  You don't address the substantive issue at all, which is that had the FSoA bankrupted Fort Knox of Gold to pay off the French, there would have been nothing left to buy more Oil with from the Saudis.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 26, 2018, 10:42:06 AM
Again your misinformed. The Link between Gold and the dollar was removed by Nixon because the French showed up and demanded gold for their dollars as was promised. They had been warned by De Gaulle that their dollars would loose their value from profligate US spending and printing and they had better redeem them while they could before the US defaulted on their promise and legal gold obligations.

That is of course exactly what we did. Defaulted.



I've been reading about the history.  That round started, not in the US, but in England in the mid 60's when the pound got unstable. Basically, the banksters were losing money on gold. The decision to take the US off the gold standard was made by the international banking cartel, not by Nixon, who was only the talking head. Connally was Treasury Secretary, but he was being pushed by Burns at the Fed. London was ground zero. Typical.

Most countries were holding dollars. France had held gold instead, under de Gaulle, and it turned out to be a good arbitrage. France got screwed when Breton Woods ended, but it wasn't just the US that benefited.
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 11:46:43 AM
Again your misinformed. The Link between Gold and the dollar was removed by Nixon because the French showed up and demanded gold for their dollars as was promised. They had been warned by De Gaulle that their dollars would loose their value from profligate US spending and printing and they had better redeem them while they could before the US defaulted on their promise and legal gold obligations.

That is of course exactly what we did. Defaulted.



I've been reading about the history.  That round started, not in the US, but in England in the mid 60's when the pound got unstable. Basically, the banksters were losing money on gold. The decision to take the US off the gold standard was made by the international banking cartel, not by Nixon, who was only the talking head. Connally was Treasury Secretary, but he was being pushed by Burns at the Fed. London was ground zero. Typical.

Most countries were holding dollars. France had held gold instead, under de Gaulle, and it turned out to be a good arbitrage. France got screwed when Breton Woods ended, but it wasn't just the US that benefited.

In France, the Bretton Woods system was called "America's exorbitant privilege"[4] as it resulted in an "asymmetric financial system" where non-US citizens "see themselves supporting American living standards and subsidizing American multinationals." As American economist Barry Eichengreen summarized: "It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one".[4] In February 1965 President Charles de Gaulle announced his intention to exchange its U.S. dollar reserves for gold at the official exchange rate.[5]

By 1971, the money supply had increased by 10%.[7] In May 1971, West Germany left the Bretton Woods system, unwilling to revalue the Deutsche Mark.[8] In the following three months, this move strengthened its economy. Simultaneously, the dollar dropped 7.5% against the Deutsche Mark.[8] Other nations began to demand redemption of their dollars for gold. Switzerland redeemed $50 million in July.[8] France acquired $191 million in gold.[8] On August 5, 1971, the United States Congress released a report recommending devaluation of the dollar, in an effort to protect the dollar against "foreign price-gougers".[8] On August 9On the afternoon of Friday, August 13, 1971, these officials along with twelve other high-ranking White House and Treasury advisors met secretly with Nixon at Camp David. There was great debate about what Nixon should do, but ultimately Nixon, relying heavily on the advice of the self-confident Connally, decided to break up Bretton Woods by suspending the convertibility of the dollar into gold; freezing wages and prices for 90 days to combat potential inflationary effects; and impose an import surcharge of 10 percent,[11] to prevent a run on the dollar, stabilize the US economy, and decrease US unemployment and inflation rates, on August 15, 1971:[12][13], 1971, as the dollar dropped in value against European currencies, Switzerland left the Bretton Woods system.[8] The pressure began to intensify on the United States to leave Bretton Woods.

On the afternoon of Friday, August 13, 1971, these officials along with twelve other high-ranking White House and Treasury advisors met secretly with Nixon at Camp David. There was great debate about what Nixon should do, but ultimately Nixon, relying heavily on the advice of the self-confident Connally, decided to break up Bretton Woods by suspending the convertibility of the dollar into gold; freezing wages and prices for 90 days to combat potential inflationary effects; and impose an import surcharge of 10 percent,[11] to prevent a run on the dollar, stabilize the US economy, and decrease US unemployment and inflation rates, on August 15, 1971:[12][13]








    Nixon directed Treasury Secretary Connally to suspend, with certain exceptions, the convertibility of the dollar into gold or other reserve assets, ordering the gold window to be closed such that foreign governments could no longer exchange their dollars for gold.
    Nixon issued Executive Order 11615 (pursuant to the Economic Stabilization Act of 1970), imposing a 90-day freeze on wages and prices in order to counter inflation. This was the first time the U.S. government had enacted wage and price controls since World War II.
    An import surcharge of 10 percent was set to ensure that American products would not be at a disadvantage because of the expected fluctuation in exchange rates.

http://www.doomsteaddiner.net/forum/Themes/doom1/images/bbc/bold.gif (http://www.doomsteaddiner.net/forum/Themes/doom1/images/bbc/bold.gif)
As stated earlier this is the History of what happened. You and RE may spin it to your personal likes to your heart's content.

https://en.wikipedia.org/wiki/Nixon_shock (https://en.wikipedia.org/wiki/Nixon_shock)  :icon_study: :icon_study:
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 11:56:58 AM
As stated earlier this is the History of what happened. You and RE may spin it to your personal likes to your heart's content. [/b][/i]

All the history records is what happenned in the aftermath of Nixon closing the Gold Window.  It says nothing about what would have occurred had he not done that.  It would have COLLAPSED Industrial Civilization right there and then.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 12:07:45 PM

Passive-Aggressive Attack.  ::)  Usually only women resort to this method.  You don't address the substantive issue at all, which is that had the FSoA bankrupted Fort Knox of Gold to pay off the French, there would have been nothing left to buy more Oil with from the Saudis.

RE

That's me Butch, "The Effete GO"

                                (http://www.reoiv.com/images/random/effetemag.jpg)



                                         




Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 12:14:52 PM

Passive-Aggressive Attack.  ::)  Usually only women resort to this method.  You don't address the substantive issue at all, which is that had the FSoA bankrupted Fort Knox of Gold to pay off the French, there would have been nothing left to buy more Oil with from the Saudis.

RE

That's me Butch, "The Effete GO"

                                (http://www.reoiv.com/images/random/effetemag.jpg)                                     

Total Shit-Post, and still more Passive-Aggressive Attack.  ::) Still does not address the underlying issue that without breaking the Gold-Dollar bond, the FSoA could not have continued buying Saudi Oil for Happy Motoring.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Surly1 on February 26, 2018, 12:18:58 PM
I'm just stealing a peek at the forum while at work, and this thread is absolutely fascinating.  :emthup: :emthup: RE, GO and Eddie.
My compliments to all. I'll read at leisure tonight.

My recollections track along the lines of what GO posted, but then that's the "official" story. Would be great to read the inside poop on this decision.

Another reason to drop in here every day.

Again, a hat tip.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 26, 2018, 03:55:38 PM
The move away from the gold standard really began with the Bank of England abandoning the pound sterling's silver standard. This happened at the onset of the Great Depression. The next major step happened almost immediately when Roosevelt confiscated gold and then immediately devalued the US dollar in 1931.

This was done against the advice of many of his advisors at the time, but later was acknowledged generally to have lessened the severity of the Depression a great deal, for what that's worth.

In the 1960's it was thought by many in the international banking community that the sterling had to be supported at all costs, and that if the sterling fell in value that there would be a run on the US dollar, with all the many countries holding reserves in US dollars would rush to trade dollars for gold, and there would be a huge rise in the gold market.

Breton Woods policies were essentially the policies of Milton Gilbert, who set up European banking after WWII under the Marshall Plan. It was also Gilbert's idea that the sterling had to be supported in the 60's. At that time he was the head of BIS. He literally "wrote the book" on gold, and was acknowledged as the world's foremost expert on gold and currencies.

When the sterling had to be devalued, which it did in 1967, it led to the situation Gilbert feared the most, and that is what then led within a short time to France demanding gold for dollars. It was a self-fulfilling prophecy.

I don't need to make big caps and shout. It's all here for anybody who wants to read about it.

https://en.wikipedia.org/wiki/Milton_Gilbert (https://en.wikipedia.org/wiki/Milton_Gilbert)

http://www.helsinki.fi/iehc2006/papers1/Roberts.pdf (http://www.helsinki.fi/iehc2006/papers1/Roberts.pdf)

https://books.google.com/books?id=I9ugHSjIGLIC&pg=PA17&lpg=PA17&dq=milton+gilbert+on+the+end+of+the+gold+standard&source=bl&ots=9H2TcBmDN7&sig=NzPQn-bVLj-94hrppPkpCs1Udus&hl=en&sa=X&ved=0ahUKEwj89M-G48TZAhUJGKwKHYJWD44Q6AEIODAC#v=onepage&q=milton%20gilbert%20on%20the%20end%20of%20the%20gold%20standard&f=false (https://books.google.com/books?id=I9ugHSjIGLIC&pg=PA17&lpg=PA17&dq=milton+gilbert+on+the+end+of+the+gold+standard&source=bl&ots=9H2TcBmDN7&sig=NzPQn-bVLj-94hrppPkpCs1Udus&hl=en&sa=X&ved=0ahUKEwj89M-G48TZAhUJGKwKHYJWD44Q6AEIODAC#v=onepage&q=milton%20gilbert%20on%20the%20end%20of%20the%20gold%20standard&f=false)



Title: Re: Da Fed: Central Banking According to RE
Post by: Surly1 on February 26, 2018, 04:19:00 PM
When the sterling had to be devalued, which it did in 1967, it led to the situation Gilbert feared the most, and that is what then led within a short time to France demanding gold for dollars. It was a self-fulfilling prophecy.

I don't need to make big caps and shout. It's all here for anybody who wants to read about it.

https://en.wikipedia.org/wiki/Milton_Gilbert (https://en.wikipedia.org/wiki/Milton_Gilbert)

http://www.helsinki.fi/iehc2006/papers1/Roberts.pdf (http://www.helsinki.fi/iehc2006/papers1/Roberts.pdf)

https://books.google.com/books?id=I9ugHSjIGLIC&pg=PA17&lpg=PA17&dq=milton+gilbert+on+the+end+of+the+gold+standard&source=bl&ots=9H2TcBmDN7&sig=NzPQn-bVLj-94hrppPkpCs1Udus&hl=en&sa=X&ved=0ahUKEwj89M-G48TZAhUJGKwKHYJWD44Q6AEIODAC#v=onepage&q=milton%20gilbert%20on%20the%20end%20of%20the%20gold%20standard&f=false (https://books.google.com/books?id=I9ugHSjIGLIC&pg=PA17&lpg=PA17&dq=milton+gilbert+on+the+end+of+the+gold+standard&source=bl&ots=9H2TcBmDN7&sig=NzPQn-bVLj-94hrppPkpCs1Udus&hl=en&sa=X&ved=0ahUKEwj89M-G48TZAhUJGKwKHYJWD44Q6AEIODAC#v=onepage&q=milton%20gilbert%20on%20the%20end%20of%20the%20gold%20standard&f=false)

As my young nephew might say, "Dafuq?"

This is the shit, right here. Thanks, Eddie. Fascinating AF.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 04:32:58 PM
The move away from the gold standard really began with the Bank of England abandoning the pound sterling's silver standard. This happened at the onset of the Great Depression. The next major step happened almost immediately when Roosevelt confiscated gold and then immediately devalued the US dollar in 1931.

Yes, everybody knows this.  The point of the argument though is that the FSoA could not have kept buying oil if it had to pay its debts in Gold.  Industrial Civilization would have crashed in 1970 instead of now.  Going off Gold kicked the can down the road and bought another 40 years of Happy Motoring.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 04:33:43 PM
The move away from the gold standard really began with the Bank of England abandoning the pound sterling's silver standard. This happened at the onset of the Great Depression. The next major step happened almost immediately when Roosevelt confiscated gold and then immediately devalued the US dollar in 1931.

This was done against the advice of many of his advisors at the time, but later was acknowledged generally to have lessened the severity of the Depression a great deal, for what that's worth.

In the 1960's it was thought by many in the international banking community that the sterling had to be supported at all costs, and that if the sterling fell in value that there would be a run on the US dollar, with all the many countries holding reserves in US dollars would rush to trade dollars for gold, and there would be a huge rise in the gold market.

Breton Woods policies were essentially the policies of Milton Gilbert, who set up European banking after WWII under the Marshall Plan. It was also Gilbert's idea that the sterling had to be supported in the 60's. At that time he was the head of BIS. He literally "wrote the book" on gold, and was acknowledged as the world's foremost expert on gold and currencies.

When the sterling had to be devalued, which it did in 1967, it led to the situation Gilbert feared the most, and that is what then led within a short time to France demanding gold for dollars. It was a self-fulfilling prophecy.

I don't need to make big caps and shout. It's all here for anybody who wants to read about it.

https://en.wikipedia.org/wiki/Milton_Gilbert (https://en.wikipedia.org/wiki/Milton_Gilbert)

http://www.helsinki.fi/iehc2006/papers1/Roberts.pdf (http://www.helsinki.fi/iehc2006/papers1/Roberts.pdf)

https://books.google.com/books?id=I9ugHSjIGLIC&pg=PA17&lpg=PA17&dq=milton+gilbert+on+the+end+of+the+gold+standard&source=bl&ots=9H2TcBmDN7&sig=NzPQn-bVLj-94hrppPkpCs1Udus&hl=en&sa=X&ved=0ahUKEwj89M-G48TZAhUJGKwKHYJWD44Q6AEIODAC#v=onepage&q=milton%20gilbert%20on%20the%20end%20of%20the%20gold%20standard&f=false (https://books.google.com/books?id=I9ugHSjIGLIC&pg=PA17&lpg=PA17&dq=milton+gilbert+on+the+end+of+the+gold+standard&source=bl&ots=9H2TcBmDN7&sig=NzPQn-bVLj-94hrppPkpCs1Udus&hl=en&sa=X&ved=0ahUKEwj89M-G48TZAhUJGKwKHYJWD44Q6AEIODAC#v=onepage&q=milton%20gilbert%20on%20the%20end%20of%20the%20gold%20standard&f=false)

and the real reason for england going off the pound sterling's silver standard was following nero's example by debasing the denarius from it's silver content.

https://en.wikipedia.org/wiki/denarii (https://en.wikipedia.org/wiki/denarii)

The history of the decline and fall of the roman empire by edward gibbon
http://www.gutenberg.org/ebooks/25717?msg=welcome_stranger (http://www.gutenberg.org/ebooks/25717?msg=welcome_stranger)

Title: Re: Da Fed: Central Banking According to RE
Post by: Surly1 on February 26, 2018, 04:43:06 PM

Yes, everybody knows this.  The point of the argument though is that the FSoA could not have kept buying oil if it had to pay its debts in Gold.  Industrial Civilization would have crashed in 1970 instead of now. 
RE

I suspect this is a minority view as framed. I know of few who would frame the abandonment of Bretton Woods in those terms. If you equate the ability to buy oil with the value of the dollar, I might agree, because the as I understand it, the French would have emptied out Fort Knox under the status quo. And that wouldn't do.

This happened when I was a kid. All I knew that gas @$27.9 the gallon went to a buck in two-three years.

And in the fullness of time as regards the oil, we then went and bought ourselves some sheiks.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 04:43:24 PM

and the real reason for england going off the pound sterling's silver standard was following nero's example by debasing the denarius from it's silver content.

The reason for devaluing Silver was to try and adjust the balance of payments.  If they hadn't done the devaluation, then they would have been bankrupted of Gold in the exchange.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 04:48:27 PM
If you equate the ability to buy oil with the value of the dollar, I might agree, because the as I understand it, the French would have emptied out Fort Knox under the status quo. And that wouldn't do.

Now you are starting to understand.  We couldn't pay the debts we were accumulating in Gold, to the French or anyone else.  Had we stayed on the Gold standard, the "Amerikan Dream" would have come to an end in 1970.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 04:53:23 PM
If you equate the ability to buy oil with the value of the dollar, I might agree, because the as I understand it, the French would have emptied out Fort Knox under the status quo. And that wouldn't do.

Now you are starting to understand.  We couldn't pay the debts we were accumulating in Gold, to the French or anyone else.  Had we stayed on the Gold standard, the "Amerikan Dream" would have come to an end in 1970.

RE

You appear to have come to the conclusion that gold has much importance and value. Being without it brings on a nation's demise does it?? :icon_scratch:  i see  :laugh:

strange how your opinion on the metal changes with your current argument.  :icon_scratch: :laugh:
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 04:56:54 PM
If you equate the ability to buy oil with the value of the dollar, I might agree, because the as I understand it, the French would have emptied out Fort Knox under the status quo. And that wouldn't do.

Now you are starting to understand.  We couldn't pay the debts we were accumulating in Gold, to the French or anyone else.  Had we stayed on the Gold standard, the "Amerikan Dream" would have come to an end in 1970.

RE

You appear to have come to the conclusion that gold has much importance and value. Being without it brings on a nation's demise does it?? :icon_scratch:  i see  :laugh:

strange how your opinion on the metal changes with your current argument.  :icon_scratch: :laugh:

Under Bretton Woods, it had value as an exchange medium.  But there simply wasn't enough of it to drag all the oil up to power industrial civilization.  We needed debt to do that.  Without the debt and just utilizing Gold for exchange, Industrial Civilization would have crashed in 1970 instead of now.  We bought 40 more years of Happy Motoring this way.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 05:08:31 PM
If you equate the ability to buy oil with the value of the dollar, I might agree, because the as I understand it, the French would have emptied out Fort Knox under the status quo. And that wouldn't do.

Now you are starting to understand.  We couldn't pay the debts we were accumulating in Gold, to the French or anyone else.  Had we stayed on the Gold standard, the "Amerikan Dream" would have come to an end in 1970.

RE

You appear to have come to the conclusion that gold has much importance and value. Being without it brings on a nation's demise does it?? :icon_scratch:  i see  :laugh:

strange how your opinion on the metal changes with your current argument.  :icon_scratch: :laugh:

Under Bretton Woods, it had value as an exchange medium.  But there simply wasn't enough of it to drag all the oil up to power industrial civilization.  We needed debt to do that.  Without the debt and just utilizing Gold for exchange, Industrial Civilization would have crashed in 1970 instead of now.  We bought 40 more years of Happy Motoring this way.

RE

hasn't surly been able to make clear to you that the arabs were quite content to take dollars, as long as they got the price opec set. That they made a deal with us, and were paid off with protection.

the gold situation had nothing to do with oil, it had to do with european, namely german,swiss, and french dismay at the US management of the dollar.

of course that's the official historic story as surly stated, the central banking according to re might very well be different.

I remember well your explanation of the historic moon landing that fooled so many was not a fact at all, but a con job, so perhaps your correct again?  :icon_scratch:  :dontknow:
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 05:16:22 PM

hasn't surly been able to make clear to you that the arabs were quite content to take dollars, as long as they got the price opec set. That they made a deal with us, and were paid off with protection.

Another Captain Obvious comment.  Yes of course, but if we had to back the dollar with gold, there wouldn't have been enough dollars to buy the Saudi oil!  ::)

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 05:25:18 PM

hasn't surly been able to make clear to you that the arabs were quite content to take dollars, as long as they got the price opec set. That they made a deal with us, and were paid off with protection.
 

Another Captain Obvious comment.  Yes of course, but if we had to back the dollar with gold, there wouldn't have been enough dollars to buy the Saudi oil!  ::)

RE

no again, stop ignoring facts please.

the world was awash in dollars, that's why they wanted to turn them in for gold. that was the reason for the bretton woods agreement, to protect against the issuance of to much much bogus fiat.

if you did that people would demand gold in exchange for the toilet paper. very simple, factual and straightforward it was.



Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 05:28:53 PM
no again, stop ignoring facts please.

Stop making circular arguments.  The point is that as long as there was a direct exchange of dollars for gold, the FSoA could not afford to keep the Happy Motoring Industrial Lifestyle going.  Taking the Dollar off Gold allowed 40 more years of this fantasy lifestyle.  Staying on gold would have crashed industrial civilization in 1970.  The only way it exists at all is through issuance of endless credit.  Don't you get that?  ???  :icon_scratch:

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: g on February 26, 2018, 05:39:41 PM
no again, stop ignoring facts please.

Stop making circular arguments.  The point is that as long as there was a direct exchange of dollars for gold, the FSoA could not afford to keep the Happy Motoring Industrial Lifestyle going.  Taking the Dollar off Gold allowed 40 more years of this fantasy lifestyle.  Staying on gold would have crashed industrial civilization in 1970.  The only way it exists at all is through issuance of endless credit.  Don't you get that?  ???  :icon_scratch:

RE

goodnight re, tired from a big market day.

go is through teaching his pupils this evening. nighty nite everybody. 
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 26, 2018, 06:13:13 PM
no again, stop ignoring facts please.

Stop making circular arguments.  The point is that as long as there was a direct exchange of dollars for gold, the FSoA could not afford to keep the Happy Motoring Industrial Lifestyle going.  Taking the Dollar off Gold allowed 40 more years of this fantasy lifestyle.  Staying on gold would have crashed industrial civilization in 1970.  The only way it exists at all is through issuance of endless credit.  Don't you get that?  ???  :icon_scratch:

RE

goodnight re, tired from a big market day.

go is through teaching his pupils this evening. nighty nite everybody.

You haven't taught anyone anything.  Get a good night's rest.  Maybe you will do better tomorrow.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on March 06, 2018, 02:35:07 AM
http://www.acting-man.com/?p=52296 (http://www.acting-man.com/?p=52296)

Acting Man
Stretched to the Limit

There are good reasons to suspect that the bull market in US equities has been stretched to the limit. These include inter alia: high fundamental valuation levels, as e.g. illustrated by the Shiller P/E ratio (a.k.a. “CAPE”/ cyclically adjusted P/E); rising interest rates; and the maturity of the advance.

 

The end of an era – a little review of the mother of modern crash patterns, the 1929 debacle. In hindsight it is both a bit scary and sad, in light of the important caesura it represented. In many ways the roaring 20s were the last hurrah of a world in its death throes, a world that never managed to make a comeback. The massive expansion of the State that had begun in the years just before WW1 resumed in full force as soon as the post-war party on Wall Street ended. The worried crowd that formed in the streets around the NYSE in the week of the crash may well have suspected that the starting gun to profound change had just been fired. [PT]

 

Near the end of a bull market cycle there is always the question of when a decline will begin, and above all, how large will it be. I believe it possible that the retreat in prices will begin soon and that it could possibly even start out with a crash. I will explain in the following what led me to draw this conclusion.

 
2015 – 2018: the S&P 500 Index Moves Up Along a Well-Defined Trend Line

Let us first look at a chart of the S&P 500 Index over the past three years including the major  trend line formed by its rally. Prices moved up steadily along this trend line for a long time, until the advance suddenly began to steepen significantly in January of 2018. Thereafter prices plunged very rapidly in early February, followed by a swift rebound. This rebound appears to have ended earlier last week.

 

S&P from 2015 to 2018 with trend line providing support: for now the trend line still holds.

 
In 1987 the Market Crashes after Breaking Through a Similar Trend Line

Let us now compare the developments of recent years to a chart showing the move in the DJIA from 1986 to 1987 (focus on the general shape of the move rather than details such as percentage gains and duration). The similarities between the patterns are quite stunning.

 

DJIA with trend line, 1986 – 1987. After breaking through the trend line, the index quickly plummeted.

 

In 1986/87 prices also moved up along a rising trend line; there was a similar acceleration of the rally into the peak, followed by an initial test of the trend line and a rebound. After a short while the trend line was tested a second time. When it failed to hold, the crash commenced, soon culminating in a loss of almost 23% in a single trading day on October 19 1987.

 

Whiplash… the bull market mascot one week after the initial trend line test. [PT]

 
DJIA in 1929 – The Market also Crashes Right after Breaking a Major Trend Line

Let us ponder a chart of the DJIA from 1928 to 1929 as our next example, once again with the major trend line that supported the advance. Once again there are strong similarities to both the current situation and the pattern observed in 1987.

 

DJIA with support trend line, 1928 – 1929; once again the market crashed right after it tested the trend line that defined the uptrend for a second time and broke through it.

 

Just as happened both in 1987 and very recently, the market rose along the trend line until the rally suddenly accelerated and peaked; this was followed by sharp pullback and a first test of the trend line, a rebound, and eventually a second test that failed and immediately morphed into a crash.

A particularly dire bear market ensued in this case – by the summer of 1932, the market had lost almost 90 percent from the early September 1929 top (peak on Sept. 03 1929: 381.17 points; low on July 08 1932: 41.22 points).

 
1990 –  A Similar Pattern and Trend Line Break Precede the Crash in Japan’s Nikkei

What about non-US equity markets? One of the biggest bear markets of all time has been underway in Japan since 1990. The next chart shows the Nikkei 225 Index, also including the trend line that served as support in the final years of its bull market advance.

 

Nikkei 225 with major support trend line, 1987 – 1990; prices decline strongly after the trend line is broken.

 

Once again prices rose along a well-defined trend line, and once again the rally accelerated into the peak, after which an initial test of the trend line and a rebound followed. On the second test the Nikkei broke through the trend line and a lengthy and severe bear market began. The decline eventually reached a staggering 82% (the low was made in 2009, almost twenty years after the top).

 
When is the Crash Danger Acute?

In summary, there are very strong similarities between the chart formation that is in place right now and the patterns that could be observed at the pre-crash peaks of the DJIA in 1929 and 1987 and the Nikkei in 1990.

This raises the question whether there are also similarities in the temporal sequence of these patterns. Below is a table that shows the time periods between the most important turning points of the patterns in calendar days after the peak.

 

Time periods between major turning points in past crash patterns

 

The line designated “initial trend line test” shows how many days it took to decline from the top to the first test of the trend line. In 1929 it took 30 calendar days, but recently it took just 13 days (peak on January 26 2018, first test completed on February 08). In short, the length of time elapsing between these two turning points was quite different in these cases.

The second line designated “peak of rebound” shows the number of days from the top to the peak of the initial retracement rally. In the three historical examples of the US in 1929 and 1987 and in Japan in 1990, it was reached after 37 to 39 calendar days, i.e., these turning points were actually quite close to each other.

Currently this would be equivalent to March 02, March 03, or March 06 (at the moment it appears as though the rebound peak may have occurred on February 26. On Feb 27 the market very briefly traded above the range of Feb. 26, but closed lower).

The last line, designated “break of the trend line”, shows how many days elapsed from the peak to the second test, when the trend line was broken and the crash wave began. It is interesting that this happened between 45 to 53 calendar days after the respective bull market peaks of the three historical examples.

 



Once again these events happened quite close to each other; the time interval between the top and the failing retest was almost of the same length. Currently the equivalent time interval would target the time period from March 12 to March 20 for the retest.

More important than the precise number of days is the break of the trend line as such though. For instance, in the sharp decline in 1998 no such trend line break occurred, after the benchmark indexes had rallied along similar well-defined uptrend lines for a very long time;  the strong advance in prices quickly resumed.

 
The Preconditions for a Crash are in Place

Readers may well wonder why such strikingly similar price patterns tend to occur at all. There are probably psychological reasons for these similarities. At first prices rise steadily over a lengthy time period, until euphoria (and the “fear of missing out”) lead to an acceleration of the rally, producing a major peak. Such a phase could be observed in January of 2018, when   the ratio of bullish to bearish advisors according to Investors Intelligence reached an all time high.

What then happens is the opposite of what most investors expect, as prices suddenly decline sharply; initially the pullback tests the trend line successfully. This is what happened in early February this time. By the time the trend line comes into view, sentiment has pivoted completely and has become very bearish, which promptly triggers a rapid rebound. Investors quickly become optimistic again, which paves the way for the decline to resume.

In short, expectations are suddenly disappointed at every turn. The subsequent retest of the trend line is the decisive moment though. If it is broken, there is a significant danger that a crash will ensue. Its psychological function is to thoroughly destroy the faith of investors in perennially rising stock prices.

Will a crash happen this time as well? Crashes happen only very rarely after all – depending on one’s definition, one could well say that a real crash happens perhaps once every few decades. However, the factors discussed above suggest that crash probabilities must at the very least be regarded as elevated in coming weeks.

 

The beast is ever so slightly bruised, but far from vanquished… Crashes are indeed quite rare, and nigh impossible to predict, since sharp run-of-the-mill corrections that don’t end up violating important trend lines cannot be differentiated from those that do ahead of the event. But when a combination of several factors that are known preconditions for crash waves is in evidence, then it is definitely worth to consider the possibility. It is irrelevant that crashes are “normally” rare events. For one thing, they are less rare when the above discussed confluence of price patterns, sentiment and valuations is present; and secondly, if a low probability event harbors very large expected effects, it is definitely a good idea to actually be prepared and have a plan. Why risk ending up as yet another deer in the headlights? The landscape will already be well stocked with those if push actually comes to shove. [PT]

 

Dimitri Speck specializes in pattern recognition and trading systems development. He is the founder of Seasonax, the company which created the Seasonax app for the Bloomberg and Thomson-Reuters systems. He also publishes the website www.SeasonalCharts.com (http://www.SeasonalCharts.com), which features selected seasonal charts for interested investors free of charge. In his book The Gold Cartel (published by Palgrave Macmillan), Dimitri provides a unique perspective on the history of gold price manipulation, government intervention in markets and the vast credit excesses of recent decades. His ground-breaking work on intraday patterns in gold prices was inter alia used by financial supervisors to gather evidence on the manipulation of the now defunct gold and silver fix method in London. His Stay-C commodities trading strategy won several awards in Europe; it was the best-performing quantitative commodities fund ever listed on a German exchange. For in-depth information on the Seasonax app click here (n.b.: subscriptions through Acting Man qualify for a special discount. Details are available on request).
Title: 💸 The Banksters are BACK!
Post by: RE on March 15, 2018, 01:46:05 AM
(http://2.bp.blogspot.com/-Z60BCrOOCfY/ThtRq-mdyrI/AAAAAAAAACY/_DbEFgB-jOo/s400/They%2527re%2Bback.gif)

The Repugnants & Trumpovetsky open the cash register for stealing again!  ::)

RE

https://www.washingtonpost.com/business/economy/senate-passes-rollback-of-post-financial-crisis-banking-rules/2018/03/14/43837aae-27bd-11e8-b79d-f3d931db7f68_story.html?utm_term=.fcfd517a8cfc (https://www.washingtonpost.com/business/economy/senate-passes-rollback-of-post-financial-crisis-banking-rules/2018/03/14/43837aae-27bd-11e8-b79d-f3d931db7f68_story.html?utm_term=.fcfd517a8cfc)

Senate passes rollback of banking rules enacted after financial crisis

(https://img.washingtonpost.com/rf/image_1484w/2010-2019/WashingtonPost/2018/03/14/National-Economy/Images/Congress_Banking_Mortgage_Data_07740-b530d-0892.jpg?uuid=TIGk8ifUEei3nfPZMdt_aA)
Sen. Mike Crapo (R-Idaho), chairman of the Senate Banking Committee, was one of the major supporters of the banking bill that passed Wednesday. (J. Scott Applewhite/AP)


By Erica Werner and Renae Merle March 14 at 6:44 PM Email the author

The Senate on Wednesday passed the biggest loosening of financial regulations since the economic crisis a decade ago, delivering wide bipartisan support for weakening banking rules despite bitter divisions among Democrats.

The bill, which passed 67 votes to 31, would free more than two dozen banks from the toughest regulatory scrutiny put in place after the 2008 global financial crisis. Despite President Trump’s promise to do a “big number” on the Dodd-Frank Act of 2010, the new measure leaves key aspects of the earlier law in place. Nonetheless, it amounts to a significant rollback of banking rules aimed at protecting taxpayers from another financial crisis and future bailouts.

In a statement, White House press secretary Sarah Huckabee Sanders praised the legislation’s passage. “The bill provides much-needed relief from the Dodd-Frank Act for thousands of community banks and credit unions and will spur lending and economic growth without creating risks to the financial system,” she said.

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Breaking news about economic and business issues.

Given the bipartisan support for the bill, Wednesday’s passage was expected. But for the first time since Trump became president, the divisions lurking within the Senate Democratic Caucus burst into full view, with Sens. Elizabeth Warren (Mass.) and Sherrod Brown (Ohio) leading vehement opposition to the bill, even as supporters — including Democrats up for reelection in states Trump won — supported it with equal vigor.

Warren and Brown argued the bill amounts to a gift to Wall Street that increases taxpayer risk while boosting the chances of another financial crisis. Supporters of the legislation — including endangered Democratic Sens. Heidi Heitkamp (N.D.), Joe Donnelly (Ind.) and Jon Tester (Mont.) — disputed that characterization, contending that the bill’s aim is to loosen onerous regulations on local banks and credit unions, freeing them to focus more on community lending, particularly in rural states.
2:13
Is Dodd-Frank dead? Here's what you need to know
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The Senate is preparing to roll back the 2010 banking legislation known as Dodd-Frank. (Elyse Samuels/The Washington Post)

“It is a bill that I am in­cred­ibly proud of,” Heitkamp said in a Senate floor debate this week. “Dodd-Frank was supposed to have stopped too big to fail, but the net result has been too small to succeed. The big banks have gotten bigger since the passage of Dodd-Frank, and the small banks have disappeared.”

Following Heitkamp on the floor, Warren condemned the legislation as “the bank lobbyist act” and said it “puts American families in danger of getting punched in the gut.”

“Washington is poised to make the same mistake it has made many times before, deregulating giant banks while the economy is cruising, only to set the stage for another financial crisis,” Warren said.

Senate Minority Leader Charles E. Schumer (D-N.Y.) opposed the legislation but has played little role in a debate that has allowed liberals and moderates in his caucus to stake out positions tailored to their own political needs. But after Warren called out red-state Democrats and other supporters of the bill by name in a fundraising appeal, Schumer encouraged her to stay focused on the substance in the debate, according to a person familiar with the exchange who requested anonymity to discuss it.

Few of the Democrats named by Warren wanted to comment publicly on dissension within the caucus. Heitkamp downplayed their disagreements, saying of Warren in an interview, “She feels very, very strongly about this. I think it’s a difference between where we’ve always been on these banking issues. And you know obviously as you’re moving the bill forward, these differences were going to come to a head, and we were going to see a conflict because I just don’t see the bill the way she does.”

It’s not clear whether the Democratic divisions laid bare by the banking bill will resurface anytime soon, given the light legislative schedule expected in the Senate for the remainder of this midterm election year. But the debate highlighted how the political imperatives for red-state Democrats can collide with those of liberals such as Warren, who’s seen as a potential presidential candidate in 2020, creating the potential for conflict that could flare anew in future.

Banks with more than $50 billion in assets are now considered “too big to fail” and are subject to the toughest regulations, including a yearly stress test to prove they could survive another period of economic turmoil. The Senate legislation, shepherded by Banking Committee Chairman Mike Crapo (R-Idaho), would raise that threshold to $250 billion in assets, potentially allowing several high-profile financial institutions, including American Express, Ally Financial and Barclays, to escape the extra regulatory scrutiny.
1:36
Pelosi criticizes proposed changes to Dodd-Frank
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House Minority Leader Nancy Pelosi (D-Calif.) called attempts to change Dodd-Frank banking regulations "a cause for alarm" on March 8. (Reuters)

The bill’s supporters say these banks have been unfairly saddled with regulations originally intended for global behemoth banks such as JPMorgan Chase, not regional or midsized firms. Lifting the restrictions would save the industry billions a year in compliance costs, industry analysts say. It would also make it easier for them to reward shareholders with dividends and stock buybacks, they say.

Democrats and advocacy groups warn that the push to loosen the regulations fails to recognize that many of the midsized institutions that would be helped by the Senate legislation fell into dire financial straits less than a decade ago and needed more than $40 billion in taxpayer bailouts. During a financial crisis, they say, banks tend to fail in tandem, suffering from similar ailments. And the failure of several in a short time period could strain the U.S. economy.

The bill has largely been marketed as long-overdue help for small community banks and credit unions. The legislation, for example, would exempt banks with less than $10 billion in assets from the “Volcker rule,” which bars banks from making risky wagers with their own money. The bill would also exempt many small banks from a Dodd-Frank requirement that financial institutions report more detailed data on whom they lend to. The industry has complained that both measures are too cumbersome and time-consuming.

Exempting small banks from the mortgage data requirement would weaken the government’s ability to enforce fair-lending requirements, making it easier for community banks to hide discrimination against minority mortgage applicants and harder for regulators to root out predatory lenders, consumer advocates say.

The bill still needs to be approved in the House, where Republicans have been pushing a more aggressive rollback of financial regulations. That chamber passed a bill last year that stripped the Consumer Financial Protection Bureau, created under Dodd-Frank, of much of its power, for example. But the future of the CFPB is not addressed in the Senate bill.

Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, has said that House Republicans will want to alter the Senate bill to reflect their priorities. But that could drive away the Senate Democrats needed to pass the legislation, and so the House will face significant pressure to accept the Senate legislation with few, if any, changes.

Although the banking bill marked the first bipartisan legislation of the Trump era aside from must-pass spending deals, it was far from a freewheeling debate on the floor. Because of disagreement between the parties that has become routine, no amendment votes were permitted, frustrating senators in both parties who hoped to advance favored policies.

Sen. Bob Corker (R-Tenn.), a member of the Banking Committee, had been pushing an amendment to strike a section of the bill that could reduce the capital cushions of five of America’s biggest banks. Though supported by liberal Senate Democrats, it never came up for a vote amid the wrangling over the amendment process.

Jeffrey Stein contributed to this report.
Title: 💵 What’s Going on in the Treasury Market?
Post by: RE on March 20, 2018, 04:54:16 AM
https://wolfstreet.com/2018/03/18/how-seriously-is-the-treasury-market-taking-the-fed/

What’s Going on in the Treasury Market?

What’s Going on in the Treasury Market?

Will we see a “monetary shock?”

Back in October 2015, the three-month Treasury yield was 0%. Many on Wall Street said that the Fed could never raise interest rates, that the zero-interest-rate policy had become a permanent fixture, like in Japan, and that the Fed could never unload the securities it had acquired during QE. How things have changed!

On Friday, the three-month Treasury yield closed at 1.78%, the highest since August 19, 2008. When yields rise, by definition bond prices fall:

The Fed’s target range for the federal funds rate has been 1.25% to 1.50% since its last rate hike at the December FOMC meeting. In other words, the three-month yield is already above the upper limit of the Fed’s target range after the next rate hike. So the market has fully priced in a rate hike at the FOMC meeting ending March 21. And it’s also starting to price in another rate hike in June.

No “monetary shock” now, but maybe later

In this rate-hike cycle, the Fed has engaged in policy action only at meetings that are followed by a press conference. There are four of these press-conference meetings per year. The next two are this week and June.

If, in this cycle, the Fed hike rates at an FOMC meeting that is not followed by a press conference – there are also four of them this year – it would be considered a “monetary shock” that the Fed decided to administer to the markets. It would be like a rate hike of 50 basis points instead of the expected 25 basis points. There would be a hue and cry in the markets around the world. But I think the Fed isn’t ready to spring that on the markets just yet. Maybe later.

The two-year yield rose to 2.31% on Friday, the highest since August 29, 2008

In past rate hike cycles, the two-year yield reacted faster to rate-hike expectations than the 10-year yield. This is happening now as well. The 10-year yield has its own dynamics that are not in lockstep with the Fed’s rate-hike scenario. On Friday, the 10-year yield closed at 2.85%, within the same range where it had been since late February, tantalizingly close to 3%:

Bearish bets against Treasuries leave skid marks

Back on February 13, as the 10-year Treasury yield was surging and threatened to take out the 3% level, I postulated that it would have a hard time doing so over the near term, for two reasons:

One, in the 3%-range – given current asset prices, dividend yields, etc. – the 10-year Treasury is appealing to more buyers, and this will keep bond prices from falling further, thus putting a lid on the yield.

Two, speculators were heavily betting against the 10-year Treasury. By mid-February, bearish bets had risen to about 960,000 contracts, an all-time record. On February 21, the 10-year yield reached 2.95%. Everyone was on the same side of the boat. And there would have to be a sharp snap-back rally that could turn into a short-squeeze.

So we have seen some of both, and the 10-year yield remains stuck until further notice.

After the surge of the two-year yield, the difference between the two-year and the 10-year yield – the “two-10 spread” – has narrowed again. On Friday, it was at 54 basis points. In the chart below, note the narrowing at the end of last year to 50 basis points, then the mini-spike, as the 10-year yield surged faster than the two-year yield, and the recent fallback:

Where does this leave the yield curve?

The chart below shows the “yield curves” as the yields across the maturity spectrum occurred on these five key dates:

Note how the spread widened toward the long-dated end (right side of chart) between the black line (December 29, 2017) and the dotted red line (February 21), with the 30-year yield surging 48 basis points over those seven weeks, and how the slope of the dotted red line steepened compared to the black line.

These yields at the long end have since reversed slightly, but short-term yields have surged, leaving the yield curve on Friday (solid red line) somewhat flatter than it had been on February 21.

But I do not think that the yield curve will “invert” – a phenomenon when short-term yields are higher than long-term yields, which has been closely associated with recessions or worse. The last such inverted yield curve occurred before the Financial Crisis.

This time, the Fed has a tool that it didn’t have before: During QE, it acquired $1.7 trillion in Treasuries and $1.8 trillion in mortgage-backed securities that it has now started to unload. It can start jawboning the markets by telling them that it will unload the securities more quickly, and it could then actually unload them more quickly. This would be a “monetary shock.” It would put a lot of pressure on long-term Treasuries, and yields would jump at the long end of the curve, thus steepening the yield curve and causing all kinds of turbulence.

It may already be in the works. The first Fed Governor came out and said that the QE Unwind isn’t fast enough. And because it’s so slow it may actually contribute to, rather than lower, “financial imbalances.” Read…  QE Unwind Is Too Slow, Says Fed Governor, Thus Launching First Trial Balloon

Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on March 20, 2018, 06:00:50 AM
You KNOW I read that already. LOL. Trump and the Fed are both doing things to push the hedgies into Treasuries. Therefore no yield break-out. Prices are headed up. The markets don't like Trump's protectionism bullshit.

Trump's decision to ignore economic advice and pander to his xenophobe base will cause the next recession, aided by Powell's rush to "normalize" interest rates. Maybe sooner than I thought. My previous calculus did not include a trade war.

Title: 💵 What Could Dethrone the Dollar as Top Reserve Currency?
Post by: RE on April 01, 2018, 12:42:26 AM
https://wolfstreet.com/2018/03/30/what-could-knock-the-dollar-down-as-top-global-reserve-currency/

What Could Dethrone the Dollar as Top Reserve Currency?

(https://wolfstreet.com/wp-content/uploads/2018/03/Global-Reserve-Currency-USD-2017-Q4_2014.png)

 by Wolf Richter • Mar 30, 2018 • 52 Comments   
Central banks seem leery about the Chinese yuan.

What will finally pull the rug out from under the dollar’s hegemony? The euro? The Chinese yuan? Cryptocurrencies? The Greek drachma? Whatever it will be, and however fervently the death-of-the-dollar folks might wish for it, it’s not happening at the moment, according to the most recent data.

The IMF just released its report, Currency Composition of Official Foreign Exchange Reserves (COFER), for the fourth quarter 2017. It should be said that the IMF is very economical with what it discloses. The COFER data for the individual countries – the total level of their reserve currencies and what currencies they hold – is “strictly confidential.” But we get to look at the global allocation by currency.

In Q4 2017, total global foreign exchange reserves, including all currencies, rose 6.6% year-over-year, or by $709 billion, to $11.42 trillion, right in the range of the past three years (from $10.7 trillion in Q4 2016 to $11.8 trillion in Q3, 2014). For reporting purposes, the IMF converts all currency balances into dollars.

Dollar-denominated assets among foreign exchange reserves rose 14% year-over-year in Q4 to $6.28 trillion, and are up 42% from Q4 2014. There is no indication that global central banks have lost interest in the dollar; on the contrary:

Over the decades, there have been some efforts to topple the dollar’s hegemony as a global reserve currency, which it has maintained since World War II. The creation of the euro was the most successful such effort. Back in the day, the euro was supposed to reach “parity” with the dollar on the hegemony scale. And it edged up for a while until the euro debt crisis derailed those dreams.

And now there’s the ballyhooed Chinese yuan. Effective October 1, 2016, the IMF added it to its currency basket, the Special Drawing Rights (SDR). This anointed the yuan as a global reserve currency.

But not all central banks disclose to the IMF how their foreign exchange reserves are allocated. In Q4, the allocation of 12.3% of the reserves hadn’t been disclosed. These “unallocated reserves” have been plunging. Back in Q4 2014, they still accounted for 41% of total reserves. They’re plunging because more central banks report to the IMF their allocation of foreign exchange reserves, and the COFER data is getting more detailed.

So among the 87.7% of the “allocated” reserve currencies in Q4 2017, the pie was split up this way:

(https://wolfstreet.com/wp-content/uploads/2018/03/Global-Reserve-Currencies-share_2017-q4.png)

Disappointingly for many folks, the Chinese yuan – the thin red sliver in the pie chart above — didn’t exactly soar since its inclusion in the SDR basket. Its share ticked up by a minuscule amount to a minuscule share of 1.2% of allocated foreign exchange reserves in Q4. In other words, central banks seem to lack a certain eagerness, if you will, to hold yuan-denominated assets.

The Swiss franc, with a share of 0.2%, is the black hair-thin line in the pie chart.

Note that the euro’s economic area, the Eurozone, has a large trade surplus with the rest of the world, which, along with other factors, disproves the assertion that a country that issues a reserve currency, such as the US, must always have a large trade deficit with the rest of the world. It can go either way.

The chart below shows the percent share of various reserve currencies since 2014. The black line with the red dots at the top is the hegemonic US dollar, whose share has edged down a tiny bit. The euro (blue line) is stable at around 20%. The dollar and euro combined accounted for 82.9% of the allocated foreign exchange reserves in Q4 2017. Each of the rest of the currencies was an inconsequential also-ran. As a memo entry and not part of the percentages, I added the descending purple line to show the rapid disappearance of “unallocated reserves.” The Chinese yuan is the bright red line at the very bottom, just above the Swiss franc:

(https://wolfstreet.com/wp-content/uploads/2018/03/Global-Reserve-Currencies-share-time-2017-q4_2014.png)

Since 1965, the dollar’s share has fluctuated sharply, and the current share of 62.7% remains in the middle of the range. The chart below shows the dollar’s share at year-end for each of the past 52 years:

(https://wolfstreet.com/wp-content/uploads/2018/03/Global-Reserve-Currencies-USD-share-2017-q4_1965-annual.png)

The dollar’s low point was in 1991 with a share of 46%. Starting in 2001, the euro, which had replaced the Deutsche mark and the currencies of four other Eurozone member states as reserve currencies – now expanded to 19 – made a visible dent into the dollar’s hegemony. But the Financial Crisis did not.

And the Chinese yuan, on which all recent hopes had rested that it could pull the rug out from under the dollar, well, it’s barely above the level of a rounding error. In other words, folks who’ve been eagerly waiting for the death of the dollar or similar fiascos will have to learn how to be very patient.

Not that there isn’t enough going on that could raise doubts about the dollar, with trillions flying out the window so fast, they make your eyes water. Read… US Gross National Debt Spikes $1.2 Trillion in 6 Months, Hits $21 Trillion
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 01, 2018, 06:35:49 AM
Looks like we get to keep printing funny money for a bit longer. Thank you banksters. Keep those SS checks coming.
Title: Re: Da Fed: Central Banking According to RE
Post by: Palloy2 on April 01, 2018, 07:02:34 AM
All they are saying is "everything's fine" and "if the USD collapses, it will be a big shock".  Which is what they ALWAYS say.

It hasn't crashed yet, but it might happen tomorrow.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 01, 2018, 07:22:20 AM
All they are saying is "everything's fine" and "if the USD collapses, it will be a big shock".

Wolf Richter isn't they. He's an independent blogger with no axe to grind. I've been reading him for years. The evidence suggests the dollar is nowhere near collapse. Sorry.

It should collapse, it will collapse...but not tomorrow, or even next week. We have a ways to go. I think there will be some signs, for those who are observant.

The advent of the PetroYuan is not causing an instant seismic shift. That's reality. It will have some effect over time, I'm sure.



Title: Re: Da Fed: Central Banking According to RE
Post by: Surly1 on April 01, 2018, 07:30:18 AM
All they are saying is "everything's fine" and "if the USD collapses, it will be a big shock".

The evidence suggests the dollar is nowhere near collapse. Sorry.

It should collapse, it will collapse...but not tomorrow, or even next week. We have a ways to go. I think there will be some signs, for those who are observant.

There are 70 years of dollar-based inertia for the PetroYuan to overcome. Inertia is a bitch to fight.
Now when Russia and China don't buy the debt to pay for the tax cut gift to the .01 percent-- now THERE will be trouble.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 01, 2018, 07:37:18 AM
The Chinese, to their credit, are always willing to play the long game.Maybe too willing. There might not be enough time for them to build a winning hand.

I always try to keep my own "early warning system" tuned up. The Horseman to worry about right now is War, not a credit collapse. jmho.

It pays to be prepped for all possible collapse cascades though, as best as one can be. Real World War is the most difficult to prep for, and the scariest of all of them.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on April 01, 2018, 07:39:48 AM
All they are saying is "everything's fine" and "if the USD collapses, it will be a big shock".

Wolf Richter isn't they. He's an independent blogger with no axe to grind. I've been reading him for years. The evidence suggests the dollar is nowhere near collapse. Sorry.

It should collapse, it will collapse...but not tomorrow, or even next week. We have a ways to go. I think there will be some signs, for those who are observant.

The advent of the PetroYuan is not causing an instant seismic shift. That's reality. It will have some effect over time, I'm sure.

The sign that the dollar will crash is when the Euro crashes, which will come first.  This will briefly boost the dollar, and then all hell will break loose.

Currently, the PetroYuan is a complete dud.  It's the Chinese version of the "currency to nowhere".

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 01, 2018, 07:42:41 AM
I think you're right about the Euro. When the banksters let the Italian, Spanish, and French banks all fail, run for the hills.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 01, 2018, 07:46:10 AM
It's way to early too know what effect the PetroYuan will have. Give it a couple of years before you call it a dud.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on April 01, 2018, 07:47:28 AM
It's way to early to know what effect the PetroYuan will have. Give it a couple of years before you call it a dud.

I'll bet you on it.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 01, 2018, 07:58:52 AM
I'm more interested in your thought process than I am in betting. I would bet you a nominal amount it has a small incremental effect in reducing dollar hedgemony.

The real problem with using the Euro as a tell, is that things happen so fast now, that might only give you one day to make any changes before the dollar goes. Or weeks at best. That's why holding a little gold is always prudent.

Seeing what happened down here in a natural disaster, it makes me a lot less trusting of credit cards, I'll tell you that.

Atlanta airport CC's weren't going through because of their city-wide hostage hack.....but the restaurants were still taking them on faith...no choice, basically. Down here many things are still strictly cash.

Pre-64 silver coins are looking like a good prep to me right now.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on April 01, 2018, 09:22:11 AM
I'm more interested in your thought process than I am in betting. I would bet you a nominal amount it has a small incremental effect in reducing dollar hedgemony.

The real problem with using the Euro as a tell, is that things happen so fast now, that might only give you one day to make any changes before the dollar goes. Or weeks at best. That's why holding a little gold is always prudent.

Seeing what happened down here in a natural disaster, it makes me a lot less trusting of credit cards, I'll tell you that.

Atlanta airport CC's weren't going through because of their city-wide hostage hack.....but the restaurants were still taking them on faith...no choice, basically. Down here many things are still strictly cash.

Pre-64 silver coins are looking like a good prep to me right now.


Mainly based on stuff Steve wrote, when he was still writing.  I don't think their clearing system for international payments is well enough established and the banking system in general isn't trusted outside China.

Far as the CCs go...CASH...don't leave home without it!

It will take a lot of 1964 quarters to buy a Hamburger.  McDonalds would still only value them at 25 cents.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 01, 2018, 09:57:55 AM
Far as the CCs go...CASH...don't leave home without it!

Funny you should mention that. I usually do carry a fair amount of cash when traveling, but this time...I went to the bank. I handed her the bank bag. I thought she had the cash. She thought I had the cash.

Fortunately we had a couple of hundred bucks between us, or we'd have been fucked. More on this in the upcoming new chapter of Collapsing in Paradise.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on April 01, 2018, 10:19:54 AM
Far as the CCs go...CASH...don't leave home without it!

Funny you should mention that. I usually do carry a fair amount of cash when traveling, but this time...I went to the bank. I handed her the bank bag. I thought she had the cash. She thought I had the cash.

Fortunately we had a couple of hundred bucks between us, or we'd have been fucked. More on this in the upcoming new chapter of Collapsing in Paradise.

Looking forward to it!  I hope it's Blog length with lotsa pics!  :icon_sunny:

RE
Title: 💶 Deutsche Bank Solves One Crisis With New CEO. Now Onto the Next
Post by: RE on April 09, 2018, 04:42:51 AM
Can DBank PUHLEEEZ just declare BK and we can move on here with collapse?  ::)

RE

https://www.bloomberg.com/news/articles/2018-04-09/deutsche-bank-solves-one-crisis-as-more-vexing-questions-loom (https://www.bloomberg.com/news/articles/2018-04-09/deutsche-bank-solves-one-crisis-as-more-vexing-questions-loom)

Deutsche Bank Solves One Crisis With New CEO. Now Onto the Next

(https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ieHmVhnd.rBQ/v0/-1x-1.jpg)
Christian Sewing Photographer: Alex Kraus/Bloomberg

By Steven Arons
and Nicholas Comfort
April 9, 2018, 12:28 AM AKDT Updated on April 9, 2018, 2:28 AM AKDT

    Fate of board chairman Achleitner still up in the air
    Investment bank strategy is most pressing issue for Sewing

There also needs to be a discussion about Achleitner, says Hermes Equity’s Hans-Christoph Hirt.

The appointment of Christian Sewing as Deutsche Bank AG’s chief executive officer to replace an embattled John Cryan after less than three years -- and three turnaround plans -- answered just one of the questions hanging over the struggling institution.

There’s the fate of Chairman Paul Achleitner and whether a divided board can close ranks behind the new CEO. Sewing also confronts a decision on scaling back the investment bank -- both Deutsche Bank’s biggest source of revenue and a perennial laggard against U.S. giants -- and winning over long-suffering shareholders.

"Without a clear strategy commitment by all parties, turning Deutsche Bank around will be difficult," according to JPMorgan Chase & Co. analysts led by Kian Abouhossein. "Our view is that the problem is not the CEO as speculated by the press, but different stakeholders with different interests, with little evidence of commitment to changing the organization in the interests of the owners: shareholders and creditors."

The ouster of Cryan capped an embarrassing two-week run for the 148-year-old lender. Media reports highlighted tension with Achleitner and speculated that the 57-year-old CEO was on his way out. Without any response from Deutsche Bank, the Briton was essentially hung out to dry amid news of the search for a successor.
Tension Within

After sounding out external candidates -- including JPMorgan Chase & Co.’s Matt Zames and Bank of America Corp.’s Christian Meissner -- the bank’s directors rushed to bring some order to the situation. Late night on Sunday, they picked Sewing, a Deutsche Bank veteran who served as co-deputy CEO with the now-departed Marcus Schenck since one of Cryan’s strategy reboots in March 2017.

"Sewing may not necessarily have been the top candidate but he was there and stood ready," Hans-Peter Burghof, a professor of banking at the University of Hohenheim in Stuttgart.

In fact, Sewing’s role on Cryan’s management team fueled some skepticism about his selection. "We struggle to see how replacing Mr. Cryan with Mr. Sewing will result in a change of fortune for the bank," wrote Citigroup Inc. analysts led by Andrew Coombs. "Compared to some of the external candidates proposed in the press over the past week, his appointment could be viewed as underwhelming.”

The supervisory board wasn’t unanimous in adopting some of the measures proposed by Achleitner, according to people with knowledge of the meeting. One sticking point was the decision to name Garth Ritchie as head of the investment bank, one person said.
Low Valuation

The tumult underscored the frustration of stakeholders over the Cryan’s sputtering revival efforts. The stock lost more than half its value during his tenure and trades at about a third of the value of its assets; in contrast JPMorgan Chase & Co. trades at more than 1.5 times its book value.

John Cryan
Photographer: Andreas Arnold/Bloomberg

Deutsche Bank shares climbed 3.4 percent to 11.74 euros at noon in Frankfurt. They’re still down 26 percent so far in 2018.

The bank has struggled to recover since the financial crisis that exploded a decade ago. The company’s rapid expansion under Josef Ackermann as a global investment bank saddled it with an unwieldy structure and a culture of excessive risk-taking, critics say. Sewing will head the third leadership team since Ackermann’s 2012 departure.
Litigation Costs

Deutsche Bank has spent more than $17 billion paying fines and settling litigation since the start of 2008, according to company filings and other disclosures compiled by Bloomberg.

Sewing’s background suggests directors may keep at least one key plank of Cryan’s strategy: a greater focus on Germany. Its home market accounted for 37 percent of Deutsche Bank revenue last year, up from 35 percent in 2016, according to its annual report. The German weekly Die Zeit called for it to merge with Commerzbank AG “in the interests of bank and country.”

That would signal a scaling back of the investment bank. Davide Serra, CEO of Algebris Investments, says that Deutsche Bank lacks the scale to compete with the likes of JPMorgan and Goldman Sachs.

Once Sewing gets his team in place, his two biggest tasks will play out over months. The bank’s once-vaunted investment bank division has lagged rivals for several straight quarters now, with Chief Financial Officer James Von Moltke recently warning of headwinds last quarter.
Sewing’s Charge

"Our start to the year was solid but ‘solid’ cannot be our ambition," Sewing said in a memo to staff, his first comments since his promotion. "With regard to our revenues we have to regain our hunger for business."

The bank has launched a wide-ranging review of the division with a focus on its U.S. operations dubbed Project Colombo, people with knowledge of the matter said previously.

The corporate and investment bank will look to “free up capacity for growth by pulling back from those areas where we are not sufficiently profitable,” according to his memo to staff.

Sewing, who has experience in risk management and audit and has never worked in the investment bank, is keen to have a roughly balanced revenue share for the bank from its two core units, according to people familiar with this thinking. In practice, that suggests eliminating some businesses with staff reductions and spending cuts.
‘Guiding Hand’

Last year, the investment bank contributed 54 percent to group revenue and the retail division 38 percent. Meanwhile, income from sales and trading fell to the lowest level since the financial crisis despite repeated promises by Cryan.

The other key challenge lies in Deutsche Bank’s consumer unit. The bank last year announced the merger of its two domestic retail units, abandoning previous plans to sell one of them, Postbank.

While the bank has recently said that its plan to merge the two units remains on track for the second quarter, it has also pledged to achieve annual cost synergies of 900 million euros by the end 2020, to a large extent by cutting the workforce. Deutsche Bank’s management hopes to do away with as much as 6,000 retail bank jobs in Germany, people with knowledge said previously.

“What’s missing is the guiding hand behind this,” said Burghof. “It feels like there isn’t really a plan.”

That frustration signals why Achleitner may be vulnerable. While the board last week proposed bringing in finance-industry veterans -- including former Merrill Lynch chief John Thain and Mayree Clark, a one-time Morgan Stanley executive -- some investors said that Achleitner shared the blame for the bank’s troubles.

“He’s been in office since 2012, and as it turns out has made a lot of bad decisions,” said Andreas Meyer, who manages about 1.4 billion euros of fixed-income securities at Aramea Asset Management in Hamburg. “He should carry the responsibility for that and leave. I don’t believe it will happen, but that’s what I’d prefer.”
Title: 🏦 Fox in the Henhouse: Why Interest Rates Are Rising
Post by: RE on April 23, 2018, 12:13:19 AM
https://www.truthdig.com/articles/fox-in-the-hen-house-why-interest-rates-are-rising/ (https://www.truthdig.com/articles/fox-in-the-hen-house-why-interest-rates-are-rising/)

Fox in the Henhouse: Why Interest Rates Are Rising

(https://smhttp-ssl-62992.nexcesscdn.net/wp-content/uploads/2018/04/Marriner_S._Eccles_Federal_Reserve_Board_Building-850x472.jpg)
The Federal Reserve headquarters in Washington, D.C. (AgnosticPreachersKid / Wikimedia Commons / CC BY-SA 3.0)

On March 31 the Federal Reserve raised its benchmark interest rate for the sixth time in three years and signaled its intention to raise rates twice more in 2018, aiming for a Fed funds target of 3.5 percent by 2020. LIBOR (the London Interbank Offered Rate) has risen even faster than the Fed funds rate, up to 2.3 percent from just 0.3 percent 2 1/2 years ago. LIBOR is set in London by private agreement of the biggest banks, and the interest on $3.5 trillion globally is linked to it, including $1.2 trillion in consumer mortgages.

Alarmed commentators warn that global debt levels have reached $233 trillion, more than three times global GDP, and that much of that debt is at variable rates pegged either to the Fed’s interbank lending rate or to LIBOR. Raising rates further could push governments, businesses and homeowners over the edge. In its Global Financial Stability report in April 2017, the International Monetary Fund warned that projected interest rises could throw 22 percent of U.S. corporations into default.

Then there is the U.S. federal debt, which has more than doubled since the 2008 financial crisis, shooting up from $9.4 trillion in mid-2008 to over $21 trillion now. Adding to that debt burden, the Fed has announced it will be dumping its government bonds acquired through quantitative easing at the rate of $600 billion annually. It will sell $2.7 trillion in federal securities at the rate of $50 billion monthly beginning in October. Along with a government budget deficit of $1.2 trillion, that’s nearly $2 trillion in new government debt that will need financing annually.

If the Fed follows through with its plans, projections are that by 2027, U.S. taxpayers will owe $1 trillion annually just in interest on the federal debt. That is enough to fund President Trump’s original trillion-dollar infrastructure plan every year. And it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds. Where will this money come from? Even crippling taxes, wholesale privatization of public assets and elimination of social services will not cover the bill.
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With so much at stake, why is the Fed increasing interest rates and adding to government debt levels? Its proffered justifications don’t pass the smell test.

‘Faith-Based’ Monetary Policy

In setting interest rates, the Fed relies on a policy tool called the “Phillips curve,” which allegedly shows that as the economy nears full employment, prices rise. The presumption is that workers with good job prospects will demand higher wages, driving prices up. But the Phillips curve has proved virtually useless in predicting inflation, according to the Fed’s own data. Former Fed Chairman Janet Yellen has admitted that the data fail to support the thesis, and so has Fed Governor Lael Brainard. Minneapolis Fed President Neel Kashkari calls the continued reliance on the Phillips curve “faith-based” monetary policy. But the Federal Open Market Committee (FOMC), which sets monetary policy, is undeterred.

“Full employment” is considered to be 4.7 percent unemployment. When unemployment drops below that, alarm bells sound and the Fed marches into action. The official unemployment figure ignores the great mass of discouraged unemployed who are no longer looking for work, and it includes people working part-time or well below capacity. But the Fed follows models and numbers, and as of this month, the official unemployment rate had dropped to 4.3 percent. Based on its Phillips curve projections, the FOMC is therefore taking steps to aggressively tighten the money supply.

The notion that shrinking the money supply will prevent inflation is based on another controversial model, the monetarist dictum that “inflation is always and everywhere a monetary phenomenon”: Inflation is always caused by “too much money chasing too few goods.” That can happen, and it is called “demand-pull” inflation. But much more common historically is “cost-push” inflation: Prices go up because producers’ costs go up. And a major producer cost is the cost of borrowing money. Merchants and manufacturers must borrow in order to pay wages before their products are sold, to build factories, buy equipment and expand. Rather than lowering price inflation, the predictable result of increased interest rates will be to drive consumer prices up, slowing markets and increasing unemployment—another Great Recession. Increasing interest rates is supposed to cool an “overheated” economy by slowing loan growth, but lending is not growing today. Economist Steve Keen has shown that at about 150 percent private debt to GDP, countries and their populations do not take on more debt. Rather, they pay down their debts, contracting the money supply. That is where we are now.

The Fed’s reliance on the Phillips curve does not withstand scrutiny. But rather than abandoning the model, the Fed cites “transitory factors” to explain away inconsistencies in the data. In a December 2017 article in The Hill, Tate Lacey observed that the Fed has been using this excuse since 2012, citing one “transitory factor” after another, from temporary movements in oil prices to declining import prices and dollar strength, to falling energy prices, to changes in wireless plans and prescription drugs. The excuse is wearing thin.

The Fed also claims that the effects of its monetary policies lag behind the reported data, making the current rate hikes necessary to prevent problems in the future. But as Lacey observes, GDP is not a lagging indicator, and it shows that the Fed’s policy is failing. Over the last two years, leading up to and continuing through the Fed’s tightening cycle, nominal GDP growth averaged just over 3 percent, while in the two previous years, nominal GDP grew at more than 4 percent. Thus “the most reliable indicator of the stance of monetary policy, nominal GDP, is already showing the contractionary impact of the Fed’s policy decisions,” says Lacey, “signaling that its plan will result in further monetary tightening, or worse, even recession.”

Follow the Money

If the Phillips curve, the inflation rate and loan growth don’t explain the push for higher interest rates, what does? The answer was suggested in an April 12 Bloomberg article by Yalman Onaran, titled “Surging LIBOR, Once a Red Flag, Is Now a Cash Machine for Banks.” He wrote:

    The largest U.S. lenders could each make at least $1 billion in additional pretax profit in 2018 from a jump in the London interbank offered rate for dollars, based on data disclosed by the companies. That’s because customers who take out loans are forced to pay more as Libor rises while the banks’ own cost of credit has mostly held steady.

During the 2008 crisis, high LIBOR rates meant capital markets were frozen, since the banks’ borrowing rates were too high for them to turn a profit. But U.S. banks are not dependent on the short-term overseas markets the way they were a decade ago. They are funding much of their operations through deposits, and the average rate paid by the largest U.S. banks on their deposits climbed only about 0.1 percent last year, despite a 0.75 percent rise in the Fed funds rate. Most banks don’t reveal how much of their lending is at variable rates or indexed to LIBOR, but Onaran comments:

    JPMorgan Chase & Co., the biggest U.S. bank, said in its 2017 annual report that $122 billion of wholesale loans were at variable rates. Assuming those were all indexed to Libor, the 1.19 percentage-point increase in the rate in the past year would mean $1.45 billion in additional income.

Raising the Fed funds rate can be the same sort of cash cow for U.S. banks. According to a December 2016 Wall Street Journal article titled “Banks’ Interest-Rate Dreams Coming True”:

    While struggling with ultralow interest rates, major banks have also been publishing regular updates on how well they would do if interest rates suddenly surged upward. … Bank of America … says a 1-percentage-point rise in short-term rates would add $3.29 billion. … [A] back-of-the-envelope calculation suggests an incremental $2.9 billion of extra pretax income in 2017, or 11.5% of the bank’s expected 2016 pretax profit. …

As observed in an April 12 article on Seeking Alpha:

    About half of mortgages are … adjusting rate mortgages [ARMs] with trigger points that allow for automatic rate increases, often at much more than the official rate rise. …

    One can see why the financial sector is keen for rate rises as they have mined the economy with exploding rate loans and need the consumer to get caught in the minefield.

    Even a modest rise in interest rates will send large flows of money to the banking sector. This will be cost-push inflationary as finance is a part of almost everything we do, and the cost of business and living will rise because of it for no gain.

Cost-push inflation will drive up the consumer price index, ostensibly justifying further increases in the interest rate, in a self-fulfilling prophecy in which the FOMC will say: “We tried—we just couldn’t keep up with the CPI.”

A Closer Look at the FOMC

The FOMC is composed of the Federal Reserve’s seven-member Board of Governors, the president of the New York Fed and four presidents from the other 11 Federal Reserve Banks on a rotating basis. All 12 Federal Reserve Banks are corporations, the stock of which is 100 percent owned by the banks in their districts; and New York is the district of Wall Street. The Board of Governors currently has four vacancies, leaving the member banks in majority control of the FOMC. Wall Street calls the shots, and Wall Street stands to make a bundle off rising interest rates.

The Federal Reserve calls itself independent, but it is independent only of government. It marches to the drums of the banks that are its private owners. To prevent another Great Recession or Great Depression, Congress needs to amend the Federal Reserve Act, nationalize the Fed and turn it into a public utility, one that is responsive to the needs of the public and the economy.
Title: 📉 World stocks stumble as US Treasury yields near 3%
Post by: RE on April 23, 2018, 06:29:54 AM
https://www.cnbc.com/2018/04/23/world-stocks-stumble-as-us-treasury-yields-near-3-percent.html (https://www.cnbc.com/2018/04/23/world-stocks-stumble-as-us-treasury-yields-near-3-percent.html)

World stocks stumble as US Treasury yields near 3%

(https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2016/06/23/103739455-RTX2CX29.530x298.jpg?v=1466700078)

    World stocks slipped on Monday as investors braced for a blizzard of earnings from the world's largest firms.
    Investors are also keeping a wary eye on U.S. bond yields as they approach peaks that have triggered market spasms in the past.
    In early New York trading, the 10-year yield was trading around 2.9950 percent.

Published 4 Hours Ago Updated 53 Mins Ago Reuters
      
Pro says there are three reasons 10-year is rising 
52 Mins Ago | 03:25

World stocks slipped on Monday ahead of a blizzard of earnings from the world's biggest firms and as wary investors watched U.S. bond yields approach peaks that have triggered market spasms in the past.

The on 10-year U.S. Treasurys hit its highest level since January 2014 at 2.99 percent, pushing the gap — or spread — to German bonds to the widest in 29 years and the dollar higher in the process.

Traders were also getting a global round of economic surveys that should show in the coming days if economic softness in the first quarter was just a passing phase linked to wintery weather and the Lunar New Year holidays in Asia.

Readings from Japan, France, and Germany were all relatively reassuring. Japan's PMI data firmed as output and domestic demand picked up, France got help from its services sector, while Germany came in above forecast despite weaker new orders numbers.

"It's a good reading, it's still encouraging," said Chris Williamson, chief business economist at IHS Markit, of the combined euro zone numbers, which he said pointed to quarterly GDP growth of 0.6 percent.

On the geopolitical front, there was plenty to digest too.

North Korea said on Saturday that it would immediately suspend nuclear and missile tests, scrap its nuclear test site and instead pursue peace and economic growth.

Talk of a trip by the U.S. Treasury Secretary Steven Mnuchin to China, also fueled hopes that the recent trade tensions between the world's two biggest economies may be thawing.

Oil prices edged down in the cross-currents but were not far from their highest since late 2014. The market had wobbled on Friday when U.S. President Donald Trump tweeted criticism of OPEC's role in pushing up global prices, but quickly steadied.

Brent crude oil futures were off 20 cents at $73.83 per barrel, U.S. crude eased to $68.16. Aluminum prices leapt up again, though, to add to this month's 25 percent surge following U.S. sanctions on Russia's producer-giant Rusal.

"Underlying (oil market) sentiment is bullish," Saxo Bank senior manager Ole Hansen. "And we have OPEC potentially trying to 'overtighten' the market."

In stock markets, MSCI's world index fell 0.25 percent after Asia shed 0.5 percent overnight and and Europe then slipped 0.2 percent as results from Switzerland's biggest bank, UBS, disappointed and the rise in yields added pressure generally.

E-Mini futures for the S&P 500 were also pointing to a lower start for Wall Street later.

More than 180 companies in the S&P 500 are due to report results this week, including Amazon, Alphabet, Facebook, Microsoft, Boeing, and Chevron.
The 3 percent barrier

Of particular concern for U.S. analysts will be executives' views about their exposure to China, amid the recent worries about a trade war.

Treasury Secretary Mnuchin said on Saturday he might travel to Beijing, a move that could ease tensions between the two supersized economies.

"A trip is under consideration," Mnuchin said at a news conference during the International Monetary Fund and World Bank spring meetings in Washington.

"I did meet with the Chinese here. The discussions were really more around the governor's actions at the PBOC (People's Bank of China) and certain actions they've announced in terms of opening some of their markets, which we very much encourage and appreciate."

Back in commodity markets, the spike in oil has driven up both market expectations of future inflation and long-term bond yields.

Yields on 10-year Treasurys are at the highest now since early 2014 and again threatening the hugely important 3 percent bulwark.

The last time yields neared this number in 2013 it rocked risk appetite and sent stocks sliding. It also came shortly before oil prices went on a mighty 75 percent tumble.

"Another $5/barrel increase in oil will be enough for U.S. 10-year yields to threaten 3 percent. Oil is now at the cusp of levels where higher prices will spark greater FX and broader asset market volatility," said Deutsche Bank's macro strategist, Alan Ruskin.

Traditionally the dollar had a slight negative correlation with oil, mostly because the dominant causation goes from dollar weakness to rising oil prices, he added.

"If oil helps push the 10-year yield into new terrain for this cycle, this will play at least mildly USD positive in a change of correlation."

Indeed, dealers cited widening yield differentials for the dollar's broad rally.

The gap with German bonds has touched the widest in almost three decades. On a spot basis shorter-term U.S. 2-year yields are testing 2.5 percent, which is the highest since 2008.

The greenback was last at 108.215 having broken through major resistance in the 107.90/108.00 zone, which has held solid since mid-February.

The dollar index powered up to 90.69, and further away from last week's low at 89.229.

The euro was easier at $1.2232, having repeatedly failed to break above $1.2400 in the last couple of weeks.

Investors are awaiting the European Central Bank's policy meeting on Thursday amid talk that policymakers feel it is still too early to announce a timetable for winding down its bond buying.

ECB chief Mario Draghi said on Friday he was confident that the inflation outlook has picked up, but uncertainties "warrant patience, persistence and prudence."
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 28, 2018, 09:19:38 AM
Pretty good economic doom article from Nomi Prins.

Tomgram: Nomi Prins, The Return of the Great Meltdown?
Posted by Nomi Prins   at 7:47am, April 26, 2018.
Follow TomDispatch on Twitter @TomDispatch.




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[Note for TomDispatch Readers: Nomi Prins is one of the most regular of TomDispatch regulars, so I have no doubt that you’ve come to know her work well. As it happens, her striking new book, Collusion: How Central Bankers Rigged the World, a piercing look at the 2007-2008 global economic meltdown and the responses to it in the years since, has just been published. As Jeremy Scahill writes, “Prins has emerged as one of the fiercest critics of crony capitalism and its sustained attacks against poor and working people. This is the book that the financial elites don’t want you to read.” Ralph Nader adds, “Taxpayers, workers, and consumers who will suffer from another bailout, all better read this clear, concise compelling book.” And Greg Palast comments, “Scarier than Stephen King horror fiction.” For just a few days -- the offer ends this Sunday night -- you can get a signed, personalized copy of Collusion for a $100 donation to this site ($125 if you live outside the U.S.A.). Check out the details at our donation page and, while you’re at it, offer a helping hand to this website, which works hard to make Prins and so many other writers with unique perspectives on this topsy-turvy planet of ours available to you regularly. Tom]

In her new book, Collusion: How Central Bankers Rigged the World, Nomi Prins remembers how the 9/11 attacks affected her. She was, at the time, working for Goldman Sachs (which has been sending key former employees directly into top government posts ever since, most recently, of course, Steven Mnuchin as Donald Trump’s Treasury secretary). Before that, she had been working for the investment bank Lehman Brothers, which crashed and burned so dramatically, helping trigger the great financial crisis of 2007-2008. Here’s what she writes:

“We each have our stories from those days, where we were, what went through our minds, how it changed us as people, as a nation. For me, those tense moments walking up Broadway away from Wall Street, with the acrid, debris-filled smoke of the Twin Towers in the air, was a last straw. I left Goldman Sachs. Partly because life was too short. Partly out of disgust at how citizens everywhere had become collateral damage, and later hostages, to the banking system. Since then, I’ve dedicated my work to exposing the intersections of money and power and deciphering the impact of the relationships between governments and central and private bankers on the citizens of the world.”

Because 9/11 did something similar to me, and this website, TomDispatch, resulted from my own urge to decipher a puzzling post-9/11 world, I couldn’t be more sympathetic. Now, almost 17 years later, as the U.S. military pursues its unending wars across the planet, the central bankers of the same planet pursue... well, let Nomi Prins explain it to you. Tom

Donald Trump and the Next Crash
Making the Fed an Instrument for Disaster
By Nomi Prins

Warning: What you are about to read is not about Russia, the 2016 election, or the latest person to depart from the White House in a storm of tweets. It’s the Beltway story hiding in plain sight with trillions of dollars in play and an economy to commandeer.

While we’ve been bombarded with a litany of scandals from the Oval Office and the Trump family, there’s a crucial institution in Washington that few in the media seem to be paying attention to, even as President Trump quietly makes it his own. More obscure than the chambers of the Supreme Court, it’s a place where he has already made substantial changes. I’m talking about the Federal Reserve.

As the central bank of the United States, the “Fed” sets the financial tone for the global economy by manipulating interest rate levels. This impacts everyone, yet very few grasp the scope of its influence.

During times of relative economic calm, the Fed is regularly forgotten. But what history shows us is that having leaders who are primed to neglect Wall Street’s misdoings often sets the scene for economic dangers to come. That’s why nominees to the Fed are so crucial.

We have entered a landmark moment: no president since Woodrow Wilson (during whose administration the Federal Reserve was established) will have appointed as many board members to the Fed as Donald Trump. His fingerprints will, in other words, not just be on Supreme Court decisions, but no less significantly Fed policy-making for years to come -- even though, like that court, it occupies a mandated position of political independence.

The president’s latest two nominees to that institution’s Board of Governors exemplify this. He has nominated Richard Clarida, a former Treasury Department official from the days of President George W. Bush who later became a strategic adviser to investment goliath Pimco, to the Fed’s second most important slot, while giving the nod to Michelle Bowman, a Kansas bank commissioner, to represent community banks on that same board.

Like many other entities in Washington, the Fed’s Board of Governors has been operating with less than a full staff. If Clarida is approved, he will join Trump-appointed Fed Chairman Jerome Powell and incoming New York Federal Reserve Bank head John C. Williams -- the New York Fed generally exists in a mind meld with Wall Street -- as part of the most powerful trio at that institution.

Williams served as president of the San Francisco Fed. Under his watch, the third largest U.S. bank, Wells Fargo, created about 3.5 million fake accounts, gave its CEO a whopping raise, and copped to a $1 billion fine for bilking its customers on auto and mortgage insurance contracts.

Not surprisingly, Wall Street has embraced Trump’s new Fed line-up because its members are so favorably disposed to loosening restrictions on financial institutions of every sort.  Initially, the financial markets reflected concern that Chairman Powell might turn out to be a hawk on interest rates, meaning he’d raise them too quickly, but he’s proved to be anything but.

As Trump stacks the deck in his favor, count on an economic impact that will be felt for years to come and could leave the world devastated. But rest assured, if the Fed can help Trump keep the stock market buoyant for a while by letting money stay cheap for Wall Street speculation and the dollar competitive for a trade war, it will. 

History Warns Us

At a time when inequality, economic hardship, and household and personal debt levels are escalating and wages are not, why should any of this matter to the rest of us? The answer is simple enough: because the Fed sets the level of interest rates and so the cost of money. This, in turn, indirectly impacts the value of the dollar, which means everything you buy.

Since the financial crisis, the Fed has kept the cost of borrowing money for banks at near zero percent interest. That allowed those banks to borrow money to buy their own stock (as did many corporations) to inflate their value but not, of course, the value of their service to Main Street.

When money is cheap because interest rates are low or near zero, the beneficiaries are those with the most direct access to it. That means, of course, that the biggest banks, members of the Fed since its inception, get the largest chunks of fabricated money and pay the least amount of interest for it.

Although during the election campaign of 2016 Trump chastised the Fed for its cheap-money policies, he’s since evidently changed his mind (which is, of course, very Trumpian of him). That’s because he knows that the lower the cost of money is, the easier it is for major companies to borrow it. Easy money means easy speculation for Wall Street and its main corporate clients, which sooner or later will be a threat to the rest of us.

The era of trade wars, soaring stock markets, and Trump gaffes may feel like it’s gone on forever. Don’t forget, though, that there was a moment not so long ago when the same banking policies still reigning caused turmoil, ripping through the country and devouring the finances of so many. It’s worth recalling for a moment what happened during the Great Meltdown of 2008, when unrestrained mega-banks ravaged the economy before being bailed out. In the midst of the current market ecstasy, it’s an easy past to ignore. That’s why Trump’s takeover of the Fed and its impact on the financial system matters so much.

Let's recall that, on September 15, 2008, Lehman Brothers crashed. That bank, like Goldman Sachs a former employer of mine, had been around for more than 150 years. Its collapse was a key catalyst in a spiral of disaster that nearly decimated the world financial system. It wasn’t the bankruptcy that did it, however, but the massive amount of money the surviving banks had already lent Lehman to buy the toxic assets they created.

Around the same time, Merrill Lynch, a competitor of Lehman's, was sold to Bank of America for $50 billion and American International Group (AIG) received $182 billion in government assistance. JPMorgan Chase had already bought Bear Stearns, which had crashed six months earlier, utilizing a $29 billion government and Federal Reserve security blanket in the process.

In the wake of Lehman’s bankruptcy, $16 trillion in bailouts and other subsidies from the Federal Reserve and Congress were offered mostly to Wall Street’s biggest banks. That flow of money allowed them to return from the edge of financial disaster. At the same time, it fueled the stock and bond markets, as untethered from economic realities as the hot air balloon in The Wizard of Oz.

After nearly tripling since the post-financial crisis spring of 2009, last year the Dow Jones Industrial Average rose magically again by nearly 24%. Why? Because despite all of his swamp-draining campaign talk, Trump embraced the exact same bank-coddling behavior as President Obama. He advocated the Fed’s cheap-money policy and hired Steve Mnuchin, an ex-Goldman Sachs partner and Wall Street’s special friend, as his Treasury secretary. He doubled down on rewarding ongoing malfeasance and fraud by promoting the deregulation of the banks, as if Wall Street’s greed and high appetite for risk had vanished.

Impending Signs of Crisis

A quarter of the way into 2018, shadows of 2008 are already emerging. Only two months ago, the Dow logged its worst single-day point decline in history before bouncing back with vigor. In the meantime, the country whose banks caused the last crisis faces record consumer and corporate debt levels and a vulnerable geopolitical global landscape.

True, the unemployment rate is significantly lower than it was at the height of the financial crisis, but for Main Street, growth hasn’t been quite so apparent. About one in five U.S. jobs still pays a median income below the federal poverty line. Median household income is only up 5.3% since 2008 and remains well below where it was in 1998, if you adjust for inflation. Workforce participation remains nearly as low as it's ever been. Meanwhile, the top 1% of American earners saw their incomes go up by leaps and bounds since the Fed started manufacturing money -- to more than 40 times that of the bottom 90%.

Just as before the 2007-2008 financial crisis, there’s a scary level of confidence among politicians and regulators that neither the economy nor the banking sector could possibly go bust. Even the new Federal Reserve chair views the possible need for bailouts as a relic of a bygone time. As he said at his confirmation hearing, “Generally speaking I think the financial system is quite strong.” When asked if there are any U.S. banks that are still too big to fail, he responded, “I would say no to that.” 

That’s a pretty decisive statement, and not strikingly different from one outgoing Fed Chair Janet Yellen made last year. By extension, it means that Trump’s new chairman supports laxer structures for the big banks and more cheap money, if needed, to help them. So watch out.

When a crisis hits, liquidity dies, and banks close their doors to the public. Ultimately, the same formula for crisis will surely send Wall Street executives crawling back to the government for aid and then Donald Trump will find out what financial negligence truly is.

A Time of Crisis and Financial Collusion

As signs of crisis emerge, few in Washington have delved into how we can ensure that a systemic crash does not happen again. That’s why I’ll never forget the strange message I got one day. It was in the middle of May 2015, about a year after my book, All the Presidents' Bankers, had been published, when I received an email from the Federal Reserve. Every year, the Fed, the International Monetary Fund, and the World Bank hold an annual conference where the most elite central bankers from around the globe assemble. To my shock, since I hadn't exactly written in a kindly fashion about the Fed, I was being invited to speak at the opening session about why Wall Street wasn’t helping Main Street.

Two months later, I found myself sitting in front of a room filled with central bankers from around the world, listening to Fed Chair Janet Yellen proclaim that the worst of the crisis and its causes were behind us. In response, the first thing I asked that distinguished crowd was this: “Do you want to know why big Wall Street banks aren’t helping Main Street as much as they could?” The room was silent. I paused before answering, “Because you never required them to.”

I added, “The biggest six U.S. banks have been rewarded with an endless supply of cheap money in bailouts and loans for their dangerous behavior. They have been given open access to these funds with no major consequences, and no rules on how they should utilize the Fed’s largess to them to help the real economy. Why should you expect their benevolence?”

After I returned home, I became obsessed with uncovering just how the bailouts and loans of that moment were only the tip of an iceberg, the sort of berg that had once taken down the Titanic -- how that cheap money fabricated for Wall Street had been no isolated American incident.

What my research for my new book, Collusion: How Central Bankers Rigged the World, revealed was how central bankers and massive financial institutions have worked together to manipulate global markets for the past decade. Major central banks gave themselves a blank check with which to resurrect problematic banks; purchase government, mortgage, and corporate bonds; and in some cases -- as in Japan and Switzerland -- stocks, too. They have not had to explain to the public where those funds were going or why. Instead, their policies have inflated asset bubbles, while coddling private banks and corporations under the guise of helping the real economy.

The zero-interest-rate and bond-buying central bank policies prevailing in the U.S., Europe, and Japan have been part of a coordinated effort that has plastered over potential financial instability in the largest countries and in private banks. It has, in turn, created asset bubbles that could explode into an even greater crisis the next time around.

So, today, we stand near -- how near we don’t yet know -- the edge of a dangerous financial precipice. The risks posed by the largest of the private banks still exist, only now they’re even bigger than they were in 2007-2008 and operating in an arena of even more debt. In Donald Trump’s America, what this means is that the same dangerous policies are still being promoted today. The difference now is that the president is appointing members to the Fed who will only increase the danger of those risks for years to come.

A crash could prove to be President Trump’s worst legacy. Not only is he -- and the Fed he’s helping to create -- not paying attention to the alarm bells (ignored by the last iteration of the Fed as well), but he’s ensured that none of his appointees will either. After campaigning hard against the ills of global finance in the 2016 election campaign and promising a modern era Glass-Steagall Act to separate bank deposits from the more speculative activities on Wall Street, Trump's policy reversals and appointees leave our economy more exposed than ever.

When politicians and regulators are asleep at the wheel, it’s the rest of us who will suffer sooner or later. Because of the collusion that’s gone on and continues to go on among the world’s main central banks, that problem is now an international one.

Nomi Prins is a TomDispatch regular. Her new book, Collusion: How Central Bankers Rigged the World (Nation Books), has just been published. She is a former Wall Street executive. Special thanks go to researcher Craig Wilson for his superb work on this piece.

Follow TomDispatch on Twitter and join us on Facebook. Check out the newest Dispatch Book, Alfred McCoy's In the Shadows of the American Century: The Rise and Decline of U.S. Global Power, as well as John Dower's The Violent American Century: War and Terror Since World War II, John Feffer's dystopian novel Splinterlands, Nick Turse's Next Time They’ll Come to Count the Dead, and Tom Engelhardt's Shadow Government: Surveillance, Secret Wars, and a Global Security State in a Single-Superpower World.

Copyright 2018 Nomi Prins

http://www.tomdispatch.com/post/176415/tomgram%3A_nomi_prins%2C_the_return_of_the_great_meltdown/ (http://www.tomdispatch.com/post/176415/tomgram%3A_nomi_prins%2C_the_return_of_the_great_meltdown/)
Title: 💸 For Economic Truth Turn to Michael Hudson
Post by: RE on May 11, 2018, 06:09:07 AM
https://www.globalresearch.ca/for-economic-truth-turn-to-michael-hudson/5639849 (https://www.globalresearch.ca/for-economic-truth-turn-to-michael-hudson/5639849)

For Economic Truth Turn to Michael Hudson
Book Review
By Dr. Paul Craig Roberts
Global Research, May 10, 2018
Region: USA
Theme: Global Economy

(https://www.globalresearch.ca/wp-content/uploads/2018/05/MHudson.jpg)
Readers ask me how they can learn economics, what books to read, what university economics departments to trust. I receive so many requests that it is impossible to reply individually. Here is my answer.

There is only one way to learn economics, and that is to read Michael Hudson’s books. It is not an easy task. You will need a glossary of terms. In some of Hudson’s books, if memory serves, he provides a glossary, and his recent book “J Is for Junk Economics” defines the classical economic terms that he uses. You will also need patience, because Hudson sometimes forgets in his explanations that the rest of us don’t know what he knows.

The economics taught today is known as neoliberal. This economics differs fundamentally from classical economics that Hudson represents. For example, classical economics stresses taxing economic rent instead of labor and real investment, while neo-liberal economics does the opposite.

An economic rent is unearned income that accrues to an owner from an increase in value that he did nothing to produce. For example, a new road is built at public expense that opens land to development and raises its value, or a transportation system is constructed in a city that raises the value of nearby properties. These increases in values are economic rents. Classical economists would tax away the increase in values in order to pay for the road or transportation system.

Neoliberal economists redefined all income as earned. This enables the financial system to capitalize economic rents into mortgages that pay interest. The higher property values created by the road or transportation system boost the mortgage value of the properties. The financialization of the economy is the process of drawing income away from the purchases of goods and services into interest and fees to financial entities such as banks. Indebtedness and debt accumulate, drawing more income into their service until there is no purchasing power left to drive the economy.

For example, formerly in the US lenders would provide a home mortgage whose service required up to 25% of the family’s monthly income. That left 75% of the family’s income for other purchases. Today lenders will provide mortgages that eat up half of the monthly income in mortgage service, leaving only 50% of family income for other purchases. In other words, a financialized economy is one that diverts purchasing power away from productive enterprise into debt service.

Hudson shows that international trade and foreign debt also comprise a financialization process, only this time a country’s entire resources are capitalized into a mortgage. The West sells a country a development plan and a loan to pay for it. When the debt cannot be serviced, the country is forced to impose austerity on the population by cutbacks in education, health care, public support systems, and government employment and also to privatize public assets such as mineral rights, land, water systems and ports in order to raise the capital with which to pay off the loan. Effectively, the country passes into foreign ownership. This now happens even to European Community members such as Greece and Portugal.

Another defect of neoliberal economics is the doctrine’s denial that resources are finite and their exhaustion a heavy cost not born by those who exploit the resources. Many local and regional civilizations have collapsed from exhaustion of the surrounding resources. Entire books have been written about this, but it is not part of neoliberal economics. Supplement study of Hudson with study of ecological economists such as Herman Daly.

The neglect of external costs is a crippling failure of neoliberal economics. An external cost is a cost imposed on a party that does not share in the income from the activity that creates the cost. I recently wrote about the external costs of real estate speculators. Fracking, mining, oil and gas exploration, pipelines, industries, manufacturing, waste disposal, and so on have heavy external costs associated with the activities.

Neoliberal economists treat external costs as a non-problem, because they theorize that the costs can be compensated, but they seldom are. Oil spills result in companies having to pay cleanup costs and compensation to those who suffered economically from the oil spill, but most external costs go unaddressed. If external costs had to be compensated, in many cases the costs would exceed the value of the projects. How, for example, do you compensate for a polluted river? If you think that is hard, how would the short-sighted destroyers of the Amazon rain forest go about compensating the rest of the world for the destruction of species and for the destructive climate changes that they are setting in motion? Herman Daly has pointed out that as Gross Domestic Product accounting does not take account of external costs and resource exhaustion, we have no idea if the value of output is greater than all of the costs associated with its production. The Soviet economy collapsed, because the value of outputs was less than the value of inputs.
“J is for For Junk Economics”. The World’s Best Economist

Supply-side economics, with which I am associated, is not an alternative theory to neoliberal economics. Supply-side economics is a successful correction to neoliberal macroeconomic management. Keynesian demand management resulted in stagflation and worsening Phillips Curve trade-offs between employment and inflation. Supply-side economics cured stagflation by reversing the economic policy mix. I have told this story many times. You can find a concise explanation in my short book, “The Failure of Laissez Faire Capitalsim.” This book also offers insights into other failures of neoliberal economics and for that reason would serve as a background introduction to Hudson’s books.

I can make some suggestions, but the order in which you read Michael Hudson is up to you. “J is for Junk Economics” is a way to get information in short passages that will make you familiar with the terms of classical economic analysis. “Killing the Host” and “The Bubble and Beyond” will explain how an economy run to maximize debt is an economy that is self-destructing. “Super Imperialism” and “Trade, Development and Foreign Debt” will show you how dominant countries concentrate world economic power in their hands. “Debt and Economic Renewal in the Ancient Near East” is the story of how ancient economies dying from excessive debt renewed their lease on life via debt forgiveness.

Once you learn Hudson, you will know real economics, not the junk economics marketed by Nobel prize winners in economics, university economic departments, and Wall Street economists. Neoliberal economics is a shield for financialization, resource exhaustion, external costs, and capitalist exploitation.

Neoliberal economics is the world’s reigning economics. Russia is suffering much more from neoliberal economics than from Washington’s economic sanctions. China herself is overrun with US trained neoliberal economists whose policy advice is almost certain to put China on the same path to failure as all other neoliberal economies.

It is probably impossible to change anything for two main reasons. One is that so many greed-driven private economic activities are protected by neoliberal economics. So many exploitative institutions and laws are in place that to overturn them would require a more thorough revolution than Lenin’s. The other is that economists have their entire human capital invested in neoliberal economics. There is scant chance that they are going to start over with study of the classical economists.

Neoliberal economics is an essential part of The Matrix, the false reality in which Americans and Europeans live. Neoliberal economics permits an endless number of economic lies. For example, the US is said to be in a long economic recovery that began in June 2009, but the labor force participation rate has fallen continuously throughout the period of alleged recovery. In previous recoveries the participation rate has risen as people enter the work force to take advantage of the new jobs.

In April the unemployment rate is claimed to have fallen to 3.9 percent, but the participation rate fell also. Neoliberal economists explain away the contradiction by claiming that the falling participation rate is due to the retirement of the baby boom generation, but BLS jobs statistics indicate that those 55 and older account for a large percentage of the new jobs during the alleged recovery. This is the age class of people forced into the part time jobs available by the absence of interest income on their retirement savings. What is really happening is that the unemployment rate does not include discouraged workers, who have given up searching for jobs as there are none to be found. The true measure of the unemployment rate is the decline in the labor force participation rate, not a 3.9 percent rate concocted by not counting those millions of Americans who cannot find jobs. If the unemployment rate really was 3.9 percent, there would be labor shortages and rising wages, but wages are stagnant. These anomalies pass without comment from neoliberal economists.

The long expansion since June 2009 might simply be a statistical artifact due to the under-measurement of inflation, which inflates the GDP figure. Inflation is under-estimated, because goods and services that rise in price are taken out of the index and less costly substitutes are put in their place and because price increases are explained away as quality improvements. In other words, statistical manipulation produces the favorable picture required by The Matrix.

Since the financial collapse caused by the repeal of Glass-Steagall and by financial deregulation, the Federal Reserve has robbed tens of millions of American savers by driving real interest rates down to zero for the sole purpose of saving the “banks too big to fail” that financial deregulation created. A handful of banks has been provided with free money—in addition to the money that the Federal Reserve created in order to take the banks’ bad derivative investments off their hands—to put on deposit with the Fed from which to collect interest payments and with which to speculate and to drive up stock prices.

In other words, for a decade the economic policy of the United States has been run for the benefit of a few highly concentrated financial interests at the expense of the American people. The economic policy of the United States has been used to create economic rents for the mega-rich.

Neoliberal economists point out that during the 1950s the labor force participation rate was much lower than today and, thereby, they imply that the higher rates prior to the current “recovery” are an anomaly. Neoliberal economists have no historical knowledge as the past is of no interest to them. They do not even know the history of economic thought. Whether from ignorance or intentional deception, neoliberal economists ignore that the lower labor force participation rates of the 1950s reflect a time when married women were at home, not in the work force. In those halcyon days, one earner was all it took to sustain a family. I remember the days when the function of a married woman was to provide household services for the family.

But capitalists were not content to exploit only one member of a family. They wanted more, and by using economic policy to suppress pay while fomenting inflation, they drove married women into the work force, imposing huge external costs on the family, child-raising, relations between spouses, and on the children themselves. The divorce rate has exploded to 50 percent and single-parent households are common in America.

In effect, unleashed Capitalism has destroyed America. Privatization is now eating away Europe. Russia is on the same track as a result of its neoliberal brainwashing by American economists. China’s love of success and money could doom this rising Asian giant as well if the government opens China to foreign finance capital and privatizes public assets that end up in foreign hands.

*

This article was originally published on Paul Craig Roberts Institute for Political Economy.

Dr. Paul Craig Roberts is a frequent contributor to Global Research.
Title: 💸 Update on the Fed’s QE Unwind
Post by: RE on June 09, 2018, 12:37:03 AM
https://wolfstreet.com/2018/06/08/update-fed-qe-unwind-treasury-mbs-balance-sheet-normalization/

Update on the Fed’s QE Unwind
by Wolf Richter • Jun 8, 2018 • 48 Comments   
Just as the Fed created money to buy Treasuries and MBS during QE, it now destroys money as these securities “roll off” the balance sheet.

(https://wolfstreet.com/wp-content/uploads/2018/06/US-Fed-Balance-sheet-2018-06-07-Treasuries.png)

It took the Fed five-and-a-half years to amass $3.4 trillion in Treasury securities and mortgage-backed securities (MBS) during QE, including the year 2014 when it was “tapering” QE to zero. The Fed is now reversing that process, including the opposite of “tapering,” as it is ramping up its QE unwind.

The Fed’s balance sheet for the week ending June 6, released Thursday afternoon, shows a total drop of $141 billion since October, the beginning of the era officially called “balance sheet normalization.” At $4,319 billion, total assets have dropped to the lowest level since May 7, 2014, during the middle of the “taper.”

If the Fed continues to follow its plan, it will shed up to $420 billion in securities this year, and up to $600 billion a year in 2019 and each year in the future, until it considers its balance sheet to be “normalized” — or until something big breaks. For May, the plan calls for the Fed to shed up to $18 billion in Treasuries and up to $12 billion in MBS. So how did it go?
Treasury securities

The balance of Treasury securities fell by $17.7 billion in May to $2,378 billion, the lowest since May 28, 2014. Since the beginning of the QE-Unwind, $88 billion in Treasuries “rolled off.” The blue arrow indicates the amount that rolled off in May:

The step-pattern in the chart is a function of how the Fed unloads securities. It doesn’t sell them outright but allows them to “roll off” when they mature. Treasuries mature mid-month or at the end of the month. Hence the stair-steps.

On May 15, $26.4 billion in Treasuries on the Fed’s balance sheet matured. The Fed replaced $17.9 billion of them with new Treasury securities directly via its arrangement with the Treasury Department that cuts out primary dealers that the Fed normally does business with. In other words, that $17.9 billion was “rolled over.” But it did not replace $8.5 billion of maturing Treasuries. They “rolled off.”

On May 31, $28.6 billion matured. The Fed replaced $19.4 billion with new Treasuries. The remaining $9.2 billion of maturing Treasuries “rolled off” without replacement.
Mortgage-backed securities

First things first: The Fed only holds MBS that were issued and guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. The credit risk lies with these government sponsored enterprises, not with the Fed.

Residential MBS are a little quirky as far as bonds go. Holders receive principal payments on a regular basis as the underlying mortgages are paid down or are paid off. At maturity, the remaining principal is paid off. Over the years, to keep the MBS balance from declining, the New York Fed’s Open Market Operations (OMO) kept buying MBS.

Settlement of those trades occurs two to three months later. Since the Fed books the trades at settlement, the time lag between trade and settlement causes large weekly fluctuations on the Fed’s balance sheet — the jagged line in the chart below. The lag also delays when MBS that “rolled off” actually disappear from the balance sheet. So the current balance sheet reflects MBS that rolled off around March and April [my detailed explanation].

Since the beginning of May, the MBS balance fell by $10.4 billion, to $1,734.6 billion, the lowest since August 12, 2015. In total, $36 billion in MBS have “rolled off” since the beginning of the QE unwind. Also note how the jags in the jagged line are starting to disappear as the Fed phased out its purchases, and the phase-out, after the time-lag, is now showing up:

(https://wolfstreet.com/wp-content/uploads/2018/06/US-Fed-Balance-sheet-2018-06-07-MBS.png)

The Fed’s total assets

QE consisted only of Treasuries and MBS. So the QE unwind only relates to Treasuries and MBS. Since the beginning of the QE Unwind, $88 billion in Treasuries and $36 billion in MBS rolled off, for a combined total of $124 billion.

The Fed has other roles that might impact assets and liabilities of the balance sheet, including that it acts as the bank of the US Treasury Department and holds “Foreign Official Deposits” by other central banks and government entities. So the overall assets on its balance sheet don’t move exactly in line with the balances of Treasuries and MBS.

In May, total assets on the Fed’s balance sheet dropped by $37 billion, to $4,319 billion, the lowest since May 2014. Assets are now down by $141 billion since the beginning of the QE-Unwind:

(https://wolfstreet.com/wp-content/uploads/2018/06/US-Fed-Balance-sheet-2018-06-07-overall.png)

Just as the Fed created money to buy Treasuries and MBS during QE, it now destroys money when Treasuries and MBS “roll off” the balance sheet. The money just disappears to where it had come from – nothingness. Just like QE added liquidity to the markets, the QE unwind is draining liquidity. QE was associated with enormous media hoopla for maximum “wealth effect” in terms of asset price inflation; but the QE unwind happens quietly, on autopilot, and the media is silencing it to death.

The “waterbed effect” of money flows. Read…  How Chinese Investors Inflate Housing Markets in the US, Canada, and Australia, as Governments Try to Stem the Tide
 
Title: Da Fed: Mother Russia Dumps HALF of its Treasury Bonds - B@@M
Post by: azozeo on June 21, 2018, 07:18:30 AM
https://www.rt.com/business/429931-russia-sells-us-treasuries/ (https://www.rt.com/business/429931-russia-sells-us-treasuries/)
Title: Da Fed: India puts Da Fuq' to Da Fed....
Post by: azozeo on June 21, 2018, 07:27:08 AM
https://www.strategic-culture.org/news/2018/06/03/india-joins-international-group-dumping-us-dollars-oil-trades-bypass-us-sanctions.html (https://www.strategic-culture.org/news/2018/06/03/india-joins-international-group-dumping-us-dollars-oil-trades-bypass-us-sanctions.html)


India Joins International Group Dumping US Dollars in Oil Trades to Bypass US Sanctions

03.06.2018

TruePublica

When Donald Trump’s administration decided to withdraw from the Iran nuclear deal, the goal was to partner with allies to push Iran to negotiate a new agreement through even tougher sanctions. The new agreement would cover nuclear activities as well as ballistic missiles and destabilizing Iranian activity in Syria, Yemen and beyond.

World leaders in Asia and Europe, in particular, are reasonably sure that Washington really wants to see the collapse of the Iranian regime in order to control oil flows.

This was an arrogant miscalculation by Washington used to bullying its way around the geopolitical chessboard.

In 2015, under pressure from US sanctions, Russia decided to make moves to drop the USD on oil transactions. Gazprom Neft, the third-largest oil producer in Russia, moved away from the dollar and towards the Chinese yuan and other Asian currencies.

On March 26 this year, China finally launched a yuan-dominated oil futures contract. Over the last decade there have been a number of “false starts,” but this time the contract got approval from China’s State Council.

With that approval, the “petroyuan” became real and China set out to challenge the “petrodollar” for dominance. Adam Levinson, managing partner and chief investment officer at hedge fund manager Graticule Asset Management Asia (GAMA), already warned last year that China launching a yuan-denominated oil futures contract will shock those investors who have not been paying attention.

Paying attention is what those very same investors are now doing.

Already, the petroyuan has proven successful. 15.4 million barrels of crude for delivery in September changing hands over two and a half hours in its first day of trading.

With Washington’s withdrawal from the Iran nuclear deal, the EU27 backed by Britain decided enough was enough and concentrated efforts to protect business to side-step US sanctions for trading with Iran.

Then comes the news yesterday that India will reportedly pay for Iranian oil in rupees as the two countries seek to bypass the US economic pressure on Tehran.

China is the world’s biggest buyer of oil. America is the second and India is the third. Whilst the USA buys about $110 billion of oil each year – China and India combined – buys nearly $200 billion. The EU including Britain buys another $200 billion.

On oil trades – America is outgunned by the combined weight of its competitors.

These moves will not cause the USD to crash as about 88 per cent of the average daily turnover of foreign exchange instruments is against the dollar.

It took the US dollar nearly a century to unsettle the British pound that had been enjoying its preeminence through the 19th century and the first half of the 20th as the global reserve currency.

However, Washington may well be reeling from the fact that they don’t really have many friends any more.

The loosening of the U.S.-Europe transatlantic alliance is now forcing the EU to find its feet as a more independent superpower. The EU has new, economically driven allies on its side and America is facing even more challenges as it attempts to flex muscle and push back – no doubt starting with an escalating trade war.

truepublica

Title: Da Fed: The Big Reset is Locked In
Post by: azozeo on July 29, 2018, 01:21:00 PM
 


Futurist and economic researcher Chris Martenson says we are not at the end of a business cycle but “. . . at the end of a credit cycle.”

https://www.zerohedge.com/news/2018-07-28/theres-no-way-make-work-martenson-warns-big-reset-locked (https://www.zerohedge.com/news/2018-07-28/theres-no-way-make-work-martenson-warns-big-reset-locked)



                                                     
Title: Germany Calls For Global Payment System Independent Of The US
Post by: azozeo on August 24, 2018, 05:46:19 PM
In a stunning vote of "no confidence" in the US monopoly over global payment infrastructure, Germany’s foreign minister Heiko Maas called for the creation of a new payments system independent of the US that would allow Brussels to be independent in its financial operations from Washington and as a means of rescuing the nuclear deal between Iran and the west. Writing in the German daily Handelsblatt, Maas said "Europe should not allow the US to act over our heads and at our expense. For that reason it’s essential that we strengthen European autonomy by establishing payment channels that are independent of the US, creating a European Monetary Fund and building up an independent Swift system," he wrote, cited by the FT.


https://www.zerohedge.com/news/2018-08-21/germany-calls-global-payment-system-independent-us (https://www.zerohedge.com/news/2018-08-21/germany-calls-global-payment-system-independent-us)
Title: 💱 Credit Suisse Freezes $5 billion of Russian Money due to U.S. Sanctions
Post by: RE on August 30, 2018, 02:24:57 AM
https://www.greanvillepost.com/2018/08/29/credit-suisse-freezes-5-billion-of-russian-money-due-to-u-s-sanctions-a-recipe-for-accelerated-de-linking-from-the-dollar-economy/ (https://www.greanvillepost.com/2018/08/29/credit-suisse-freezes-5-billion-of-russian-money-due-to-u-s-sanctions-a-recipe-for-accelerated-de-linking-from-the-dollar-economy/)

Credit Suisse Freezes $5 billion of Russian Money due to U.S. Sanctions – A Recipe for Accelerated De-Linking from the Dollar Economy
August 29, 2018 shorty

HELP ENLIGHTEN YOUR FELLOWS. BE SURE TO PASS THIS ON. SURVIVAL DEPENDS ON IT.

(https://www.greanvillepost.com/wp-content/uploads/2017/10/Koeniglogobanner1.jpg)

A few days ago, Reuters reported that Switzerland’s second largest bank, Crédit Suisse, has ‘frozen’ about 5 billion Swiss francs of Russian money, or about the same in US-dollars, for fear of falling out of favors with Washington – and being ‘sanctioned’ in one way or another. Crédit Suisse, like her bigger sister, UBS, have been amply punished already by Washington for facilitating in the US as well as in Switzerland tax evasion for US oligarchs. They want to be good boys now with Washington.
Switzerland’s banking watchdog, FINMA, does not require Swiss banks to enforce foreign sanctions, but has said they have a responsibility to minimize legal and reputational risks. Crédit Suisse is cautious. In 2009, it reached a $500 million settlement with U.S. authorities over dealings with sanctions-hit Iran. And most every major bank remembers the 2014 settlement of France’s BNP Paribas for a record $8.9 billion fine for violating U.S. sanctions against Sudan, Cuba and Iran.

(https://www.greanvillepost.com/wp-content/uploads/2018/08/creditSuisse-740x675.jpg)

When asked, two other Swiss banks, UBS and Julius Baer, who are known to deal with Russian clients, declined a straight forward answer whether they too will resort to sanctioning their Russian customers. An UBS spokesman said evasively, they were “implementing worldwide at least the sanctions currently imposed by Switzerland, the U.N., the EU and the U.S.”

What doesn’t stop amazing me, is how the western world just accepts such horrendous US fraud, or better called, outright theft of other countries resources, be it monetary or natural resources. And all that is possible only because the entire western world and all those African and lately again, Latin American countries – many of them developing countries, including some of the major oil producers – are still tied to the US dollar. All international money transactions, regardless whether they concern the United States, or simply two completely independent countries, have to transit through a US bank either in London or New York. This is what makes it possible for the US to implement financial and economic sanctions in the first place.

A few days ago, the German Foreign Minister, Heiko Maas, dared proposing that the EU detach itself from the international, totally privately run, Belgium registered SWIFT transfer system, as it is fully controlled by the US banking oligarchy, is operating in more than 200 countries and territories. He suggested that the EU create an independent transfer system, much like Russia and China have done, to free themselves from the financial slavehood to Washington. The reaction of one of his rightwing German countryman and parliamentarian was swift – it was not the right time to even think of de-coupling the EU from Washington, now where Russia is in dire straits and Germany and the rest of Europe needs the US more than ever. – Can you imagine!

Irrespective of the spineless behavior of the EU and the Swiss Government, the latter unable even to stand up to its own neutrality – let them rot in their submissiveness to empire and its EU vassals – gutlessness, which by the way they, the Swiss Government, has also demonstrated vis-à-vis Venezuela – more important, much more important is, what does this all mean for Russia?
In this pathetic, gutless Europe, it is highly questionable whether Mr. Mass’s excellent idea will survive and actually gain support. Hardly at this stage.

Irrespective of the spineless behavior of the EU and the Swiss Government, the latter unable even to stand up to its own neutrality – let them rot in their submissiveness to empire and its EU vassals – gutlessness, which by the way they, the Swiss Government, has also demonstrated vis-à-vis Venezuela – more important, much more important is, what does this all mean for Russia?
To begin with, the Crédit Suisse ‘frozen’ 5 billion dollars, you may as well call it what it is in reality: Totally illegally “confiscated” Russian assets. It is rare, if ever, that the US government returns so called ‘frozen’ assets of any sanctioned country. And under the current scenario, Trump and his masters and the pressure of the corrupt Hillary swamp, will not let go of demonizing and ‘sanctioning’ Russia, regardless of the real impact of these sanctions, and regardless of the total lawlessness of these actions, regardless of the manufactured and lie-based reason for these sanctions, regardless of the fact that everybody with a half-brain knows about the manipulated and false pretexts for sanctions, and regardless of another fact, namely that these actions are contributing to an ever accelerating suicide of the empire and its corrupt system that eventually will drown in its own Washington swamp. – Good riddance! The sooner the better.

And the impact of these sanctions is hardly what they pretend to be. They are foremost a call on the Atlantists – or call them Fifth Columnists, of which there are still too many embedded in the Russian financial sector – to counteract the internal measures Russia is taking to escape the dollar slavehood. They will not succeed. The vessel is turning and turning ever faster; turning from west to east.

Despite the constant demonization of the ruble, how it lost 50% of its value because of the sanctions, the Russian currency is worth way more than all the western fiat currencies together. The western dollar-dependent moneys are based on hot air, or not even – on zilch, nada, zero; they are literally produced by private banks like casino money. The ruble is doubly-backed by gold and by Russia’s well-recovered economy – and so is the Chinese Yuan.
So, what does a 50% loss of the ruble mean? – Loss against what? Loss against the US dollar and the currencies of Washington’s vassal allies? – With a delinked Russian economy from the western economy, the western concept of ‘devaluation’ is totally meaningless. The ruble doesn’t need to compare itself anymore to the western dollar-enslaved currencies.

So, the urgent call by the nature of things for Russia to delink from the western economy, from the western fraudulent dollar-based monetary system, is being heeded by Russia. – I cannot but repeat and repeat again that the dollar economy and the enslaving monetary system it produced, is an absolute fraud. It is a crime that would be punishable by any international court that deserves the name of a court of law, that is not bought and whose judges are not threatened if they don’t fold to the dictate of Washington. But upholding the laws of ethics and moral – the laws that our more honest and humble forefathers not too long ago crafted, is a thing of the past. The corruption in everything accompanied by intimidations and coercions, have been accepted by just about everybody as the new normal. This in itself is not normal. It creates a pressure cooker that eventually will simply explode.

To move away from this ever-increasing stench of cultural decay – a de-dollarization is a must, is a recipe for survival. And survive, Russia will. Russia is buying massively gold, shedding US treasury bonds from its reserves, replacing them with gold and Chinese Yuan, an IMF-accepted official reserve currency. In July 2018 Russia purchased a record 26 tons of gold, leading up to gold reserves of close to a total of 2000 tons, quadrupling her gold inventory since 2008. This makes Russia the world’s fifth largest gold holder.

As Mr. Putin said already a few years ago, the sanctions are the best thing that happened to Russia since the collapse of the Soviet Union. It forced us to rehabilitate and boost our agricultural production for food self-sufficiency and to rebuild and modernize our industrial park. Today Russia has a cutting-edge industrial arsenal and is no longer dependent on “sanctioned” imports. Russia is not only food-autonomous but has become the world’s largest wheat exporter. And take this – according to Mr. Putin, Russia will supply the world with only organic food, no GMOs, no toxic fertilizers and pesticides.

Russia has clearly and unstoppably embarked on an “Economy of Resistance”: Local production for local markets with local money based on and for the development of the local economy; trading with friendly nations who share similar cultural and moral values – it’s called, regaining economic sovereignty. That’s key. That’s what most countries in the west under the yoke of the US empire and its puppets, enforced by NATO, have lost in the steadily increasing stranglehold of globalization. Russia, China, Iran, Venezuela, Syria, North Korea, Pakistan, soon Mexico – and others are breaking loose from the fangs of the Washington Consensus that brought the world almost three decades of pure misery, exploitation and monetary enslavement.

Russia is strengthening her ties with China, with whom she has already for years a ruble-yuan swap agreement between the respective central banks, indicating a strong economic and trading relation. Both are members of the SCO – Shanghai Cooperation Organization. And Russia is also an integral part and link in President Xi’s Belt and Road Initiative – BRI – a multi-trillion-yuan economic development scheme for the next at least hundred years, that will span the world with several transport routes, including shipping lines, ports and industrial expansion, as well as cultural exchange, education and research centers on the way. Members of the SCO encompass half the world’s population and account today already for about a third of the globes GDP – and growing fast, both in members as well as economic output.
Russia as part of this block of sovereign nations doesn’t need the west anymore, doesn’t need the Crédit Suisse confiscated 5 billion dollars anymore. Freedom is priceless. Sanctions are like the fiat currency they are based on; not more than rotten smelling hot air, and dissipating fast into oblivion.
Peter Koenig is an economist and geopolitical analyst. He is also a water resources and environmental specialist. He worked for over 30 years with the World Bank and the World Health Organization around the world in the fields of environment and water. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research; ICH; RT; Sputnik; PressTV; The 21st Century; TeleSUR; The Vineyard of The Saker Blog, the New Eastern Outlook (NEO); and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance.

About the Author
 Peter Koenig is an economist and geopolitical analyst. He is also a former World Bank staff and worked extensively around the world in the fields of environment and water resources. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research, ICH, RT, Sputnik, PressTV, The 4th Media (China), TeleSUR, The Vineyard of The Saker Blog, and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance.
Title: 💵 When Will The US Lose Control Of the World Payments System?
Post by: RE on September 08, 2018, 12:00:46 AM
http://www.ianwelsh.net/when-will-the-us-lose-control-of-the-world-payments-system/ (http://www.ianwelsh.net/when-will-the-us-lose-control-of-the-world-payments-system/)


When Will The US Lose Control Of the World Payments System?

2018 August 31
tags: EU, Sanctions, SWIFT, world payments system
by Ian Welsh

(https://bravenewcoin.com/assets/Uploads/_resampled/ResizedImage869375-BIS-correspondant-banking.png)

One of the greatest powers of the United States, one which was hardly used before Clinton, is the ability to freeze people out of the payments system. When Argentina had its previous debt crisis, it cut a deal with investors: they took a haircut, and it agreed to pay them the haircut. Some investors refused.

Later that deal was effectively destroyed, because Argentina lost in a US court, and as a result could not pay the investors who had taken the haircut—a US judge was able to cut a sovereign state off from paying its debtors. It could only have access if it paid both those who took the haircut and those who didn’t.

Throughout the last 20 years, in particular, the US has enforced financial sanctions against a bewildering number of people and states. Right now it is disallowing Venezuela from buying many foreign goods. (When “socialism” doesn’t collapse fast enough, the US is always on hand to give it a shove.)

During the Iran sanctions period, before the Iran nuclear deal, the US and the EU cut Iran off from the payments system, virtually wholesale. SWIFT, the electronic payments system headquartered in Brussels refused to cooperate, saying that it should not be used as a tool of politics.

But the EU threatened the board and senior SWIFT executives with criminal charges, and SWIFT folded.

Lots of Iranians died and suffered under those sanctions, just like Iraqis did under the 90s sanctions.

When the Iran deal was cut, the sanctions were eased.

But Trump, when he tore up the Iran deal, re-imposed sanctions. The EU disagreed, but many EU companies are obeying the American order because America has said that it will sanction both companies and individuals who disobey.

And even if SWIFT doesn’t cooperate as a body, the problem is that most payments at some point touch American banks. The moment they do, America jurisdiction cuts in. (This is how FIFA got hit for corruption by US law enforcement. None of the bribes had anything to do with the US, but payments went thru US banks.)

So Europe is considering creating a payments system which does not ever touch US jurisdiction:

    Germany’s foreign minister has called for the creation of a new payments system independent of the US as a means of rescuing the nuclear deal between Iran and the west that Donald Trump withdrew from in May…

    …“For that reason it’s essential that we strengthen European autonomy by establishing payment channels that are independent of the US, creating a European Monetary Fund and building up an independent Swift system,” he wrote.

This adds Europe to a group which includes Russia and China, along with virtually every nation who has been subject to US sanctions.

The thing is that such sanctions used to be fairly rare. But Clinton weaponized them against Iraq and every President since them has used them as a bludgeon. They are a way, like drones to punish countries and individuals and to ignore sovereign rights.

The MMT types go on and on about being sovereign in one’s currency, but the fact is that you aren’t sovereign if another country can cut you out of the payments system. And right now the only countries in the world that are sovereign in that sense are America, the EU and China. And the EU and China are only somewhat sovereign.

These punishments are extra-territorial, they are an imposition of US law on non US countries and citizens. They are possible only because the US is the world hegemonic power, and sits at the center of the world payments system. Venezuela can sanction, but no one cares unless they have assets actually in Venezuela.

This power has been abused, repeatedly, to interfere in business that is none of America’s business. One can say that it might have been used acceptably when the entire UN security council agreed (I disagree), but when it doesn’t, the US has acted anyway.

And so, now, every great power in the world, with the possible exception of Japan, wants to take that power away from the US.

About time, but it will take time. It isn’t just about virtual links, it is about physical links: it must be done over continental cables and thru satellites which are not American. The way current software acts doesn’t take that in account, and physical infrastructure as well as software needs to be built.

But I hope that Europe is serious, because combined with China and Russia this is something which can be done, and done fairly fast (within a decade, I’d guess.) The only problem is that the EU, too, likes having this power. Are they really willing to give it up? Because the best way to do this would be to create a system which cannot be sanctioned without the agreement of all the powers who create: a system which cannot be sanctioned unilaterally. Everyone involved should have a veto.

Time will tell if Europe and, indeed, other nations, truly want a system that none of them can use to punish others.
Title: Re: 💵 When Will The US Lose Control Of the World Payments System?
Post by: g on September 08, 2018, 06:35:09 AM
It has already happened. The mechanism is already in place tested and ready.

China is much too wise a world citizen as is their partner in this venture Russia to bring down the entire World's Financial system. They will move slowly, determinedly, focused and not disruptive of the hand that currently feeds them.

                   “A little impatience will spoil great plans.”  – Chinese Proverb



                                              (https://i.ytimg.com/vi/tdY9lgsd6qQ/hqdefault.jpg)

Title: 📉 What Happens When the Next Financial Crisis Strikes?
Post by: RE on September 12, 2018, 12:14:50 AM
Feces contact rotating blades.  ::)

Have your Financial Hurricane Kit in place!

RE

https://www.propublica.org/article/what-happens-when-the-next-financial-crisis-strikes (https://www.propublica.org/article/what-happens-when-the-next-financial-crisis-strikes)

What Happens When the Next Financial Crisis Strikes?
As the 10-year anniversary of the last crash nears, pundits are predicting the next one. That’ll bring another problem: Who’s going to solve the crisis when our president has poisoned relations with the institutions that helped fix the last one?

by Allan Sloan Sept. 11, 6 a.m. EDT

(https://assets.propublica.org/images/articles/_threeTwo2000w/20180911-trump-market-3x2.jpg)
President Donald Trump is shown on a television monitor on the floor of the New York Stock Exchange in March. (Drew Angerer/Getty Images)
A Closer Look

Examining the News

This article was co-published with the Washington Post.

It came as a nasty surprise to almost everyone a decade ago when we found ourselves on the cusp of a worldwide financial collapse.

Most business journalists — including me — failed to see the 2008 disaster until it was almost upon us. But these days, predicting meltdowns has become positively trendy. With stocks at or near record levels, unemployment low and the economy booming, it’s become conventional journalistic wisdom to predict that evil days lie ahead. And not very far ahead. The recent New York Times editorial, “Inviting the Next Financial Crisis,” is just one example.

But I don’t think that today’s obvious problems will cause tomorrow’s crisis. Why? Because obvious problems usually don’t cause crises. You get a crisis when problems combine in unpredictable and unforeseen ways.

In 2008, complex financial instruments that almost no one understood — based on various pools of shaky loans — inflicted huge losses on giant companies like Bear Stearns, Lehman Brothers and American International Group almost overnight. Those institutions didn’t realize their portfolios were toxic until financial sepsis had already set in. Worse, a series of financial relationships among those players and others, intended to reduce risk, ended up accelerating it.
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However, there is one clear and present danger to the financial system that almost no one seems to be discussing in public. In fact, multiple experts whispered about it to me and said they discuss it behind closed doors but don’t breathe a word elsewhere for fear of becoming the target of a presidential tweetstorm. So I’ll do it, at the risk of being called a peddler of “fake news.” I think the biggest danger of financial problems exploding into a worldwide meltdown involves … Donald Trump.

No, I’m not talking about Trump’s economic and regulatory policies, which people can legitimately disagree about. I’m talking about the way Trump behaves. This is a guy with minimal impulse control, someone who makes up stuff on the fly, tweets it, publicly undercuts his subordinates, insults opponents and allies, and goes back on his word so frequently that no major player in the worldwide financial system is likely to trust him.

Based on what I saw a decade ago, I feel comfortable telling you that if trust and cooperation between the United States and other major financial powers are lacking, relatively small problems could metastasize rather than being cured or, at least, treated.

Let’s look at some of today’s financial problems, which I don’t think will cause a crisis because they’re, well, obvious.

The first danger is that U.S. interest rates are on the way up, regardless of whether Trump succeeds in bullying the Federal Reserve into abandoning its rate-raising program. The Fed cut short-term rates, which it controls directly, to virtually zero a decade ago to stimulate the economy and boost the prices of assets, especially stocks. It also went to extraordinary lengths to force down long-term rates.

Now, both short and long rates are going back up. A major reason: the increase in current and future federal budget deficits created by last year’s tax bill, which will require massive federal borrowing.

Higher interest rates drive down the market value of existing bonds and hurt prices of houses and other assets. I don’t know where the stock market is going — who does? — but higher interest rates will exert downward pressure on it.

Here are some other problems: House prices, especially in high-income areas and in parts of blue states targeted by last year’s tax legislation (which limited annual deductions for state and local income and real estate taxes to $10,000), seem to be weakening. Given that home equity is most people’s biggest financial asset, you can see why this is a problem. As is the fact that some mortgage lenders seem to be reducing down payment requirements and making riskier loans.

Subprime auto loans are growing rapidly, possibly because they performed relatively well during last decade’s meltdown. Back then, subprime auto loans performed better than subprime mortgages, apparently because financially stressed borrowers realized that their lives could be devastated in an eye blink by having their car repossessed and being unable to drive to work, but it would take a lot longer for lenders to repossess their homes.

Therefore, quite rationally, they gave car payments priority over house payments. Now, however, people seem to be taking out subprime loans for multiple cars, which could reduce their incentive to keep making payments if their finances hit the wall.

Student loan debt is a huge, growing and widely recognized problem. But while it’s in crisis territory for many students and their co-signers, I don’t think it threatens the financial system.

Corporate debt — especially from private-equity firms buying companies and from corporations trying to make predatory “activist investors” happy by going into hock to buy their own shares — is very high. And it’s having an impact. Consider the collapse of private equity-owned Toys R Us, which couldn’t generate enough profit to cover its buyout debt. The tanking of Toys R Us has led to problems for landlords, who typically borrow heavily to finance shopping centers. And to mass layoffs. Dozens of other retail chains, most of them burdened by debt (which makes it far harder for them to compete with the likes of Amazon), are closing stores. That throws thousands of people out of work.

Now, the Big However.

I don’t think there’s danger to the worldwide financial system from the problems we know. However, there could be danger from things that we don’t know. Are there risky derivatives tied to subprime auto loans or distressed real estate or even student loans that could trigger meltdowns of major institutions? I just don’t know.

Some mistakes of a decade ago are instructive. Subprime mortgages were a recognized problem before the crisis, but Federal Reserve chief Ben Bernanke, among others, downplayed the danger because such mortgages were only a relatively small part of our economy. However, there were all sorts of esoteric mortgage-related securities out in the world and few players understood them. These esoterica multiplied the risks, and institutions like Lehman Brothers, Merrill Lynch and Bear Stearns were gutted by them.

Then there was the government’s disastrous decision to let Lehman go broke, which it did on Sept. 15, 2008 (now accepted as the official date of the crisis). Regulators who bailed out Bear Stearns six months earlier were being heavily criticized, which I’m sure (but can’t prove) influenced their decision to let Lehman croak.

Oops. Lehman’s failure led the Reserve Primary money market mutual fund to “break the buck” by saying it couldn’t redeem shares at a full $1 because it owned Lehman securities. This led to an incipient run on all money funds, forcing the Treasury to guarantee that the $3.4 trillion of funds — that’s trillion, with a “t” — could redeem their shares.

In addition, hedge funds that had Lehman as their “prime broker” couldn’t get access to their assets. That led other hedge funds to start withdrawing assets en masse from their prime brokerage accounts at the Goldman Sachs and Morgan Stanley investment banks. The Fed then quickly gave them commercial bank charters to restore confidence by making them eligible for huge Fed loans.

Is there another Lehman-like disaster lurking? I don’t think so. But I don’t pretend to know.

But I do fear the Triple T: the Toxic Trump Threat.

Some context. Even with George W. Bush as an unpopular lame duck president as the financial crisis unfolded in 2008, Treasury Secretary Hank Paulson, Fed Chairman Bernanke and New York Fed head (and later Treasury Secretary) Tim Geithner coordinated with central bankers and government officials in other countries and made unpopular and difficult decisions. Bush didn’t interfere. Neither did Obama, when he took office in 2009.

Whatever problems you might have had with Bush and Obama, they radiated seriousness and acted like grownups during the crisis. They allowed Paulson, Bernanke and Geithner to make up bailout rules as they went along, forestalling a worldwide collapse without being publicly second-guessed by the White House. (Congress, angered by some of the bailouts, subsequently reduced the Fed’s power to offer loans to non-banks under “unusual and exigent” circumstances. I sure hope the Fed has figured out a workaround that it can use, should the need arise.)

If for some reason we run into a serious international financial problem with Trump as president, do you think anyone will take Treasury Secretary Steve Mnuchin or Fed Chair (and Trump tweet target) Jerome Powell seriously? Or believe they have authority to commit the U.S. to anything?

Do you think Trump, who has picked fights with Europe and Japan and China, could or would cooperate with the Europeans, Japanese and Chinese? Will they trust Trump to keep his word should something he or Mnuchin or Powell say or do upset “the base”? I think not.

With luck, we’ll never have to find out if I’m right. And I hope that in 2028, people will be talking about the 20th anniversary of the 2008 financial crisis, not the 10th anniversary of the one that struck in 2018.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on September 12, 2018, 04:20:23 AM
When the time comes, Trump will do exactly what he's told, and the bailouts will flow to the TBTF banks like milk and honey.

Just lay on some KY, you tax donkeys.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on September 12, 2018, 04:38:23 AM

Just lay on some KY, you tax donkeys.

You seem to be obsessed with Anal Sex today.  ::)

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on September 12, 2018, 06:38:35 AM
It's an apt metaphor for a lot of things that are gonna happen.

I wonder if Lindsey Graham dresses up like Elton John in the privacy of his home. Bet he has a powdered wig of his own.
Title: Da Fed: US Gov't Spends A Record $433 Billion In One Month As Deficit Explodes
Post by: azozeo on September 15, 2018, 07:40:51 AM

((GC note: Is Trump maxing out the US credit in preparation for a declaration of bankruptcy and a financial reset?)

Two days ago we previewed the the US budget deficit for the first 11 months of fiscal 2018, which according to CBO data, hit $895 billion, up $222 billion or 39% from the same period last year. Additionally, we noted that according to CBO calculations, the US would hit a $1 trillion deficit in calendar 2019, one year sooner than the previous forecast of 2020.



https://www.zerohedge.com/news/2018-09-13/us-government-spends-record-433-billion-one-month-deficit-explodes (https://www.zerohedge.com/news/2018-09-13/us-government-spends-record-433-billion-one-month-deficit-explodes)
Title: Re: Da Fed: US Gov't Spends A Record $433 Billion In One Month As Deficit Explodes
Post by: Eddie on September 15, 2018, 08:01:02 AM

((GC note: Is Trump maxing out the US credit in preparation for a declaration of bankruptcy and a financial reset?)

Two days ago we previewed the the US budget deficit for the first 11 months of fiscal 2018, which according to CBO data, hit $895 billion, up $222 billion or 39% from the same period last year. Additionally, we noted that according to CBO calculations, the US would hit a $1 trillion deficit in calendar 2019, one year sooner than the previous forecast of 2020.



https://www.zerohedge.com/news/2018-09-13/us-government-spends-record-433-billion-one-month-deficit-explodes (https://www.zerohedge.com/news/2018-09-13/us-government-spends-record-433-billion-one-month-deficit-explodes)


A trillion here and a trillion there and pretty soon you're talking some real money.

It does look like the US national debt is going parabolic sometime in the not-too-distant future. But with today's world, I'm not sure how we get to a hyperinflation from there. 

With credit tightening and interest rates rising, and the USD still getting upward pressure from EM's, we look to be headed into a deflationary event...where it goes from there I'm not at all sure. 

Tangible assets are still preferable to equities or bonds in my book. Not sure how low gold will drop if equites crash, but I do expect at least some correction.....but gold might soar after that. I don't look for the $700 gold we once expected....because the big players aren't long that much gold today, the way they were in 2008.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on September 15, 2018, 08:13:36 AM
And when I say gold will correct, that's a medium term guess, not something I expect next week. Technically gold looks near a short term bottom now, and will probably go higher first, over the next few weeks sometime.

But if stocks crash, gold will take a hit, most likely. One big drop and that's my buy zone, if I have anything to buy with...I will be a buyer of gold and silver.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on September 15, 2018, 08:48:14 AM
I was wandering around the daily goldbug rants, and (lo and behold) I found someone else who agrees with my thesis. Pretty good analysis, imho.


When The U.S. Stock Market Crashes, Buy Gold



 -- Published: Friday, 14 September 2018 | Print  | 2 Comments

By David Brady, CFA

While we wait for news on the 25% tariffs on $200bln or 40% of Chinese exports to the U.S.—and with the threat of the same on the remaining ~$300bln to follow—I want to outline the endgame for the dollar and the likely beginning of the explosive rally for Gold.

Simply put: When the U.S. stock market crashes, buy Gold.


To be more specific: when the S&P 500 has fallen 20-30%, buy Gold, in my opinion, because the ‘Fed Put’ will soon be exercised at that point. The Fed will reverse policy to stimulus on steroids. The dollar rallied from April 2008 and peaked in March 2009, when stocks bottomed out—the same time the Fed announced QE, or QE1 as we now know it. Then the dollar fell. It is not unreasonable to expect the same to happen this time around. Gold bottomed out in October 2008, as stocks plummeted and then soared 280% to greater than 1900 over the next three years, as QE1 and QE2 were underway.

(https://sprottmoney.com/media/magpleasure/mpblog/upload/7/4/74dac436b9823880f40ce18d4dfe80a9.png)

The coming crash in the U.S. stock market is the catalyst for the Fed’s reversal in policy, so why do I expect a crash?

Quantitative Tightening and Budget Deficits


Lee Adler pointed out several weeks ago that as the budget deficit soars, Treasury bond issuance is increasing by around $100bln per month. At the same time, the Fed is increasing its balance sheet reduction, or “QT” program, to $50bln a month in October, a run-rate of $600bln per year. That means $150bln of additional demand for U.S. Treasuries is required every month.

(https://sprottmoney.com/media/magpleasure/mpblog/upload/8/c/8c1412cd66150e11013231d62d68d45e.png)

To make matters worse, foreign central banks are buying fewer Treasuries. So, more supply and less demand typically means lower prices and higher yields, hence the Fed will be forced to intervene in October or shortly thereafter with QE again to fill the demand gap. But they need an excuse to reverse policy. A stock market crash would provide that excuse.

The Global Punchbowl is Being Removed


Ron Stoeferle provides excellent information on Gold but, more importantly, on global central bank liquidity, which is expected to turn negative in Q4 this year or Q1 next due to the Fed’s QT and the ECB’s plan to taper its QE to zero at the end of this year.

(https://sprottmoney.com/media/magpleasure/mpblog/upload/d/d/dd5a28eac90204d5848ca354e862f506.png)

In my opinion, the only reason stock prices have risen since the 2008 financial crisis is global liquidity stimulus in the form of central bank money printing or QE. With the punchbowl removed, like any Ponzi scheme, stocks will collapse—bonds, too—unless the central banks all reverse course to QE on steroids.

The Fed is focused on three priorities in this order: Stocks, Bonds and the Dollar.

U.S. equities represent 150% of U.S. GDP. Federal tax receipts are heavily reliant on taxes from capital gains, IRA distributions and consumption driven by wealth created at top of the food chain, the 1% who are heavily invested in stocks. This makes the stock market critical to U.S. government finances and the perception of solvency. Without a rising stock market, Federal tax receipts fall and the budget deficit increases. This makes matters much worse when budget deficits are already ballooning due to tax cuts and higher spending.

At the same time, the Fed can’t allow bond yields to rise dramatically, as that would sink all risk assets (most notably the housing market) and balloon the Treasury’s debt interest costs and, again, the budget deficit.


With respect to the dollar, back in Q4 2017, the Fed noticed that a weaker dollar pushed bond yields higher. This was at a time when Treasury bond issuance was soaring due to the rapidly rising budget deficit, and the Fed had begun reducing its balance sheet, so-called “QT. Who wants to buy U.S. Treasuries if their prices are falling as yields rise AND the dollar is falling in foreign currency terms also? So in February this year, the Fed began supporting a stronger dollar. Ten-year Bond yields have remained capped at around 3% ever since.

(https://sprottmoney.com/media/magpleasure/mpblog/upload/7/c/7c63c4eef7a9f7a6876e8a46fdf429ff.png)

But the stronger dollar is now creating enormous stress on emerging markets that have borrowed heavily in dollars, and it risks global contagion that could spread to banks worldwide. We have already seen the emerging market currencies plummet in recent months, most notably those of Argentina and Turkey. The IMF has already provided loans to Argentina to limit international banks’ losses on their debt investments.

A stronger dollar also weighs on the dollar value of foreign earnings for U.S. multinationals, undermining their earnings per share.

None of this is good for the stock market. The S&P has struggled since February, due in part to the Fed’s rate hikes and QT policy, as well as the strength of the dollar. The only reason why the S&P has not fallen further is the record level of stock buybacks, aided by Trump’s corporate tax cuts this year. But their effect runs out at the end of the year.

Yet despite the stress rate hikes, QT and dollar strength put on the stocks, Fed Chair Powell is likely to continue the Fed’s tightening policies until something breaks, and that is likely to be the stock market. His comments, despite the growing problems in emerging markets, reflect this.

When the stock market crashes, the Fed faces what Luke Gromen and Louis Curran termed “The Fed’s Trilemma”. The U.S. central bank will have to choose to sacrifice one of their priorities: the stock market, the bond market or the dollar. Well, given the potentially disastrous effects of a protracted stock market meltdown and, moreover, a Treasury bond market collapse, they will obviously sacrifice the dollar.

This is why I believe the Fed will be forced to revert to monetary insanity on steroids following the stock market crash to come: in order to pump stocks even higher and keep bond yields down. Otherwise the entire U.S. Ponzi scheme collapses. In order to do this, they will have to sacrifice the dollar.

If there was any doubt that the Fed plans to do this, it was erased recently. The FOMC minutes in August led with the Fed’s plans to address the next crisis. During his Jackson Hole address two days later, Fed Chair Powell said he would do “whatever it takes” in such an event. If that weren’t enough, Hank Paulson, Ben Bernanke, and Tim Geithner wrote an Op-Ed in the New York Times this week that basically called for emergency powers to bail out every financial institution should such a crisis occur. It’s obvious that they plan to ride to the rescue yet again. Why else would they so frequently—and all of a sudden—talk about plans to address a crisis?

Not to mention the fact that over the past several months, almost every member of the Fed has been at pains to say each and every aspect of Trump’s policies (Trade, Foreign, Fiscal, Immigration, Regulatory) could lead to another financial crisis. Why are they all repeatedly saying this, unless they expect such a crisis soon and are preparing to blame Trump in order to divert it from the true culprits: themselves. If you didn’t already know, the Fed apparently never makes mistakes. Never. They cover their tracks well.

Trade War

I’ll keep this brief, because I’ve covered it extensively in previous articles. The trade war could bring down the U.S. stock market in so many ways. It could further hit emerging market economies and cause global contagion and recession. China could further devalue the yuan—we saw what happened when they devalued the yuan by just 3% in August 2015. China could sell Treasuries or announce their true, and massively understated, Gold holdings. Tariffs could impact American companies’ costs and, therefore, their earnings. They could also cause a spike in consumer inflation and higher interest rates and yields, hurting consumer spending and increasing consumer debt defaults.

The U.S. stock market is exposed in so many ways to the trade war between the U.S. and China—and much of the rest of the world, it seems. But make no mistake, this would just be the catalyst for a stock market crash, not the true cause. That lies with the Fed and its policies, in my opinion.


There are plenty of other signals out there that a crash is coming, but I’ll finish with one. The Banks are still near record long U.S. Treasury Bond futures. The Commercials are the so-called smart money for a reason. If they are record long, it is because they expect yields to fall. What could cause yields to fall precipitously? A stock market crash, followed by a return to Quantitative Easing #4?

(https://sprottmoney.com/media/magpleasure/mpblog/upload/8/c/8cbdefdfd64855f7080277f190fde019.png)

In conclusion, this article is directly related to the prospects for Gold in the near future, because a stock market crash will trigger a Fed reversal in policy to “monetary insanity on steroids” and a peak in the dollar. This will be tremendously bullish for Gold, other precious metals, commodities, bonds and stocks. Everything will go up… except the dollar.

http://news.goldseek.com/GoldSeek/1536954452.php (http://news.goldseek.com/GoldSeek/1536954452.php)

Title: Re: Da Fed: Central Banking According to RE
Post by: RE on September 15, 2018, 11:20:55 AM
I was wandering around the daily goldbug rants, and (lo and behold) I found someone else who agrees with my thesis. Pretty good analysis, imho.

It's a "buy" @ $700/oz.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on September 15, 2018, 11:59:00 AM
It certainly is, but I'd  be willing to buy the first bounce off a bottom resembling the Oct. 2008 move. It might be $800, or even $900.
Title: 🏦 What Made The Financial Crisis Go From Bad to Disaster
Post by: RE on September 16, 2018, 02:00:54 AM
https://www.forbes.com/sites/hershshefrin/2018/09/15/what-made-the-financial-crisis-go-from-bad-to-disaster/#7347baa516c3 (https://www.forbes.com/sites/hershshefrin/2018/09/15/what-made-the-financial-crisis-go-from-bad-to-disaster/#7347baa516c3)

16,167 viewsSep 15, 2018, 02:30pm
What Made The Financial Crisis Go From Bad to Disaster
Hersh Shefrin

I write about how psychology impacts financial and economic behavior

(https://thumbor.forbes.com/thumbor/960x0/https%3A%2F%2Fspecials-images.forbesimg.com%2Fdam%2Fimageserve%2F76c456a74db74676b02bb9a8cbe30b94%2F960x0.jpg%3Ffit%3Dscale)

Even before Lehman Brothers failed ten years ago this weekend, the financial crisis was bad. But it was the failure of Lehman Brothers that tipped a bad situation into an absolute disaster, and brought the global financial system to the brink of collapse.

The Lehman Brothers corporate sign in polished metal is seen displayed in the window of an auction house in London, Friday, Sept. 24, 2010.  (AP Photo/Kirsty Wigglesworth)

Lehman Brothers did not have to fail, and the decision to allow it to fail was psychologically driven. For some years, I have thought it likely that this was the case, having written about it in my book Behavioral Risk Management, and having taught the lesson to my risk management students at NYU.

Now a new book by Laurence Ball, titled The Fed and Lehman Brothers, documents the factors that drove the decision to allow Lehman to fail. The book offers a compelling counterpoint to the official explanation for why  Lehman Brothers was allowed to fail.

The official explanation is that because the value of Lehman’s collateral and net worth was so low, the U.S. government lacked the legal authority to save the firm. This view has been strenuously argued by the principal decision makers who chose not to rescue the firm, former Treasury secretary Hank Paulson, former Fed chair Ben Bernanke, and former head of the Federal Reserve Bank of New York Timothy Geithner.

Hank Paulson, chairman and founder of the Paulson Institute and former U.S. Treasury secretary, second right, speaks while Ben S. Bernanke, former chairman of the U.S. Federal Reserve, left, and Tim Geithner, former U.S. Treasury secretary, second left, listen during a Brookings Institution discussion in Washington, D.C., U.S., on Wednesday, Sept. 12, 2018. The event is part of an initiative to document how and why the U.S. government's responses to the financial crisis of 2007-2009 were designed the way they were. Photographer: Zach Gibson/Bloomberg
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My view is that individual psychological issues impacting Paulson, and group psychology issues impacting the dynamics that characterized the communication among the three principals, were the true drivers of the decision. In my book Behavioral Risk Management, I discuss Paulson’s fear that a decision to rescue Lehman, following the decision to rescue Bear Stearns some months earlier, would result in him being remembered as “Mr. Bailout,” thereby leaving his conservative legacy in tatters.

In his book, Laurence Ball describes the communication dynamics among Paulson, Bernanke, and Geithner. Although the authority to save Lehman belonged to the Fed, not the Department of the Treasury, by sheer force of personality, Paulson persuaded Bernanke and Geithner that the default position should be to let Lehman fail. This strikes me as a classic case of groupthink, where members of a group are reluctant to challenge the position put forward by a strong leader.

The psychological issues around saving Lehman, both the event itself, and the subsequent spin, are incredibly interesting. Availability bias, which is a psychological bias about the overweighing of information that is easily recalled, can be very strong. Paulson, Bernanke, and Geithner have worked very hard at delivering the message that Lehman Brothers could not have been legally rescued. Paulson complains that despite their efforts, they still are not believed. If he is correct, then their collective effort to exploit availability bias has failed. Still, until the publication of Ball’s book, there was very little written in the press about what truly drove the decision to let Lehman fail.

I argue that serious discussions about the financial crisis need to take place against the backdrop of Hyman Minsky’s ideas about financial instability. The Mr. Bailout issue did not cause the financial crisis. Rather, it was all the issues that Minsky stressed, such as excessive debt, imprudent shadow banking activities, Ponzi finance, asset pricing bubbles, and weak regulation. The Mr. Bailout issue only served to make a bad situation that much worse.

It is natural to ask what lessons all of this has for where we are today. In my view, answering that question sensibly requires that we start with the issues Minsky emphasized.

The Federal Reserve Bank of New York provides much important data and perspective about debt levels in the U.S. Earlier this year, the bank’s President and Chief Executive Officer William Dudley, told us that in the aggregate, American households are much better prepared to withstand a systemic shock than they were ten years ago.

At the same time, Dudley offered some caveats, specifically mentioning student loan debt. In this regard, the bank’s website provides some sobering statistics. Between 2006 and 2016, student indebtedness grew by 170 percent. Moreover, the default rate on this debt has grown substantially. Consider students who left college in the years 2010 and 2011. Among this group, 28 percent have defaulted on their student loans within five years. The corresponding default rate was 19 percent for those who left school in the years 2005 and 2006.

Looking abroad, there are many causes for concern. Turkey, Italy, and China spring easily to mind. In respect to China, our current trade war with them is inducing them to respond by reversing their policies for making their economy more stable. China's former Central Bank governor Zhou Xiaochuan resigned last October. He has been warning that China risks facing a Minsky Moment, by which  he means falling asset prices, capital flight, and a financial crisis that the Chinese government would be unable to prevent.

China is the second largest economy in the world. A Chinese financial crisis will set chain reactions in motion, so that their financial crisis would become our financial crisis.

Then who knows what the next Mr. Bailout event will be that would take a bad situation and make it much worse.

I have been a behavioral economist for over 40 years, lucky to be studying how psychology impacts the way the financial world works. Currently serving as the Mario L. Belotti Professor of Finance at Santa Clara University, I earned my Bachelor of Science Degree from the Univ... MORE

Hersh Shefrin, Professor of Behavioral Finance, Santa Clara University and author of Beyond Greed & Fear, Behavioral Corporate Finance, and Behavioral Risk Management
.
Title: 💸 What Can Cause the Next Mortgage Crisis in the US?
Post by: RE on September 17, 2018, 01:48:55 AM
https://wolfstreet.com/2018/09/16/what-can-cause-the-next-mortgage-crisis-in-the-us/

What Can Cause the Next Mortgage Crisis in the US?
by Wolf Richter • Sep 16, 2018 • 54 Comments   
The soothingly low mortgage delinquency rate is a deceptive indicator: the New York Fed weighs in.

Mortgage delinquencies at all commercial banks in the US inched down to 3.14% in the second quarter, the lowest since Q2 2007, according to the Federal Reserve. But after those soothingly low delinquency rates in 2007, something happened. By Q3 2008, the delinquency rate hit 5.2%, and in Q4 2009, it went over 10%, and stayed in the double-digits until Q1 2013. This was the mortgage crisis. And we’re a million miles away from it, thank God. Or are we?

This chart compares home prices in the US (green, left scale) to delinquency rates (red, right scale). Delinquency rates started surging after home prices started falling. The inflection point is marked by the vertical purple line, labeled “it starts”:

(https://wolfstreet.com/wp-content/uploads/2018/09/US-home-prices-v-mortgage-delinquencies-1-1.png)

Home prices began falling in 2006. By 2008, some homeowners were seriously “underwater” – they owed more on their house than the house was worth. When they ran into financial trouble because they were in over their heads, or because one of the breadwinners in the household lost their jobs, or because they’d lied on their mortgage application and never had enough income to begin with, or because they were investors who couldn’t make the math work out anymore, or whatever, they were stuck.
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In a rising housing market, they would just sell the home and pay off the mortgage. But they couldn’t sell their home because it was worth less than the mortgage, and default was the only option.

The chart above shows the relationship between home prices and delinquencies. In a rising housing market, delinquencies will always be low but are not an indicator of future default risks. But home prices are an indicator of default risk.

“Borrowers’ ability to withstand economic shocks depends importantly on housing equity,” the New York Fed explained in its new Economic Policy Review. “This dynamic played a key role in the 2007-09 recession, when surging mortgage debt followed by falling home prices put many homeowners ‘underwater’ on their mortgages.”

When home equity turns “negative,” that’s when serious trouble begins. The New York Fed:

    Over the first half of the 2000s, U.S. household debt, particularly mortgage debt, rose rapidly along with house prices, leaving consumers very vulnerable to house price declines. Indeed, as house prices fell nationwide from 2007 to 2010 and unemployment rates soared, mortgage defaults and foreclosures skyrocketed because many households were “underwater”…

But the national averages don’t do a good job. About a third of homeowners own their homes free and clear, and there is no risk associated with them. Another third of homeowners owe relatively small amounts or very manageable amounts on their homes, after years of having made payments without cash-out refinancing. And they’re not a risk factor either. They can always sell their home and pay off their mortgage, even if home prices drop 40%.

The risk lies at the remaining third of the homeowners, the most vulnerable, the most leveraged, those that bought recently at the highest prices, those that refinanced to cash out their home equity….

Then there’s the issue of home prices dropping a lot more in some regions – and this is averaged out in the national statistics. The New York Fed (emphasis added):

    At a more disaggregated level, the time series of our leverage metrics clearly reflect the dramatic regional home price dynamics that others have observed, with the widest swings in prices found in the “sand states”: Arizona, California, Florida, and Nevada. Studying these states illustrates one of the key lessons from our analysis: Looking at measures of leverage based on contemporaneous housing values will often lead one to misestimate the vulnerability of a housing market to shocks.

    Homeowners in the sand states were much less levered in 2005 than those in other regions, yet as home prices reverted to their mean, the leverage of these homeowners rapidly increased and extremely high mortgage defaults followed.

The paper warns: “Most importantly, higher leverage, and in particular a household being underwater on its mortgage(s), is a strong predictor of mortgage default and foreclosure.”

In fact, according to research cited by the paper, negative equity is a “necessary condition” for mortgage default:

    Negative-equity loans represent a pool of default risks: If the borrowers are hit with liquidity shocks resulting from, say, a lost job, then default may be the only viable option. Positive-equity borrowers faced with liquidity shocks, on the other hand, are generally able to sell the property and avoid default.

Thus, “household leverage” blowing out is not a function of the mortgage, which doesn’t change much, but a function of the home price, which can decline sharply. This increases household leverage due to market forces, without even any input from the household. It happens on a case-by-case basis, and the national averages fail to predict this condition.

Even if they don’t default, households that have become overleveraged due to declining home prices impact the broader economy, the New York Fed points out:

    They may cut back consumption in response to a negative shock, in part because they lack “debt capacity” that could help them smooth consumption.
    They’re often unable to refinance to take advantage of lower mortgage rates.
    They may reduce spending on property maintenance or investments.
    The may not be able to move when opportunities arise for them elsewhere.
    High leverage in conjunction with down-payment requirements further reduces transaction volume and prices, “thereby generating self-reinforcing dynamics.”

And the differences, as real estate in general, are local, according to the report: “In cities where more homeowners are highly leveraged, house prices are more sensitive to shocks (such as city-specific income shocks).”

It all boils down to this: There can be no mortgage crisis unless home prices decline enough in some markets. And given how inflated home prices are in many markets, and that mortgage rates are now climbing, any reversion toward the mean of home prices in those markets would cause the delinquency rate to do a beautiful “déjà-vu all over again,” so to speak. That low national delinquency rate these days, often touted as a sign of low risk in the housing market, has zero meaning as an indicator of risk for the most vulnerable households when the prices of their homes begin to drop.
Title: 💰Who Bought the $1.47 Trillion of New US National Debt over the Past 12 Months?
Post by: RE on September 19, 2018, 02:31:04 AM
https://wolfstreet.com/2018/09/18/who-bought-1-47-trillion-of-new-us-national-debt-past-12-months/

Who Bought the $1.47 Trillion of New US National Debt over the Past 12 Months?
by Wolf Richter • Sep 18, 2018 • 9 Comments   
China, Japan, other foreign investors, the Fed, US government funds? Nope.

(https://wolfstreet.com/wp-content/uploads/2018/09/US-treasury-holdings-China-Japan-2018-07.png)

Foreign private-sector investors and “foreign official” investors – central banks, governments, etc. – whittled down their holdings of US Treasury Securities by $21 billion at the end of  July, compared to a year ago, to $6.25 trillion, according to the Treasury Department’s TIC data released Tuesday afternoon.

Over the same period, the US gross national debt – fueled by a stupendous spending binge and big-fat tax cuts – soared, despite a booming economy, by a brain-wilting $1.468 trillion, in just 12 months.

So, with foreigners having shed $21 billion over the 12-month period, who bought this $1.468 trillion in new US Treasury debt?
Here’s who didn’t buy:

China’s holdings of marketable Treasury securities have remained roughly stable despite the arm-wresting match over trade, with its holdings at the end of July, at $1.17 trillion, up $4.7 billion from a year earlier.

Japan’s holdings fell by $78 billion year-over-year to $1.035 trillion, continuing the trend since the peak at the end of 2014 ($1.24 trillion):

Russia, always a smallish holder of Treasuries compared to China and Japan, has liquidated 90% of its holdings, bringing them from $153 billion in May 2013 to just $14.9 billion in July:

(https://wolfstreet.com/wp-content/uploads/2018/09/US-treasury-holdings-Russia-2018-07.png)

China and Japan have long played an outsized role as creditor to the US government. But their importance has been declining for years due to the growing pile of the US debt, and the simultaneous decline of their holdings. This caused their combined holdings (green line) to drop from nearly 13% of total US government debt at the end of 2015 to 10.4% in July, with Japan’s holdings (blue line) accounting for 4.9%, and China’s (red line) for 5.5%:

(https://wolfstreet.com/wp-content/uploads/2018/09/US-treasury-holdings-China-Japan-2018-07-percent-of-debt.png)

The Runners-up

Of the 12 largest holders of US Treasuries, after China and Japan, seven are tax havens for foreign corporate and/or individual entities (bold). The value in parenthesis denotes the holdings in July 2017:

    Ireland: $300 billion ($312 billion)
    Brazil: $300 billion ($271 billion)
    UK (“City of London”): $271 billion ($230 billion)
    Switzerland: $233 billion ($244 billion)
    Luxembourg: $222 billion ($213 billion)
    Cayman Islands: $196 billion ($240 billion)
    Hong Kong: $194 billion ($197 billion)
    Saudi Arabia: $167 billion ($142 billion)
    Taiwan: $164 billion ($184 billion)
    Belgium: $155 billion ($99 billion)
    India: $143 billion ($136 billion)
    Singapore: $128 billion ($112 billion)

The Americans are the only ones left.

By the end of July, the US gross national debt had reached $21.31 trillion, up $1.47 trillion from July last year – as I said above, a truly brain-wilting increase for a booming economy. Here’s who bought or shed this paper over those 12 months:

    Foreign official and private-sector holders shed $21 billion, reducing their stake to $6.23 trillion, or to 29.2% of the total US national debt.
    The US government (pension funds, Social Security, etc.) shed $44 billion, reducing “debt held internally” to $5.70 trillion, or to 26.7% of the total.
    The Federal Reserve shed $128 billion through the end of July as part of its QE Unwind, reducing its pile to $2.337 trillion by the end of July, or to 11.0% of total US national debt.
    So if everyone shed, who bought? American institutional and individual investors, directly and indirectly, through bond funds, corporate or state pension funds, and other ways, owned $7.05 trillion, or 33.1% of the total US debt at the end of July, having added $1.66 trillion to their holdings over those 12 months!

And here’s how that rapidly growing elephantine US debt is now divvied up:

(https://wolfstreet.com/wp-content/uploads/2018/09/US-Treasury-holdings-pie-2018-07.png)

American private-sector investors are buying with a new-found passion. Yields have risen quite a bit, though they remain below the rate of inflation for everything up to three-year maturities: The one-month yield closed today at 2.05%, the one-year yield at 2.58%, the two-year yield at 2.81%, and the 10-year yield squiggled over the 3% line again, to close at 3.05%.

The fact that the 10-year yield is still so low, compared with short-term yields, shows that there is huge demand for long-term maturities. If there were less demand, the yield would have to rise to lure new investors into buying (prices fall when yields rise). And anytime the yield rises just a little bit on the 10-year, these new buyers emerge in force and that demand pushes the price up and pushes the yield back down. And this demand for US Treasuries is not coming from foreign entities, the Fed, or US government funds, but from American investors.

And investors are buying anything to get higher yields. Today’s megadeal, the ninth-largest ever, is one of the riskiest, and reminiscent of the deals in 2006 and 2007. And they’re still blowing off the Fed. Read… Just How Wildly Exuberant is the Junk-Credit Market? 
 
Title: 🏦 Danske Bank CEO quits in a $234 billion money laundering scandal
Post by: RE on September 19, 2018, 03:44:22 AM
Is there anyone in the Bankstering Biz that DOESN'T launder money? ???  :icon_scratch:

RE

Danske Bank CEO quits in a $234 billion money laundering scandal

    Danske Bank Borgen resigns over possible money laundering
    Danske says 200 bln euros flowed through Estonian branch
    Vast majority of flows were suspicious
    Bank failed to heed warnings from regulators, whistleblower

Published 3 Hours Ago Updated 1 Hour Ago Reuters
      
(https://fm.cnbc.com/applications/cnbc.com/resources/img/editorial/2017/08/22/104666570-GettyImages-656030458.530x298.jpg?v=1503415778)   
Ole Jensen | Corbis | Getty Images

Danske Bank's chief executive Thomas Borgen quit on Wednesday in a money laundering scandal which involved 200 billion euros ($234 billion) flowing through its Estonian branch between 2007 and 2015, most of which was suspicious.

"It is clear that Danske Bank has failed to live up to its responsibility in the case of possible money laundering in Estonia. I deeply regret this," Borgen said in a statement which detailed failings in compliance, communication and controls.

Regulators and the financial community will scrutinise the Danske Bank report, which follows calls by Brussels for a new European Union watchdog to crack down on financial crime after a series of scandals involving anti-money laundering controls.

Dutch bank ING this month admitted criminals had been able to launder money through its accounts and agreed to pay 775 million euros ($900 million) to settle the case.

A third of Danske Bank's stock market value has been wiped out in the last six months, mainly driven by concerns over a possible inquiry by U.S. authorities and the penalties this could entail.

Danske Bank said its investigation into the affair concluded that Borgen, Chairman Ole Andersen and the board of directors "did not breach their legal obligations towards Danske Bank."

While Danske said it was not able to provide an accurate estimate of the suspicious transactions through its Estonian branch, it said the non-resident portfolio included customers from Russia, Azerbeijan, Ukraine and other ex-Soviet states.

The report found that Danske Bank failed to take proper action in 2007 when it was criticised by the Estonian regulator and received information from its Danish counterpart that pointed to "criminal activity in its pure form, including money laundering" estimated at "billions of roubles monthly".

And when a whistleblower raised problems at the Estonian branch in early 2014 the allegations were not properly investigated and were not shared with the board, Danske said.

While it took measures to get its Estonian business under control in 2014, these were insufficient, the report said.

Danske Bank also said it had decided not to migrate its Baltic banking activities onto its IT platform, because it would be too expensive. Accordingly, the Estonian branch did not employ Danske's anti-money laundering procedures.

U.S. authorities earlier this year accused Latvia's ABLV of covering up money laundering and the bank was promptly denied U.S. dollar funding, leading to its collapse.

While Danske does not have a banking licence in the United States, banning U.S. correspondent banks from dealing with it would amount to shutting it out of the global financial network.

The bank, whose shares fell as much as 5 percent following the release of the report, also lowered its expectations for annual net profit to 16-17 billion Danish crowns, from a previous range of 18-20 billion.
Title: 📉 Wolf Richter's Long View of the “Yield-Curve Inversion”
Post by: RE on September 25, 2018, 12:04:54 AM
https://wolfstreet.com/2018/09/22/yield-curve-inversion-2-year-10-year-spread-recessions-long-view/

My Long View of the “Yield-Curve Inversion”
by Wolf Richter • Sep 22, 2018 • 69 Comments   
All bull markets come to an end, even the 35-year Great Bond Bull Market.

The US Treasury 2-year yield crept up 3 basis points during the week, to 2.81% at the close on Friday, the highest since June 2008. In a month or two, as the fourth rate hike for 2018 and more rate hikes next year are getting further baked in, the 2-year yield will cross the 3% mark! Just two years ago, many soothsayers on Wall Street said this would never happen again – that the Fed, in fact, could never raise rates to this point. But here we are.

The 10-year yield rose 8 basis points during the week, to 3.07%. This widened the spread between the 2-year and the 10-year yield on Friday to a still hair-thin 26 basis points. But it was up from 18 basis points on August 27, the low point so far in this cycle, and thus the yield curve has “steepened” a tiny bit. This chart shows that spread going back to 2007:

(https://wolfstreet.com/wp-content/uploads/2018/09/us-treasury-yields-spread-2_10-2018-09-21.png)

For periods in 2006 and 2007, the 2-year yield was higher than the 10-year yield, and thus the yield curve was “inverted.” At the left end of the chart, denoting 2007, the line dipped below zero. The Great Recession officially began in December 2007, by which time the yield curve was no longer inverted as the Fed had started cutting short-term rates.

This scenario has played out repeatedly in past decades, when the “inverted yield curve” phenomenon was followed by recessions or worse. Inverted yield curves didn’t cause those recessions; but they were reliable predictors of them.

The chart below of the 2-year and 10-year yields shows the last two recessions (shaded areas), the yield curve inversions before those recessions, and the steepening of the yield curves following the recessions. The yield curve inverted where the black line is above the red line (click on the chart to enlarge):

(https://wolfstreet.com/wp-content/uploads/2018/09/US-Treasury-yields-10-year-v-2-year_1992_2018-09-21.png)

Starting in 2008, the Fed imposed its yield-repression policy on the Treasury market, thus totally manipulating the market. But since December 2015, the Fed has been “gradually” stepping away from those methods of yield repression. So the yield curve is not showing free-market behavior; it’s showing the Fed’s manipulations, and the side-effects of the Fed’s backing away from these manipulations.

There will be another recession. There always is at some point. A recession is an essential and necessary part of the normal business cycle. The only question is when – and the yield curve might no longer have a clue.

During the prior rate-hike cycles, the Fed raised much faster, and it was much more difficult for the 10-year yield to move out of the way of the soaring and over-shooting 2-year yield.

In this rate-hike cycle, the Fed is moving in slow-motion – everything is “gradual,” as the Fed has been ceaselessly pointing out – and the 10-year yield has a chance to keep limping ahead in spurts and starts.

If you squint a little as you look at the chart above, you can see that the 2-year yield soared 4 percentage points (400 basis points) in the three years from June 2003 through June 2006. The third year in this rate hike cycle will be complete in December 2018. And the 2-year yield will have likely risen from 0.99% in December 2015 to a little over 3% by December 2018, so a touch over 2 percentage points – or about half the speed of the last rate-hike cycle!

There is another thing to consider. The great bond bull-market started in October 1981. At the time, the 10-year yield peaked at just under 16%. Then yields fell (falling bond yields means rising bond prices). This bond bull market, with all its ups and downs, lasted till July 2016, when the 10-year yield bottomed out at 1.37%.

During these 35 years, yields dropped during each recession as the Fed cut rates, but then yields didn’t return to prior highs. Instead they wobbled from lower lows to lower lows. And after each recession, their peaks remained lower than their peaks before the recession.

But all bull markets come to an end, even the Great Bond Bull Market. And this dynamic of interest rates being lower after the recession than they’d been before it, in line with rates having fallen overall for 35 years, has likely fizzled, and rates overall won’t keep going lower. And those folks who expect that during the next recession, yields will fall below the low points in the past cycle will likely be disappointed.

Nightmare scenario for the markets? They just shrugged. But homebuyers haven’t done the math yet. Read…  Mortgage Rates Head to 6%, 10-Year Yield to 4%, Yield Curve Fails to “Invert,” and Fed Keeps Hiking 
Title: Re: 📉 Wolf Richter's Long View of the “Yield-Curve Inversion”
Post by: Eddie on September 25, 2018, 05:26:03 AM
https://wolfstreet.com/2018/09/22/yield-curve-inversion-2-year-10-year-spread-recessions-long-view/

My Long View of the “Yield-Curve Inversion”
by Wolf Richter • Sep 22, 2018 • 69 Comments   
All bull markets come to an end, even the 35-year Great Bond Bull Market.

The US Treasury 2-year yield crept up 3 basis points during the week, to 2.81% at the close on Friday, the highest since June 2008. In a month or two, as the fourth rate hike for 2018 and more rate hikes next year are getting further baked in, the 2-year yield will cross the 3% mark! Just two years ago, many soothsayers on Wall Street said this would never happen again – that the Fed, in fact, could never raise rates to this point. But here we are.

The 10-year yield rose 8 basis points during the week, to 3.07%. This widened the spread between the 2-year and the 10-year yield on Friday to a still hair-thin 26 basis points. But it was up from 18 basis points on August 27, the low point so far in this cycle, and thus the yield curve has “steepened” a tiny bit. This chart shows that spread going back to 2007:

(https://wolfstreet.com/wp-content/uploads/2018/09/us-treasury-yields-spread-2_10-2018-09-21.png)

For periods in 2006 and 2007, the 2-year yield was higher than the 10-year yield, and thus the yield curve was “inverted.” At the left end of the chart, denoting 2007, the line dipped below zero. The Great Recession officially began in December 2007, by which time the yield curve was no longer inverted as the Fed had started cutting short-term rates.

This scenario has played out repeatedly in past decades, when the “inverted yield curve” phenomenon was followed by recessions or worse. Inverted yield curves didn’t cause those recessions; but they were reliable predictors of them.

The chart below of the 2-year and 10-year yields shows the last two recessions (shaded areas), the yield curve inversions before those recessions, and the steepening of the yield curves following the recessions. The yield curve inverted where the black line is above the red line (click on the chart to enlarge):

(https://wolfstreet.com/wp-content/uploads/2018/09/US-Treasury-yields-10-year-v-2-year_1992_2018-09-21.png)

Starting in 2008, the Fed imposed its yield-repression policy on the Treasury market, thus totally manipulating the market. But since December 2015, the Fed has been “gradually” stepping away from those methods of yield repression. So the yield curve is not showing free-market behavior; it’s showing the Fed’s manipulations, and the side-effects of the Fed’s backing away from these manipulations.

There will be another recession. There always is at some point. A recession is an essential and necessary part of the normal business cycle. The only question is when – and the yield curve might no longer have a clue.

During the prior rate-hike cycles, the Fed raised much faster, and it was much more difficult for the 10-year yield to move out of the way of the soaring and over-shooting 2-year yield.

In this rate-hike cycle, the Fed is moving in slow-motion – everything is “gradual,” as the Fed has been ceaselessly pointing out – and the 10-year yield has a chance to keep limping ahead in spurts and starts.

If you squint a little as you look at the chart above, you can see that the 2-year yield soared 4 percentage points (400 basis points) in the three years from June 2003 through June 2006. The third year in this rate hike cycle will be complete in December 2018. And the 2-year yield will have likely risen from 0.99% in December 2015 to a little over 3% by December 2018, so a touch over 2 percentage points – or about half the speed of the last rate-hike cycle!

There is another thing to consider. The great bond bull-market started in October 1981. At the time, the 10-year yield peaked at just under 16%. Then yields fell (falling bond yields means rising bond prices). This bond bull market, with all its ups and downs, lasted till July 2016, when the 10-year yield bottomed out at 1.37%.

During these 35 years, yields dropped during each recession as the Fed cut rates, but then yields didn’t return to prior highs. Instead they wobbled from lower lows to lower lows. And after each recession, their peaks remained lower than their peaks before the recession.

But all bull markets come to an end, even the Great Bond Bull Market. And this dynamic of interest rates being lower after the recession than they’d been before it, in line with rates having fallen overall for 35 years, has likely fizzled, and rates overall won’t keep going lower. And those folks who expect that during the next recession, yields will fall below the low points in the past cycle will likely be disappointed.

Nightmare scenario for the markets? They just shrugged. But homebuyers haven’t done the math yet. Read…  Mortgage Rates Head to 6%, 10-Year Yield to 4%, Yield Curve Fails to “Invert,” and Fed Keeps Hiking

So, I had to read this one twice to try to get to his POV. So he thinks we've  reached a point where the expected yield curve might NOT invert as expected? that seems to be one possible takeaway.

So maybe that means some other trigger for the next deflationary event....back to  Euro bank failures, or a Chinese market collapse, or....????
Title: Re: 📉 Wolf Richter's Long View of the “Yield-Curve Inversion”
Post by: RE on September 25, 2018, 06:00:50 AM
So, I had to read this one twice to try to get to his POV. So he thinks we've  reached a point where the expected yield curve might NOT invert as expected? that seems to be one possible takeaway.

So maybe that means some other trigger for the next deflationary event....back to  Euro bank failures, or a Chinese market collapse, or....????

The charts certainly make it look like we're headed for an Inversion.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on September 25, 2018, 06:41:31 AM
My calculus expects one, followed by the Fed backing off again on rates.

But if inflation sets in, then they're really trapped between a rock and a hard place. Interest rates have to go up to fight double digit inflation.

I'm not really looking for a giant crash in 2020. That will come a bit later, I expect, if it comes at all. I'm not sure that's even a given.

I do look for the real estate market to soften with higher mortgage rates. I think we're starting to see it already in the usual most highly sensitive markets, like Cali and NYC.
Title: 🏦 Federal Reserve Raises Interest Rates For The 3rd Time This Year
Post by: RE on September 27, 2018, 06:13:59 AM
https://www.huffingtonpost.com/entry/federal-reserve-interest-rates_us_5bac776fe4b091df72ed7187 (https://www.huffingtonpost.com/entry/federal-reserve-interest-rates_us_5bac776fe4b091df72ed7187)

Federal Reserve Raises Interest Rates For The 3rd Time This Year
Three more rate hikes are slated for 2019.
Martin Crutsinger

WASHINGTON (AP) — The Federal Reserve signaled its confidence Wednesday in the U.S. economy by raising a key interest rate for a third time this year, forecasting another rate hike before year’s end and predicting that it will continue to tighten credit into 2020 to manage growth and inflation.

The Fed lifted its short-term rate — a benchmark for many consumer and business loans — by a modest quarter-point to a range of 2 percent to 2.25 percent. It was its eighth hike since late 2015. The central bank also stuck with a previous forecast for three more rate hikes in 2019.

In a statement after its latest policy meeting, the Fed dropped phrasing it had long used that characterized its policy as “accommodative” — that is, favoring low rates. The Fed had used variations of that pledge in the seven years that it kept its key rate at a record low near zero and over the past nearly three years in which it’s gradually tightened credit.

By removing that language, the Fed may be signaling its resolve to keep raising rates. In a news conference after its meeting, though, Chairman Jerome Powell said the removal of the “accommodative” language did not amount to a policy change.

“Our economy is strong,” Powell declared at the start of his news conference. “Growth is running at a healthy clip, unemployment is low. The number of people working is rising steadily, and wages are up. Inflation is low and stable, all of these are very good signs.”

The chairman added, though: “That’s not to say everything is perfect. The benefits of this strong economy have not reached all Americans. Many of our country’s economic challenges are beyond the scope of the Fed.”
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The Fed’s actions and its updated economic forecasts Wednesday had been widely anticipated. Initially, there was little reaction in the stock or bond markets. But later in the afternoon, stocks sold off, and major indexes closed modestly lower.

“The Fed stuck to script today, pushing ahead with another rate hike,” said Michael Pearce, senior U.S. economist at Capital Economics.

But Pearce added, “Our view is that officials are still underestimating just how quickly the economy is likely to lose momentum next year.”

He said he expects the Fed to suspend its rate hikes by mid-2019 — and then feel compelled to cut rates by early 2020 to support the economy.

In its updated outlook Wednesday, the Fed foresees one final rate hike after 2019 — in 2020 — which would leave its benchmark at 3.4 percent. At that point, it would regard its policy as modestly restraining growth. The Fed seeks to slow the economy when it reaches full employment to prevent a tight job market from raising inflation too high.

During a late-afternoon news conference in New York, President Donald Trump said he was “not happy” about the Fed’s latest rate hike. In a highly unusual move for a president, Trump has publicly complained that the Fed’s rate increases could blunt his efforts to boost growth through tax cuts and deregulation.

Earlier, Powell said during his news conference that such outside criticism would have no effect on the Fed’s use of rates to try to maximize employment and stabilize prices.

“We’ve been given a really important job to do on behalf of the American people,” Powell said. “My colleagues and I are focused, exclusively, on carrying out that mission.”

The Fed’s latest forecast predicts that the unemployment rate, now 3.9 percent, will reach 3.7 percent by the end of this year and then 3.5 percent next year. Not since the late 1960s has unemployment fallen that low.

The central bank expects unemployment to begin rising to 3.7 percent at the end of 2021. It foresees the economy growing 3.1 percent this year before slowing to 2.5 percent in 2019, 2 percent in 2020 and 1.8 percent in 2021. The Fed sees the economy’s long-run growth at a 1.8 percent annual rate — far below the Trump administration’s projections for a sustained rate of 3 percent.
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Many analysts think the economy could weaken next year, in part from the effects of the trade conflicts Trump has pursued with China, Canada, Europe and other trading partners. The tariffs Trump has imposed on imported steel and Chinese goods, in particular, complicate the Fed’s decision-making.

That’s because the tariffs — and the resulting retaliation from America’s trading partners — could weaken the U.S. economy. The Fed would normally respond to weaker growth by cutting interest rates. But tariffs, which are an import tax, can inflate prices. And the Fed typically counters higher inflation by raising rates.

Megan Greene, global chief economist at Manulife Asset Management, said she thought the tariffs were more likely to slow the economy than to accelerate inflation.

“The real risk of trade wars,” Greene wrote last week, “is a hit to growth, not a boost to inflation.”

Indeed, the Fed’s regional banks have reported that some businesses are delaying investments until they see some resolution to the trade hostilities. In his news conference, Powell said some companies have told Fed officials that the tariffs have raised fears that supply chains will be disrupted and raw materials will cost more.

Powell said he had yet to see evidence that the administration’s tariffs have raised prices for many consumers. But he said rising inflation remains a threat resulting from Trump’s trade policies.

“It’s a concern,” Powell said. “It’s a risk. You could see prices moving up. You don’t see it yet. But you could see retail prices moving up. The tariffs might provide a basis for companies to raise prices in a world where they’ve been very reluctant to and unable to raise prices.”
Title: 💸 Inversion Watch: Dancing the Global “Yield Curve” Tango?
Post by: RE on September 30, 2018, 02:41:37 AM
https://wolfstreet.com/2018/09/29/treasury-yield-curve-survives-rate-hike-intact-yield-curves-steepen-in-china-japan-germany/

Inversion Watch: Dancing the Global “Yield Curve” Tango?
by Wolf Richter • Sep 29, 2018 • 8 Comments   
Treasury yield curve survives rate hike upright. Yield curves steepen in China, Japan & Germany. Era of NIRP scheduled to end.

The Fed raised its target range by a quarter point on Wednesday, but had already been completely baked in: US Treasury yields barely budged. And the “yield curve” – that monster that tends to “invert” late in the rate-hike cycle, where short-term yields are higher than long-term yields, which tends to be followed by recessions or worse – hasn’t inverted yet because long-term yields have risen in parallel. That was not a given two months ago.

The chart below shows the yield curves on September 28 at the close (red line) and on December 14, 2016, when the Fed got serious about raising rates (blue line). The red line has “flattened” compared to the black line, especially from the 2-year yield on out, and the 24-basis-point spread between the 2-year and the 10-year markers has shriveled to 24 basis points, from the 127-basis-point spread on December 14, 2016:

(https://wolfstreet.com/wp-content/uploads/2018/09/US-Treasury-yield-curve-2018-09-28.png)

While the Fed has succeeded in pushing up shorter-term yields, the effects have been less and less the longer the maturities get, to where the 30-year yield hasn’t budged at all since December 2016.

The Fed leads, other central banks follow – and markets expect it. The ECB is now gingerly communicating that future rate increases are coming, that the era of QE will end this year, and that the era of NIRP (negative interest rate policy) will end next year. Even the Bank of Japan is making noises about giving long-term yields – which it specifically controls via its “yield curve targeting” model – more room to move; and its negative short-term yields are under pressure from Japanese banks.

As a result, in both NIRP bailiwicks, long-term yields have started to rise, even as short-term yields remain locked in place for now, and yield curves have steepened.

Dancing the global yield curve tango?

The chart below shows the yield curves of the four largest economies. Yields on September 29 are in brighter colors and the yields on July 20 are in washed-out colors. Note that all longer-term yields have risen, even in Germany and Japan where short-term yields are still cemented into the NIRP absurdity:

(https://wolfstreet.com/wp-content/uploads/2018/09/US-Treasury-Japan-German-China-yield-curves-2018-09-29.png)

Some observations:

In the US Treasury market (red line), the entire yield curve has risen in near-parallel since July 20, with all yields rising by similar amounts. This is what has kept the yield curve from inverting when the Fed’s move pushed up short-term yields.

In the Chinese government bond market (light blue line), the yield curve has steepened, as the 1-year yield has inched down since July 20, while all other yields have risen. Chinese 30-year yields are now at 4.2%.

Japanese yields (dark blue line) for maturities up to 5 years are totally flat and a notch below zero. Then they begin to rise, turning positive at around 6 years. The 7-year yield was still negative on July 20 (-0.01%). By Friday it had risen to positive 0.024%. The 10-year yield has risen to 0.13%. And beyond it, the curve steepens sharply. The entire JGB market is under iron-fisted control of the Bank of Japan, which owns nearly half of them, and we can assume that the yield curve is exactly where the BOJ wants it with its “yield curve targeting.” Nothing is allowed to happen by market forces, which have died.

German yields (green line) are now positive from about 6 years out. A month ago, the 7-year yield was still negative (-0.025). By Friday, it had risen to positive 0.124%. But short-term yields remain deeply mired in the negative, thanks to the ECB’s NIRP, with the 3-month to 2-year yields hovering around negative -0.6%.

The ECB’s QE is scheduled to end in December, and NIRP is scheduled to go on the chopping block next year. The Fed has been “removing accommodation” since December 2015, albeit at a glacial, or rather “gradual” pace. Even the BOJ, despite declarations to the contrary, has been sporadically dialing back its QQE program. Markets might still be in denial, and the way back to some sort of normalcy, if that’s the right word, will be long and arduous, and might never quite get there, but it would be a start.

The US is “on an unsustainable fiscal path, there’s no hiding from it,” explained Fed Chairman Jerome Powell at the press conference, along with some other key concepts. Read… The Fed’s Not Backing Off: Powell’s Standouts & Zingers at the Press Conference 
 
Title: 💸 US Dollar Refuses to Die as Global Reserve Currency — But Loses Ground
Post by: RE on October 01, 2018, 02:52:37 AM
https://wolfstreet.com/2018/09/30/us-dollar-global-reserve-currency-hegemony-chinese-rmb-yuan-euro/

US Dollar Refuses to Die as Global Reserve Currency — But Loses Ground
by Wolf Richter • Sep 30, 2018 • 4 Comments   

(https://wolfstreet.com/wp-content/uploads/2018/09/Global-Reserve-Currencies-USD-share-annual-2018-Q2.png)

Chinese RMB gains, but is inconsequential as central banks remain leery. Euro hangs on.

Those who’re eagerly awaiting the end of the “dollar hegemony,” or the end of the dollar as the top global reserve currency, well, they’ll need some patience, because it’s happening at a glacial pace – according to the IMF’s just released data on the “Currency Composition of Official Foreign Exchange Reserves” (COFER) for the second quarter 2018.

What it confirms: Global central banks are ever so slowly losing their appetite for being over-exposed to US-dollar-denominated assets, though they’re not dumping them from their foreign exchange reserves; they’re just tweaking them.

They’re not dumping euro-denominated assets either; au contraire. But they’re giving up on the Swiss franc. And they remain leery of the Chinese renminbi though they’re starting to dabble in it – it seems at the expense of the dollar.

In Q2 2018, total global foreign exchange reserves, in all currencies, rose 3.2% year-over-year, to $11.48 trillion, well within the range of the past three years. For reporting purposes, the IMF converts all currency balances into US dollars.

US-dollar-denominated assets among these reserves edged up to $6.55 trillion, but given the overall rise of total foreign exchange reserves, the share of dollar-denominated assets among these reserves edged down to 62.25%, the lowest since the period 2012-2013. In this chart of the dollar’s share of reserve currencies, note its low point in 1991 with a share of 46%. And note the arrival of the euro:

The euro became an accounting currency in the financial markets in 1999, thereby replacing the former European Currency Unit (ECU). Euro banknotes and coins appeared on January 1, 2002. At the end of 2001, the dollar’s share of reserve currencies was 71.5%. In 2002, it dropped to 66.5%. By Q2 2018, it was down to 62.25%.

In Q2, the Euro’s share edged up to 20.26%, the highest since Q4 2014. The creation of the euro has been the most successful effort to reduce the dollar’s hegemony. Before the Financial Crisis, and the euro Debt Crisis, the theme in Europe was that the euro would reach “parity” with the dollar on the hegemony scale. But this talk fizzled out during the euro Debt Crisis.

The latest effort at whittling down the dollar’s hegemony is the elevation of the Chinese renminbi to a global reserve currency, as of October 1, 2016, when the IMF added it to its currency basket, the Special Drawing Rights (SDR).

The RMB’s gains make “glacial” appear lightning fast. In the chart below, the RMB is the thin red sliver with a share of just 1.84%, but this is up from 1.39% in Q1, and up from 1.2% in Q4 2017 – minuscule, considering that China is the second largest economy in the world. It seems, central banks remain leery of holding RMB-denominated assets, but they’re beginning to dabble in it.

(https://wolfstreet.com/wp-content/uploads/2018/09/Global-Reserve-Currencies-share-2018-q2.png)

Note the Swiss franc, the barely visible black line in the pie chart above. It has been in the 0.16% to 0.18% range since Q1 2016, but that’s a sharp drop-off from its share in prior years.

In the chart below, the black line at the top is the hegemonic US dollar, whose share of reserve currencies has edged down. The euro (blue line), at 20.26% in Q2, has been vacillating at around 20% for years. The dollar and euro combined accounted for 82.5% of the allocated foreign exchange reserves in Q2. The Chinese RMB is the bright red line at the bottom since its inclusion in Q4 2016. It’s just above the Swiss franc and roughly on par with the Canadian dollar and the Australian dollar:

(https://wolfstreet.com/wp-content/uploads/2018/09/Global-Reserve-Currencies-share-time-2014-Q4_2018-Q2.png)

All these percentages denote the currencies’ share of “allocated” reserves. Not all central banks disclose to the IMF how their foreign exchange reserves are “allocated” by specific currency. But over the years, disclosure to the IMF has increased. In Q4 2014, “allocated” reserves accounted for 59% of total reserves. By Q2 2018, this has risen to 91.6%. In other words, the COFER data is getting more complete.

A word about the relationship between the dollar as the top reserve currency and the huge trade deficits the US has with the rest of the world: There is a theory that says that the US, as the country with the top reserve currency, must have a huge trade deficit with the rest of the world. What pulls the rug out from under this theory is that the Eurozone, which has the second largest reserve currency, has a large trade surplus with the rest of the world.

However, the status of the dollar as the top reserve currency and top international funding currency allows those trade deficits to be financed and thus makes those trade deficits possible over the longer run (going on two decades now).

That Trump is bungling the debate on how to deal with the trade deficits became clear when he was getting bashed like a sitting duck from all sides: from Corporate America, China, the EU, other entities that would lose, and their propaganda outlets in the media. Read… What I Wrote to the White House about Trade & Tariffs 
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on October 01, 2018, 04:27:25 AM
Good piece. So much for the death of the Euro too. It ain't goin' nowhere for a while. It's still the biggest threat to the dollar, as I said not long ago.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on October 01, 2018, 08:30:15 AM
The Swiss franc is a good one to show how currencies don't always act like they should.

Swiss long bonds have been paying NEGATIVE interest for three years, and somebody keeps right on buying them. You are right, and the Swiss franc should collapse at some point. But it doesn't seem to be happening. Not everything can be explained in terms of  arbitrage. That's the takeaway.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on October 01, 2018, 08:35:49 AM
The Swiss franc is a good one to show how currencies don't always act like they should.

Swiss long bonds have been paying NEGATIVE interest for three years, and somebody keeps right on buying them. You are right, and the Swiss franc should collapse at some point. But it doesn't seem to be happening. Not everything can be explained in terms of  arbitrage. That's the takeaway.

You can explain it with one word.

ILLUMINATI!

Switzerland is Home Base for the Illuminati.  They'll keep that currency propped up until the Sun goes Red Giant.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on October 01, 2018, 09:36:23 AM
More likely because it's the home of the Swiss PEOPLE. They buy their own bonds preferentially, like the Japs.

I refer to the Swiss as the Nazi French anyway, which sort of describes their national identity. It's not exactly historically accurate, but it does get the point across.

They buy Swiss francs because no other money is clean enough or pure Aryan enough to use...it would contaminate their wallets and make their retail establishments smell like foreigners.

And it's got some credibility because Switzerland has the highest per capita gold holdings of any country...( probably a lot of it is gold crowns from Jewish teeth, but that's another story.)

They even grow 60% of their own food, which could probably be 100% if need be. 70% ethnic German and 20% "other European"...not many Asians or Africans (or Americans, for that matter.)
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on October 01, 2018, 09:45:17 AM
The Swiss People don't buy their bonds, the SNB does.  And where is the "Central Bank of Central Banks", the BIS?  Basel, Switzerland.

(https://media.glassdoor.com/l/10670/bank-for-international-settlements-office.jpg)

Thye are all Nazis though.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on October 01, 2018, 09:51:05 AM
BIS= Bank of Illuminati Separatists
Title: 💸 What Happened To Treasurys On Wednesday?
Post by: RE on October 04, 2018, 04:18:06 AM
https://seekingalpha.com/article/4209753-happened-treasurys-wednesday (https://seekingalpha.com/article/4209753-happened-treasurys-wednesday)

What Happened To Treasurys On Wednesday?
Oct. 3, 2018 11:22 PM ET

(https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2015/05/bund%205.12.jpg)

The Heisenberg
Currencies, macro, commodities, geopolitics
The Heisenberg Report
(19,257 followers)
Summary

On Wednesday, bonds were routed and the selloff was the talk of the financial universe.

30-year and 10-year yields hit their highest levels since 2014 and 2011, respectively.

Understanding why is critical, as is appreciating the extent to which Friday's jobs report just became even more critical than it already was.

Here's everything you need to know.

A couple of weeks back, I wrote something for this platform called "The Bond Selloff That Nobody Noticed".

That was a recap of events that transpired during the week of September 17, when yields rose on what looked like a combination of rising inflation expectations and the term premium trade.

One of the oddities of that week was the dollar (NYSEARCA:UUP), which did not rise in tandem with U.S. yields. Instead, the greenback fell as commodities rallied, a combination that helped buoy sentiment in downtrodden ex-U.S. assets, particularly emerging markets, where equities outperformed their U.S. counterparts handily and currencies logged their best week since February.

On September 18, Jeff Gundlach expressed his incredulity at the perceived lack of press coverage:

Fast forward to Wednesday and Treasurys sold off hard. This time around, the financial media definitely took note.

Wednesday's bond rout was the talk of the financial universe as 30-year and 10-year yields hit their highest levels since 2014 and 2011, respectively.

(https://static.seekingalpha.com/uploads/2018/10/3/47439673-1538603791099177.png)
(Bloomberg)

(https://static.seekingalpha.com/uploads/2018/10/3/47439673-15386038085661771.png)
(Bloomberg)
Title: 💸 The Fed’s QE Unwind Reaches $285 Billion
Post by: RE on October 05, 2018, 12:01:07 AM
https://wolfstreet.com/2018/10/04/feds-balance-sheet-normalization-reaches-285-billion/

The Fed’s QE Unwind Reaches $285 Billion
by Wolf Richter • Oct 4, 2018 • 15 Comments   
The “up to” begins to matter for the first time.

The Fed released its weekly balance sheet Thursday afternoon. Over the four-week period from September 6 through October 3, total assets on the Fed’s balance sheet dropped by $34 billion. This brought the decline since October 2017, when the QE unwind began, to $285 billion. At $4,175 billion, total assets are now at the lowest level since March 5, 2014:

(https://wolfstreet.com/wp-content/uploads/2018/10/US-Fed-Balance-sheet-2018-10-04-overall-.png)

During QE, the Fed bought Treasury securities and mortgage-backed securities (MBS). During the “balance sheet normalization,” the Fed is shedding those securities. But the balance sheet also reflects the Fed’s other activities, and so the amount of its total assets is higher than the combined amount of Treasury securities and MBS it holds, and the changes in total assets also reflect its other activities.

The QE unwind was still in ramp-up mode in September, according to the Fed’s plan. For September, the Fed was scheduled to shed “up to” $24 billion in Treasuries and “up to” $16 billion in MBS.

From September 6 through October 3, the Fed’s holdings of Treasury Securities fell by $19 billion to $2,294 billion, the lowest since March 5, 2014. Since the beginning of the QE-Unwind, the Fed has shed $172 billion in Treasuries:

(https://wolfstreet.com/wp-content/uploads/2018/10/US-Fed-Balance-sheet-2018-10-4-Treasuries.png)

The “up to” begins to matter

Though the plan calls for shedding “up to” $24 billion in Treasury securities in September, the Fed shed only $19 billion. Here’s what happened – and why this will happen more often going forward:

When the Fed sheds Treasury securities, it doesn’t sell them outright but allows them to “roll off” when they mature; Treasuries mature mid-month or at the end of the month. Hence, the step-pattern of the QE unwind in the chart above.

On September 15, no Treasury securities matured. On September 30, two security issues in the Fed’s holdings matured, totaling $19 billion. Those were allowed to “roll off” entirely without replacement. In other words, the Treasury Department redeemed them and paid the Fed $19 billion for them. The Fed then destroyed this money – in a reverse process of QE when it created this money with which to buy securities.

But since only $19 billion in Treasury securities matured, only $19 billion could roll off, and the “up to” $24 billion cap could not be reached.

This will happen again. For example, in October, $22.9 billion in Treasury securities will mature. In October the “up to” cap increases to the final cruising speed of $30 billion a month, but only $22.9 billion can roll off.

In November, however, $50 billion in Treasury securities will mature. The Fed will let $30 billion roll off, maxing out the “up to” cap of $30 billion, and will replace the remaining $20 billion.

Mortgage-Backed Securities (MBS)

The Fed is also shedding the MBS on its balance sheet. The Fed acquired residential MBS that were issued and guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Residential MBS differ from regular bonds; holders receive principal payments as the underlying mortgages are paid down or are paid off. At maturity, the remaining principal is paid off. To keep the balance of these ever-shrinking MBS from declining after QE ended, the New York Fed’s Open Market Operations (OMO) kept buying MBS.

The Fed books the trades at settlement, which occurs two to three months after the trade. Due to this lag of two to three months, the Fed’s balance of MBS at the end of September reflects trades from around June, give or take a few weeks. In September, the “up to” cap for shedding MBS was $16 billion. But at the time of the trades, through June, the cap was $12 billion. In July, it increased to $16 billion. So we would expect the roll-off that was booked in September to be somewhere between the June cap of $12 billion and the July cap of $16 billion.

And this is what we got. Over the period from September 6 through October 3, the balance of MBS fell by $14.2 billion, to $1,682 billion, the lowest since September 10, 2014. In total, $89 billion in MBS have been shed since the beginning of the QE unwind:

(https://wolfstreet.com/wp-content/uploads/2018/10/US-Fed-Balance-sheet-2018-10-04-MBS.png)

Based on various tidbits in speeches and discussions by Fed governors, it seems that a consensus is building that the Fed wants to get rid of all its MBS and only hold Treasury Securities. The Fed’s strategy of buying MBS under what Wall Street had wishful-thinkingly called “QE infinity” was designed to lower long-term interest rates, particularly mortgage rates. If the Fed decides to shed all its MBS and stay out of this market, it would further reduce the official support for – or rather, official manipulation of – the mortgage market, and by extension, the housing market.

The Fed has been raising rates to where Wall Street is starting to squeal. But Fed Chairman Jerome Powell says, “We’re a long way from neutral at this point.” Read…  Powell Explains Just How Hawkish the Fed is Getting 
Title: 📉 10 & 30-Year Yields Surge, Yield Curve “Steepens,” Stocks Drop, as Fed
Post by: RE on October 08, 2018, 12:02:46 AM
https://wolfstreet.com/2018/10/07/stocks-drop-as-10-year-yield-surges-yield-curve-steepens-and-fed-talks-up-rate-hikes/ (https://wolfstreet.com/2018/10/07/stocks-drop-as-10-year-yield-surges-yield-curve-steepens-and-fed-talks-up-rate-hikes/)

10 & 30-Year Yields Surge, Yield Curve “Steepens,” Stocks Drop, as Fed Talks Up Rate Hikes in 2019
by Wolf Richter • Oct 7, 2018 • 18 Comments   

(https://www.lombardiletter.com/wp-content/uploads/2018/03/iStock-517227608-960x451.jpg)

Ironically, after having lamented the flattening yield curve for a year, soothsayers now lament the steepening yield curve.

On Friday, capping a rough week in the US Treasury market, the 10-year yield closed at 3.23%, the highest since May 10, 2011, and stocks fell for the second day in a row. This is an unnerving experience for pampered equity investors who’ve come to take endless stock-price inflation for granted, who’d figured for years that interest rates would never rise, and as short-term interest rates began rising, figured that long-term interest rates would never rise – and now they’re rising too.

To rub it in that this is a new world, similar to the old world before QE and before zero-interest-rate policy, another Fed heavy-weight discussed what’s coming: Quite a few more rate hikes.

New York Fed president John Williams told Bloomberg TV on Friday that we’re witnessing a “Goldilocks economy” with strong labor market, earnings growth, “low and stable inflation,” etc. “We want to sustain this economy, we want to keep it in good balance, so we don’t want to see inflationary pressures pick up,” he said.

And the topic came to “neutral” – the infamously theoretical short-term interest rate that is high enough to stop pushing the economy but is low enough to avoid slowing it.

“Of course, we don’t really know what the neutral interest rate is,” he said, pointing out that the FOMC members on average peg it at “about 3%. “We’re just a little bit above 2% for the federal funds target, so we have a ways to go to get to some idea of what people think of as neutral. We don’t really know where that is…. We continue to get closer to the range of neutral over the next year.”

This echoes Fed Chairman Jerome Powell’s pronouncements that “we’re a long way from neutral at this point” – and he’s thinking of taking rates beyond neutral [read…  Powell Explains Just How Hawkish the Fed is Getting].

OK, so no slow-down in the rate hike tango next year. And the bond market is finally getting the drift of what this will do to long-term yields: They’ll rise too. And this caused some peculiar moves during the week:

    The 3-month yield rose just 4 basis points to close at 2.23% on Friday, October 5, the highest since February 2008.
    The 2-year yield rose 7 basis points over the week, to 2.88%.
    The 10-year yield jumped 18 basis points, to 3.23%.
    The 30-year yield jumped 21 basis points, to 3.40%.

The 2-year yield that has now reached the highest level since June 23, 2008:

(https://wolfstreet.com/wp-content/uploads/2018/10/us-treasury-yields-2-year-2018-10-05.png)

The real action was reserved for long maturities – surprising the folks that had been clamoring for a “yield-curve inversion,” where the 10-year yield would stay low, and the 2-year yield would rise above it. This yield-curve inversion phenomenon in the past occurred before recessions or worse. The last one occurred before the Financial Crisis.

So surely, if the yield curve inverts, the Fed would quit raising rates and Wall Street could go on undisturbed, the thinking went.

But over the week, the 10-year yield jumped to 3.23%. In this rate-hike cycle, the 10-year yield has moved in two surges of over 100 basis points each with some backtracking in between. Are we now looking at the beginning of the third such surge that would take the 10-year yield across the 4% line by mid-2019? Seems likely to me:

(https://wolfstreet.com/wp-content/uploads/2018/10/US-treasury-yields-10-year-2018-10-05.png)

Surging long-term interest rates will raise borrowing costs for:

    Consumers, whose debts, including mortgages, have ballooned by $442 billion over the past year.
    Corporations, whose debts have ballooned by $574 billion over the past year;
    The federal government, whose debt has ballooned by $1.27 trillion in fiscal 2018.
    But state and local government debts have edge down a smidgen over the year (-$4 billion).

In total, indebtedness of consumers, corporations, and all governments has grown by $2.04 trillion over the past four quarters. And they’re going to be paying higher interest rates on this ballooning debt. In other words, debt service costs are going to rise substantially.

And a 10-year yield of 3.23% is still low, though it is incomprehensibly high to those who in mid-2016, had expected it to be zero by now. And it’s going higher.

The spread between the 2-year yield (2.88%) and the 10-year yield (3.23%) has widened to 35 basis points. This is still nothing to write home about, but it’s almost twice the 18-basis point spread on August 27.

The chart below shows the yield curves on Friday, October 5 (red line); a week earlier, on September 28 (green line); and on December 14, 2016, when the Fed got serious about raising rates (blue line). Note how the red line has steepened compared to the green line, but remains relatively flat compared to the black line, especially from the 2-year yield on out. Friday’s 35-basis-point spread between the 2-year and the 10-year markers is still small compared to the 127-basis-point spread on December 14, 2016:

(https://wolfstreet.com/wp-content/uploads/2018/10/US-Treasury-yield-curve-2018-10-05-.png)

If the yield curve were to invert, the red line in the chart above would have a downward slope. But this yield curve isn’t ready to invert just yet.

Wall Street soothsayers had been postulating over the summer that the yield curve would invert by September’s rate hike, and that the Fed, scarred by the Financial-Crisis turmoil that happened after the yield curve had inverted last time, would then quit raising rates and give Wall Street a break. Instead, the yield curve has done the opposite – it steepened.

Ironically, after having lamented the flattening yield curve for a year in order to get the Fed to back off, these soothsayers are now lamenting the steepening of the yield curve. They now fear, as long-term debt gets more expensive for borrowers and more attractive for investors, that investors might abandon stocks, and that the ludicrously inflated stock market might start hissing a lot of hot air.

Some of this may already be producing side-effects. Read… “Trump Bump” Peaked in San Francisco’s Housing Bubble 
Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on October 09, 2018, 12:32:19 PM

Is another “Great Depression” on the horizon? It would be easier to dismiss these words from Nouriel Roubini, Marc Faber or other doom-and-gloom prognosticators. Coming from Christine Lagarde’s team, though, they take on a new dimension of scary.

The International Monetary Fund head isn’t known for breathlessness on the world stage. And yet the IMF sounded downright alarmist in its latest Global Financial Stability report, stating that “large challenges loom for the global economy to prevent a second Great Depression.”

Even some market bears were taken aback. “Why,” asks Michael Snyder of The Economic Collapse Blog would the IMF use this phrase “in a report that they know the entire world will read?”

Perhaps because, unfortunately, the findings of other referees of global risks – including the Bank for International Settlements – hint at similar dislocations.


https://www.atimes.com/article/great-depression-ahead-imf-sounds-dire-warning/amp/ (https://www.atimes.com/article/great-depression-ahead-imf-sounds-dire-warning/amp/)
Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on October 09, 2018, 12:55:42 PM

This article was written by Brandon Smith and originally published at Birch Gold Group

Blind faith in the U.S. dollar is perhaps one of the most crippling disabilities economists have in gauging our economic future. Historically speaking, fiat currencies are animals with very short lives, and world reserve currencies are even more prone to an early death. But, for some reason, the notion that the dollar is vulnerable at all to the same fate is deemed ridiculous by the mainstream.

This delusion has also recently bled into parts of the alternative economic movement, with some analysts hoping that the Trump Administration will somehow reverse several decades of central bank sabotage in only four to eight years. However, this thinking requires a person to completely ignore the prevailing trend.

Years before there was ever an inkling of a trade war, multiple nations were establishing bilateral agreements that would cut the dollar as the primary exchange mechanism. China has been a leader in this effort, despite it being one of the largest buyers of U.S. Treasury debt and dollar reserves since the 2008 crash. In the past few years, these bilateral deals have been growing in scope, starting small and then expanding into massive agreements on raw commodities. China and Russia are a perfect example of the de-dollarization trend, with the two nations forming a trade alliance on natural gas as far back as 2014. That agreement, which is expected to start boosting imports to China this year, removes the need for dollars as a reserve mechanism for international purchases.

https://www.activistpost.com/2018/10/the-world-is-quietly-decoupling-from-the-u-s-and-no-one-is-paying-attention.html (https://www.activistpost.com/2018/10/the-world-is-quietly-decoupling-from-the-u-s-and-no-one-is-paying-attention.html)
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on October 10, 2018, 06:04:37 AM

This article was written by Brandon Smith and originally published at Birch Gold Group

Blind faith in the U.S. dollar is perhaps one of the most crippling disabilities economists have in gauging our economic future. Historically speaking, fiat currencies are animals with very short lives, and world reserve currencies are even more prone to an early death. But, for some reason, the notion that the dollar is vulnerable at all to the same fate is deemed ridiculous by the mainstream.

This delusion has also recently bled into parts of the alternative economic movement, with some analysts hoping that the Trump Administration will somehow reverse several decades of central bank sabotage in only four to eight years. However, this thinking requires a person to completely ignore the prevailing trend.

Years before there was ever an inkling of a trade war, multiple nations were establishing bilateral agreements that would cut the dollar as the primary exchange mechanism. China has been a leader in this effort, despite it being one of the largest buyers of U.S. Treasury debt and dollar reserves since the 2008 crash. In the past few years, these bilateral deals have been growing in scope, starting small and then expanding into massive agreements on raw commodities. China and Russia are a perfect example of the de-dollarization trend, with the two nations forming a trade alliance on natural gas as far back as 2014. That agreement, which is expected to start boosting imports to China this year, removes the need for dollars as a reserve mechanism for international purchases.

https://www.activistpost.com/2018/10/the-world-is-quietly-decoupling-from-the-u-s-and-no-one-is-paying-attention.html (https://www.activistpost.com/2018/10/the-world-is-quietly-decoupling-from-the-u-s-and-no-one-is-paying-attention.html)

Things are changing, there is no doubt. But the USD is still strong, and I'd be surprised to see the floor drop out. Long term big macro forces are in play, however. The DXY chart of the dollar is something I always keep an eye on. An imminent crash looks unlikely to me. I'd be more concerned if the DXY broke 80 to the downside, and if it breaks 75 or so, the dollar is in fact in real trouble. Bears watching.

Screen Shot 2018 10 10 at 7 57 57 AM
Screen Shot 2018 10 10 at 7 57 57 AM
Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on October 11, 2018, 01:31:36 PM

Back in August, Bloomberg interviewed Karen Petrou about her research on quantitative easing and the Fed’s policies since the 2008 financial crisis. What she has discovered has not been encouraging for people who aren’t already high-income, and in recent research presented to the New York Fed, she concluded “Post-crisis monetary and regulatory policy had an unintended but nonetheless dramatic impact on the income and wealth divides.”

This assessment is based on her own work, but also on a 2018 report released by the Minneapolis Fed. The report showed that both income and wealth growth in the US have been much better for higher-income households in recent decades.

https://www.activistpost.com/2018/10/new-data-shows-federal-reserve-is-causing-more-inequality.html (https://www.activistpost.com/2018/10/new-data-shows-federal-reserve-is-causing-more-inequality.html)
Title: 💸 Agents of Chaos: Trump, the Federal Reserve and Andrew Jackson
Post by: RE on October 18, 2018, 12:28:40 AM

https://www.globalresearch.ca/agents-of-chaos-trump-the-federal-reserve-and-andrew-jackson/5657052 (https://www.globalresearch.ca/agents-of-chaos-trump-the-federal-reserve-and-andrew-jackson/5657052)

Agents of Chaos: Trump, the Federal Reserve and Andrew Jackson
By Dr. Binoy Kampmark
Global Research, October 15, 2018
Region: USA
Theme: Global Economy, History

Andrew Jackson

(https://www.globalresearch.ca/wp-content/uploads/2015/04/Federal-Reserve-Economy.jpg)
“It is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes.” — President Andrew Jackson, Washington, July 10, 1832

They are three players, all problematic in their own way.  They are the creatures of inconvenient chaos.  Donald Trump was born into the role, a misfit of misrule who found his baffling way to the White House on a grievance.  Wall Street, with its various agglomerations of vice and ambition constitute the spear of global instability while the US Federal Reserve, long seen as a gentlemanly symbol of stability, has done its fair share to avoid its remit to right unstable ships, a power in its own right.

The Federal Reserve, despite assuming the role of Apollonian stabiliser, remained blind and indifferent through the Clinton era under the stewardship of Alan Greenspan.  The creatures of Dionysus played, and Greenspan was happy to watch.  While he is credited with having contained the shock of the 1987 stock-market crash, he proceeded to push a period of manically low interest rates and minimal financial regulation through the hot growth of the 1990s and early 2000s. Rather than condemning “Ninja loans” and other such bank exotica, he celebrated them as creations of speculative genius.

The mood at the Fed these days might seems chastened.  They are the monkish wowsers and party poopers, those who lock down the bar and tell the merrily sauced to head home.  The sense there is that the market, boosted and inflated, needs correction after years of keeping interest rates at floor levels. Unemployment levels are at 3.7 percent; inflation levels are close to 2 percent.

    “If the strong growth in income and jobs continues,” reasoned Federal Reserve chairman Jerome H. Powell in August, “further gradual increases in the target range for the federal funds rate will likely be appropriate.”

    Cooling through an increase in interest rates was deemed necessary in light of a consumer binge induced by Trump’s tax cuts, and no one knows when it will stop.  “What’s not yet clear,” observes Timothy Moore, “is how far rates will have to rise to reach a level that the Fed considers neutral – where rates neither bolster nor restrain the pace of growth – because rates already have risen so much.”

To three rises in the federal-funds rate that have already taken place could be added another in December and in 2019.

Powell is now facing attacks by President Trump, a self-described “low interest rate person,” in a manner not unlike the assault on the Second Bank of the United States by President Andrew Jackson.  Trump’s adolescent indignation is akin to the person whose balloons have been pinched.  In July, he was “not thrilled” with that round of rate hikes and said as much.  “Because we go up and every time you go up they want to raise rates again.”  Markets, playing their side of the disruptive bargain, reacted, with the dollar, stocks and treasury yields falling.

This month, the same story repeated itself.  When the markets go up, Trump, invariably, sees his hand in it; when they go down, someone else foots the blame.  Now, according to the president, the Federal Reserve has “gone crazy” and “wild” in various measures.  “I’d like our Fed not to be so aggressive, because I think they’re making a big mistake.”  To Fox News’s Shannon Bream, Trump insisted that, “The Fed is going loco and there’s no reason for them to do it.”  White House chief economic advisor Larry Kudlow found himself defending his boss “as a successful businessman and investor” informed about such matters.

The history between the Fed and the White House has been punctuated by occasional bouts of surliness.  Paul Volcker’s time as chairman saw an irate, desperate James Baker, when President Ronald Reagan’s chief of staff, attempt to gain an assurance that interest rates would not rise.  He failed.  By and by, however, the Fed has remained something of a holy cow, a point Trump cares little about.

But it was Jackson’s loathing of banks that proved not only effectual but the stuff of legend.  He found much suspicion in the whole notion of credit. He had also previously suffered at the hands of a land transaction involving the use of valueless paper notes.  Only specie – silver and gold – deserved his commanding trust.

The very idea of a central bank running rough shod over state rights presented the hero of the Battle of New Orleans with a perfect target.  His vision of frontiersman expansionism was being foiled.  Such acrimony, according to Arthur Schlesinger Jr.’s The Age of Jackson, was a case of socio-economic falling out.  Elites were attempting to monopolise financial power; Jackson, if in somewhat exaggerated fashion (though less so than Trump) spoke of common-man values against big business.

John M. McFaul, on the other hand, sees it somewhat differently.  “Jacksonian banking policy was the result of neither an ideological timetable of entrepreneurial design nor radical hard-money purposes.”  Political expedience came first.  The truth lies tantalisingly in between: the ideologue and the opportunist sharing the same body of a man.

From 1823 to 1836, Nicholas Biddle served as president of the Second Bank.  While he was deemed within pro-banking advocates competent and assured, his values were those of a system that had entitled him.  He dispensed favours to his friends with aristocratic grace; he resisted regulatory efforts.  His move to limit credit and insist on calling in loans was intended to corner Jackson, forcing his hand to add more government funds to the bank deposits.

Jackson called his bluff, and his 1832 veto not to renew the bank’s charter remained, an effective freeze on supplying federal funds.  “Is there,” he rhetorically posed to the Senate in his veto message, “no danger to our liberty and independence in a bank that in its nature has so little to bind it to our country?”  Eventually, Congress was won over, leaving the Second Bank defunct on the expiry of its charter in 1836.  Jackson did his own bit of chaotic undermining by draining the bank coffers in a way that would subsequently be deemed an abuse of executive power.

The stock gurus and economic wizards are waving wands and gazing at crystal balls, but the markets are simply engaging in the usual frenetic activity that accompanies remarks made by figures of power.  Behind the scenes, the speculators get busy and anticipate the next flurry.  Creative – or perhaps not so creative destruction – is currently unfolding, much of it an illusion.  Trump’s America remains, much like Jackson’s discredited paper notes, of questionable value.  But unlike the Second Bank, the Federal Reserve is very much intact in the face of institutional mocking. Thankfully for its board and Powell, its charter is not coming up for renewal, nor is Powell going to prove to be another Biddle.

*

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Dr. Binoy Kampmark was a Commonwealth Scholar at Selwyn College, Cambridge.  He lectures at RMIT University, Melbourne.  He is a frequent contributor to Global Research and Asia-Pacific Research. Email: bkampmark@gmail.com
Title: 🏦 The banking crisis 10 years on, and the danger of another crash
Post by: RE on October 29, 2018, 03:02:40 AM
https://www.cbsnews.com/news/the-banking-crisis-10-years-on-and-the-danger-of-another-crash/ (https://www.cbsnews.com/news/the-banking-crisis-10-years-on-and-the-danger-of-another-crash/)

 CBS News October 28, 2018, 9:23 AM
The banking crisis 10 years on, and the danger of another crash

(https://cbsnews1.cbsistatic.com/hub/i/r/2018/10/25/601a7905-e5e4-48b8-8baa-a83bf324eb70/resize/620x/2fba7627cba65e54bd62d9b5151db520/foreclosure-sign-620-getty-images-86540209.jpg)
An auction sign is posted in front of a foreclosed home May 7, 2009 in Richmond, California.
Justin Sullivan/Getty Images

Gretchen Morgenson was a business columnist for The New York Times during those dark and frightening autumn days of 2008, when Lehman Brothers was down brought by bad mortgage investments, and was liquidated; 25,000 employees lost their jobs. Fearing it would be next, Merrill Lynch agreed to a shotgun marriage with Bank of America. Meanwhile, two of the country's largest mortgage lenders, Fannie Mae and Freddie Mac, required a government bailout.

"It was very scary," Morgenson said. "Why are these companies failing? Who was next?"

The banking system was near collapse, the stock market in free fall. And to many, it seemed like government officials were as clueless as the rest of us

"There was just a real sense of being in a dark room filled with furniture that you were gonna stumble on and fall over and that you didn't know how to kind of maneuver in," Morgenson said. "There were so much that we didn't know, and that, really, people did not want us to know.

Morgenson says that the seeds of the crash were sewn in the boom-years leading up to it. Home prices were skyrocketing, and many believed they would never fall.

One homeowner, a Mr. Sabrowski, told the "CBS Evening News" in May 2005, "We're pretty confident that the housing market here is not going to go down at all; it's just going to go up!"

To keep their monthly payments low, more and more borrowers were opting for risky mortgages. Broker Michael Brown told CBS News that year that roughly three-quarters of his business involved adjustable-rate mortgages: "And out of those adjustable rate mortgages, I'd say 95 percent are interest-only."

And many lenders were stretching the limits, offering so-called "subprime mortgages" to those with shaky credit, allowing them to buy homes they could barely afford.

Study Shows Over Half Of Nation's Subprime Mortgages Came From CA Banks

Morgenson said, "There was, underlying this drive for home ownership in the United States, almost an overarching policy that bigger rates of home ownership was good for America."

Few knew that at the same time some banks were pushing those untraditional mortgages, in order to repackage and sell them to global investors, said CBS News business analyst Jill Schlesinger. Pension funds, insurance companies, even other banks bought these mortgage-backed securities.

It was, said Columbia University professor Adam Tooze, a trigger. "That's what sets the bomb off," he said.

Tooze has focused his historian's eye for a new take on the causes and effects of the financial crisis, in his book, "Crashed: How a Decade of Financial Crises Changed the World" (Viking). He says policymakers were caught by surprise at just how fast the crisis spread.

"I don't think they understood the way in which a relatively small bit of the mortgage market, which is what sub-prime was, how that could spiral into this general crisis of the Atlantic banking system," Tooze said.

    How Merrill Lynch Bribed traders to buy bum mortgage-backed securities (CBS Moneywatch, 12/23/10)

(https://cbsnews1.cbsistatic.com/hub/i/r/2018/10/28/f7d8b79f-4be7-4f5b-81a0-a95fe0ba8443/resize/220x/834633dbd00d482d426d089a3efcfa68/crashed-cover-viking-244.jpg)
As home prices plunged, millions of homeowners could not repay the money they borrowed, driving down the value of those mortgage-backed securities.

And the banks didn't have the money that they were using to hold those mortgage securities with. "Because they'd borrowed it," Tooze said.

The result: taxpayers had to shell out billions to help cover the banks' losses.

Schlesinger asked, "What do you think would've happened if the mantra of, 'Let them fail,' were enacted?"

"I think we would've seen a catastrophe of the type we've not seen before, worse even than the Great Depression of the 1930s," Tooze said.

But those actions sparked fierce public anger, leaving little appetite for saving what some believed were reckless homebuyers. Rick Santelli, on CNBC, "How many people want to pay for your neighbor's mortgage that has an extra bathroom and can't pay their bills?"

Swift action may have saved the financial system, but not before $19 trillion in household wealth evaporated, along with nearly nine million jobs.

Schlesinger asked, "In retrospect, a lot of people feel like the banks were bailed out – 'Okay, I understand that, save the system' – but people were left hanging out to dry. Is there something to that?"

"Absolutely," Tooze said. "There's a huge imbalance between the emergency efforts that kept the system going, and the very slow-moving and inadequate measures that were enacted later on to support American homeowners.

"They were very slow-acting. They provided relief to a small minority of American homeowners, many years after the acute crisis of 2008. And in the meantime, ten million American families lost their homes."

All of which, Tooze says, made the recovery long, painful, and uneven for ordinary American families. "That's where the real loss is," he said.

So what about now? Despite recent turbulence, ten years later the stock market is still at an all-time high, and the unemployment rate is the lowest in nearly fifty years, but many of the new rules put in place after the crisis to protect the system from another meltdown are now being weakened. 

    Trump signs bill signing scaling back Dodd-Frank (CBS News, 05/24/18)
    Consumer Financial Protection Bureau enforcement actions halt under Mulvaney (CBS News, 04/10/18)

The danger of that, Tooze said, "is that you have banks which are not able to take the hit of a large amount of unexpected losses, and are not able to withstand a sudden panic and loss of confidence when people just want to pull their money out of the banking system."

Gretchen Morgenson said, "The banks are much more well-capitalized [today]. They have a lot more money set aside for a rainy day than they did leading up to the crisis. But by not prosecuting any very high-level executives who were involved, I think that message was very clear that this kind of behavior, this kind of big risk-taking behavior that risks the entire financial system, will not be punished."

Morgenson, now an investigative reporter at the Wall Street Journal, worries that failure to hold anyone accountable will resonate for years to come.

"I think people get what happened, that this inequality that was pervasive in the response to the crisis, the very powerful institutions got taken care of. The individuals who were powerless did not. I think people understand that very well," she said.

    Investors may be forgetting the lessons from Lehman Brothers collapse (CBS Moneywatch, 09/15/18)
    Lessons for next U.S. financial crisis from 3 key ex-officials (CBS Moneywatch, 07/18/18)

     
For more info:

    Jill on Money
    Follow @JillonMoney on Twitter
    "Crashed: How a Decade of Financial Crises Changed the World" by Adam Tooze (Viking), in Hardcover, eBook and Audio formats, available via Amazon
    Adam Tooze, Columbia University
    Gretchen Morgenson, The Wall Street Journal
    Follow @gmorgenson on Twitter

     
Story produced by Mark Hudspeth.
Title: 💸 The Fed’s QE Unwind Hits $321 Billion
Post by: RE on November 03, 2018, 03:18:26 AM
https://wolfstreet.com/2018/11/01/the-feds-qe-unwind-hits-321-billion/

The Fed’s QE Unwind Hits $321 Billion

by Wolf Richter • Nov 1, 2018 • 62 Comments   
The “up to” exacts its pound of flesh.

Over the four-week period from October 3 through October 31, the Federal Reserve shed $35 billion in assets, according to the Fed’s weekly balance sheet released Thursday afternoon. This brought the balance sheet to $4,140 billion, the lowest since February 12, 2014. Since October 2017, when the Fed began its QE unwind, or “balance sheet normalization,” it has now shed $321 billion:

(https://wolfstreet.com/wp-content/uploads/2018/11/US-Fed-Balance-sheet-2018-11-01-overall.png)

The Fed acquired Treasury securities and mortgage-backed securities (MBS) as part of QE, which ended in 2014. Between the end of QE and the beginning of the QE Unwind in October 2017, the Fed replaced maturing securities with new securities to keep their levels roughly the same. In October last year, the Fed kicked off the QE unwind and began shedding those securities. But the balance sheet also reflects the Fed’s other activities, and the amount of its total assets is always higher than the sum of Treasury securities and MBS it holds.

October was a new milestone: the QE unwind left the ramp-up phase and entered the cruising-speed phase, according to the Fed’s plan. In the cruising-speed phase, the Fed is scheduled to shed “up to” $30 billion in Treasuries and “up to” $20 billion in MBS a month, for a total of “up to” $50 billion a month.

From October 3 through October 31, the Fed’s holdings of Treasury Securities fell by $23.8 billion to $2,270 billion, the lowest since February 19, 2014. Since the beginning of the QE-Unwind, the Fed has shed $195 billion in Treasuries:

(https://wolfstreet.com/wp-content/uploads/2018/11/US-Fed-Balance-sheet-2018-11-1-Treasuries.png)

The “up to” exacts its pound of flesh

The plan calls for shedding “up to” $30 billion in Treasury securities in October. But the Fed shed only $23.8 billion. Why?

When the Fed sheds Treasury securities, it doesn’t sell them outright but allows them to “roll off” when they mature, which is when the Treasury Department sends money to all holders of those maturing bonds to redeem those bonds at face value. Treasuries mature mid-month or at the end of the month. This creates the step-pattern of the QE unwind in the chart above.

On October 15, no Treasury securities matured. On October 31, three security issues in the Fed’s holdings matured, totaling $23 billion. Those were allowed to “roll off” entirely without replacement. In other words, the Treasury Department paid the Fed $23 billion for them.

But this was $7 billion below the “cap.” And it will happen again. But not in November. In November, about $59 billion in Treasuries will mature. If the Fed follows the plan with the “up to” cap of $30 billion, it will let $30 billion “roll off” and will replace the remaining $29 billion with new securities from the Treasury Department.

But in December, only $18 billion in Treasuries will mature. And that’s all the Fed will let roll off. This will play out many times going forward, unless the Fed changes its strategy, which it can if it wants to.
Mortgage-Backed Securities (MBS)

As part of QE, the Fed acquired residential MBS that were issued and guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae. Holders of residential MBS receive principal payments as the underlying mortgages are paid down or are paid off. At maturity, the remaining principal is paid off. To keep the balance of MBS from declining after QE ended, the New York Fed’s Open Market Operations kept buying MBS in the market.

The Fed books the trades at settlement, which occurs two to three months after the trade. Due to this lag, the Fed’s balance of MBS at the end of October reflects trades in June through August. For October, the “up to” cap for shedding MBS was $20 billion. But at the time of the trades, in June the cap was $12 billion; and in July, it increased to $16 billion.

And this is what happened. From October 3 through October 31, the balance of MBS fell by $13 billion, to $1,669 billion, the lowest since July 9, 2014. In total, $102 billion in MBS have been shed since the beginning of the QE unwind:

(https://wolfstreet.com/wp-content/uploads/2018/11/US-Fed-Balance-sheet-2018-11-01-MBS.png)

So how does the QE unwind drain money from the market?

When Treasury securities mature, the Treasury Department redeems them, and whoever holds them gets paid face value, and the securities become void and disappear. The Fed is one of many holders of Treasury securities. It too gets paid face value when the securities it holds mature. If the Fed doesn’t reinvest this money in new securities, that money just disappears the same way it was created by the Fed to buy the securities during QE.

The Fed creates money, and it destroys money. But it doesn’t sit on trillions of dollars in a cash account.

Since the US government runs a big deficit, the Treasury Department has to raise the funds needed to redeem maturing securities well in advance by selling new securities at scheduled auctions. In other words, the bond market gives this money to the Treasury Department to redeem the maturing bonds. And the Treasury Department gives this money to the Fed for the maturing bonds it holds. And the Fed destroys this money. This is how the Fed’s QE unwind drains money from the market.

People have tried to figure out how to trade this. But there is not a specific day when the Fed’s QE Unwind drains tens of billions of dollars from the market. The drains runs from the bond market through Treasury auctions and then the Treasury Department’s cash account to the Fed. Throughout the process, the timing of the drainage gets disbursed – as does the impact on the markets.
 
Title: 🏦 Subprime Rises: Credit Card Delinquencies Blow Through Financial-Crisis Peak
Post by: RE on November 21, 2018, 02:07:59 AM
https://wolfstreet.com/2018/11/20/subprime-rises-credit-card-delinquencies-spike-past-financial-crisis-peak-at-smaller-banks/


Subprime Rises: Credit Card Delinquencies Blow Through Financial-Crisis Peak at the 4,705 Smaller US Banks

by Wolf Richter • Nov 20, 2018 • 42 Comments   
So what’s going on here?

In the third quarter, the “delinquency rate” on credit-card loan balances at commercial banks other than the largest 100 banks – so the delinquency rate at the 4,705 smaller banks in the US – spiked to 6.2%. This exceeds the peak during the Financial Crisis for these banks (5.9%).

The credit-card “charge-off rate” at these banks, at 7.4% in the third quarter, has now been above 7% for five quarters in a row. During the peak of the Financial Crisis, the charge-off rate for these banks was above 7% four quarters, and not in a row, with a peak of 8.9%

These numbers that the Federal Reserve Board of Governors reported Monday afternoon are like a cold shower in consumer land where debt levels are considered to be in good shape. But wait… it gets complicated.

The credit-card delinquency rate at the largest 100 commercial banks was 2.48% (not seasonally adjusted). These 100 banks, due to their sheer size, carry the lion’s share of credit card loans, and this caused the overall credit-card delinquency rate for all commercial banks combined to tick up to a still soothing 2.54%.

In other words, the overall banking system is not at risk, the megabanks are not at risk, and no bailouts are needed. But the most vulnerable consumers – we’ll get to why they may end up at smaller banks – are falling apart:

(https://wolfstreet.com/wp-content/uploads/2018/11/US-consumer-credit-card-delinquency-2018-Q3.png)

Credit card balances are deemed “delinquent” when they’re 30 days or more past due. Balances are removed from the delinquency basket when the customer cures the delinquency, or when the bank charges off the delinquent balance. The rate is figured as a percent of total credit card balances. In other words, among the smaller banks in Q3, 6.2% of the outstanding credit card balances were delinquent.
So what’s going on here?

The credit card business is immensely profitable, and so banks are willing to take some risks. It’s immensely profitable for three reasons:

    The fee the bank extracts from every transaction undertaken with its credit cards (merchant pays), even if the credit-card holder pays off the balance every month and never incurs any interest expense.
    The fees the bank extracts from credit card holders, such as annual fees, late fees, etc.
    The huge spread between the banks’ cost of funding and the interest rates banks charge on credit cards.

So how low is the banks’ cost of funding? For example, in its third-quarter regulatory filing with the SEC (10-Q), Wells Fargo disclosed that it had $1.73 trillion in total “funding sources.” This amount was used to fund $1.73 trillion in “earning assets,” such as loans to its customers or securities it had invested in.

This $1.73 trillion in funding was provided mostly by deposits: $465 billion in non-interest-bearing deposits (free money), and $907 billion in interest bearing deposits; for a total of $1.37 billion of ultra-cheap funding from deposits.

In addition to its deposits, Wells Fargo lists $353 billion in other sources of funding – “short-term and long-term borrowing” – such as bonds it issued.

For all sources of funding combined, so on the $1.73 trillion, the “total funding cost” was 0.87%. Nearly free money. Rate hikes no problem.

In Q3, Wells Fargo’s credit-card balances outstanding carried an average interest rate of 12.77%!

So, with its cost of funding at 0.87%, and the average interest rate of 12.77% on its credit card balances, Wells Fargo is making an interest margin on credit cards of 11.9 percentage points. In other words, this is an immensely profitable business – hence the incessant credit-card promos.
With credit cards, the US banking system has split in two.

The largest banks can offer the most attractive incentives on their credit cards (cash-back, miles, etc.) and thus attract the largest pool of applicants. Then they can reject those with higher credit risks – having not yet forgotten the lesson from the last debacle.

The thousands of smaller banks cannot offer the same incentives and lack the marketing clout to attract this large pool of customers with good credit. So they market to customers with less stellar credit, or with subprime-rated credit — and charge higher interest rates. 30% sounds like a deal, even if the customer will eventually buckle under that interest rate and will have to default.

That’s why banks take the risks of higher charge-offs: They’re getting paid for them! But at some point, it gets expensive. And if it takes a smaller bank to the brink, the FDIC might swoop in on a Friday evening and shut it down. No biggie. Happens routinely.

The real problem with credit cards isn’t the banks – credit card debt is not big enough to topple the US banking system. It’s the consumers, and what it says about the health of consumers.

The overall numbers give a falsely calming impression. Credit card debt and other revolving credit has reached $1.0 trillion (not seasonally adjusted). This is about flat with the prior peak a decade ago.

(https://wolfstreet.com/wp-content/uploads/2018/11/US-consumer-credit-cards-2018-Q3.png)

Since the prior peak of credit-card debt in 2008, the US population has grown by 20 million people, and there has been a decade of inflation and nominal wage increases, and so the overall credit card burden per capita is far lower today than it was in 2008 (though student loans and auto loans have shot through the roof). So no problem?

But this overall data hides the extent to which the most vulnerable consumers are getting into trouble with their credit cards, having borrowed too much at usurious rates. They’ll never be able to pay off or even just service those balances. For them, there is only one way out – to default.

The fact that this process is now taking on real momentum — as demonstrated by delinquency rates spiking at smaller banks — shows that the group of consumers that are falling apart is expanding. And these are still the good times, of low unemployment in a growing economy.

Retail sales, when adjusted for inflation, are not so hot these days, rising only 2.0% in October, at the lower end of the post-Financial Crisis range. E-commerce is piping hot. But sales at the stores that populate malls are dismal. Read…. Mall Retailers Melt Down in Four Charts
Title: Pentagon Fails Audit, $21 Trillion in Transactions Could Not Be Traced
Post by: azozeo on December 02, 2018, 09:03:26 AM

The Pentagon Fails Audit – $21 Trillion in Transactions Could Not Be Traced, Documented, or Explained
Michael Krieger | Posted Wednesday Nov 28, 2018

WAR is a racket. It always has been.

It is possibly the oldest, easily the most profitable, surely the most vicious. It is the only one international in scope. It is the only one in which the profits are reckoned in dollars and the losses in lives.

A racket is best described, I believe, as something that is not what it seems to the majority of the people. Only a small “inside” group knows what it is about. It is conducted for the benefit of the very few, at the expense of the very many. Out of war a few people make huge fortunes.

https://libertyblitzkrieg.com/2018/11/28/the-pentagon-fails-audit-21-trillion-in-transactions-could-not-be-traced-documented-or-explained/#more-55205
Title: The Cabal’s Financial System is about to Implode
Post by: azozeo on December 03, 2018, 08:00:45 AM

The Dark Forces

While most people are focused on the accusations of the Neocons and Liberals, pushing for the impeachment of President Trump, by making him out to be a crazy man not capable of running the government, this is in actual fact their response to his ongoing draining of the swamp operation. He is purging his staff of Deep State puppets, and attempting to wipe out corruption. It also shows that many people don’t understand what really is going on, as most are still asleep, with every day passing by just like any other day. Soon people will discover who and what really has been going on, and who they really are, when we discover our true origin. On one side, there are the Dark Forces that have almost unlimited free reign on the surface of the planet and have had so for tens of thousands of years, while on the other hand there are the Light Forces – the Patriots that are making great efforts to remove the negative forces as soon as they can.

 

America has two kinds of armies; the non-corrupted military that serves their Commander-in-Chief, President Trump, and the military of the Deep State, known as the MIC – Military Industrial Complex, with the Secret Space Program military, comprising of the remnants of the Nazis’ Paperclip group, that were secretly relocated to America after WW2.

 

The force the President and his patriots are up against; is basically the military industrial complex – MIC, that is headed by Draco-reptilian officers, otherwise known as the Dark Forces, which are sabotaging positive initiatives, making it impossible to break through the negative Quarantine. This is the reason why i.e. commercial space travel cannot commence, even though the technology to make it happen is already available in the public domain for at least 70 years. But trust the Plan, every day we are coming one step closer to full Disclosure.

 

The mass arrests will show the world the truth about the banking institutions, our government and the cabal’s heinous crimes against humanity. Light will literally come to Earth for everyone. There has been a lot of activity behind the scenes and now it has become safer for the good guys to act, removing the dark forces, that comprise the Deep State. The main aim of the patriots is to minimise suffering on the planet and to decrease the level of violence.

 

The patriots have been fighting for an amazing future, that is real and will happen. To name a few things; Free Energy, Interstellar Travel, Tele Time Travel, an asset-backed monetary system, natural cures for the money-racket of chronic diseases on the planet such as cancer, methodologies to clean up the atmosphere from the poisonous, disastrous effects of geo-engineering and the exposure of the danger of GMO foods with a turn to 100% organic foods, bringing nutrition without poisons, in other words a real Golden Age is upon us. Many phenomena that were hidden will be revealed, and much of history that has been lost will be found and revealed again.

 

As an example; the Smithsonian Institute has recently been a prime cabal terrorist target to destroy the American culture and its artefacts. Similarly, they procured with their war actions in Iraq, to deliberately demolish as many ancient objects of art and ancient history, including clay tablets, with the objective of extinguishing humanity’s history forever.

 

The Cabal’s Financial System

In the recent past, the Cabal spent trillions upon trillions of dollars every year to give us the impression that nothing has been changed and nothing ever will. If the Deep State had it their way they would begin World War 3, for the sole purpose of restarting their Fiat Financial System, this time to be established on the SDR.

 

All they tell us are lies and pure nonsense of course. “Products are bought with products,” not with money alone, said the great 19th-century French economist, Jean-Baptiste Say. He described the real world, as a win-win world. If you want something, you have got to give something in return. Which means you have to produce something to give – and not just a piece of paper with ink on it.

 

This basic insight is that at the heart of civilisation; we aspire trading, sharing and cooperating, rather than stealing and committing corruption. It is at the heart of progress and prosperity. This means in other words; the more you want, the more innovative and better products you have to produce.

 

But the reality is that our financial authorities are not merely telling appeasing and incoherent lies; they are preventing people from seeing the truth. Optimistically coloured views and comments are not enough. Their principles are absurd, and are shameful lies. They tell people they can get richer by using their magic; by increasing the money supply, lowering the interest rate, manipulating statistics, or stealing from future generations by racking up obscene levels of debt.

 

All is deliberately done to solidify their grip on humanity over and again to acquire permanent enslavement of the populace at large. As a final goal, they aim to own the planet for themselves, believing that they have a right to it, being the Bloodline Families. They are the so-called One Percent Ultra Rich, made up of criminal bankers and multinational business owners. Another part of their script is the implosion of the stock market. The rulers’ Financial Institutions will then be able to call in all loans, followed by many bankruptcies and foreclosures, for yet more enrichment of the one percent.

 

Fortunately, thanks to the efforts of President Trump and his patriots, this is not going to happen, as they will have the initiative of the narrative by blaming the central bank for the coming implosion of the economy.

 

 

Election Fraud

Concerning the November 6th elections, a massive voter fraud has been uncovered in multiple locations across America. A staggering amount of voting machines were impounded by the Trump Team. Expect new elections for the vacant seats in DC after the guilty parties are arrested. The enormous amount of fraud that has been committed has been carefully documented and filmed. The Deep State puppets thought they would be successful in winning the House, they will be exposed!

 

In Sept 2018, Trump issued an EO (Executive Order) to prevent election fraud and interference; everyone caught committing it, will go to jail. Consequently, most of the Democratic deputies caught up in this fraud will be removed, either through FISA, the pending Indictments, or this voting fraud. New elections will be held early next year. The MSM will have to change their colours, otherwise they will be out of business. In the EO it is stated, that within max. 45 days after the elections, punishment will be executed, this means that these three disclosures will occur before 21st of December next. Trust that the patriots will eventually win!!! – Step by step, in this issue and the next; the hidden rulers will be disclosed.  In the process, readers will discover their true historical descent.

 

The Ruling Bloodlines

There are nine important areas in which the bloodlines are heavily infiltrated. These are the Military, Government, Religion, Education, Management, Finance, Media, Healthcare and Sciences. In essence, they are everywhere in public life. They hold key positions in all of these main areas, aided by a fully-controlled and complicit Media machine and with their ownership of the Financial System and all big financial institutions, they virtually, have covered all bases.

There are 13 original core bloodlines, but there are many other lines that branch off from these. Together they cover a vast array of influence in our society, while amongst themselves there is little competition. They are one big happy family, working together to achieve their sinister goals. On an interpersonal level, there may be rivalry for the positions of ultimate power, but on the whole, they work together like a pack of wolves. Everyone that wants to move higher up, does so with proof of willingness to embrace higher levels of evil. The whole Familial society is geared toward upward progression. All members are born into the greater family in which the instructions and agenda are handed down from generation to generation.

 

They view and treat the populace as their ‘collateral’. They are the dolls that are manoeuvred around on the chess board, in accordance with their game plan. It is in their interest that people are prepared for the coming soul harvesting. In truth, people are being prepared the way they not would agree to. It is preparation for the Negative Polarity, based on peoples own Free Will decisions to the dark side, with subtle ‘help’ and ‘manipulation’ from the cabal. For them, a negative polarisation of planet Earth is essential, and that makes the control over the MSM important too them. In tailoring all the information, in a shrewd way, negatively, false narratives are easily believed by the masses. The objective is to subtly influence everybody’s life. The basic underlying concept is; ‘If you wish to enslave a man, make him believe that he is free.’

 

Contrary to the general opinion; the British Royalty is not the most powerful line. Today’s known names do not hold the real ancient power. There are others above these lineages in the Hierarchy, these names are secret. However, these are carefully elaborated and documented in my latest book THE GREAT AWAKENING.

 

In this book, it is also explained why ‘Democracy’ is an illusion which was created to uphold the people’s slavery. Whichever political side ‘wins’; the Deep State always wins. There are many possibilities and alternative ‘scripts’. All of them lead toward the ultimate implementation of the overall blueprint for their desired One World Government, with rigorously reduced population numbers. For now, people are saturating their minds with unhealthy productions served up on their television sets to which they are addicted, watching violence, pornography, greed, hatred, selfishness, incessant ‘bad news’, bringing fear and ‘terror’.

 

They are able to create dramatic weather and climate changes. Wind-speeds surpassing 300 KMs per hour at times will become the normal, Directed Energy Weapons, or DEWs initiated wildfires. Recurrent raging tsunamis and widespread devastation will occur to wipe out populations; as solar emissions cause major melting of ice caps, and a subsequent drastic rise in sea levels, resulting in the submergence of many metropolitan areas. All of this, hopefully sounds familiar to the readers for now. Hopefully readers of this site are awakened and recognise these sinister methods.

 

The Illuminati

The Illuminati were originally based in Europe, which is where their power base has always remained. This is why their power hierarchy around the world, whether in the U.S., Asia, Australia, Canada, or elsewhere will always point back to Europe, where the 13 bloodline rulers are based. Each ruler represents an area of Europe, held under his sway; and each one represents an ancient dynastic bloodline.

 

To elaborate on this a little more; Only by arrogance and ignorance does Man believe he is alone in our Universe. The time period from the ‘Big Bang’ until the formation of our Solar system was about 9.1 billion years. Just about twice the 4.6 billion years it took the Earth to evolve to the present day. What kinds of evolution could have been manifesting elsewhere during those more than 4 billion years, before our Sun even was formed? Then add to that the 4.6 billion, minus 200,000 years, to reach the dawn of Man as we know him today. This was abundant time for several early technological civilisations to have colonised our galaxy. The conclusion of this exercise is to realise that certain Extra Terrestrials may be technologically more than a few thousand years ahead of us, if not billions of years ahead.

 

The actual rulers

The 13 basic bloodlines, for e.g. the Rothschild and the various bloodlines branching off from the Merovingian bloodline, are the most commonly known, but these still have a low ranking in the Big Pyramid Structure of the bloodline hierarchy. Nonetheless, they are the best known in the power game on Earth. The Rothschilds bloodline fights for their power position in the financial structure, and the Merovingian bloodlines for their position in the Earth’s nobility as for example the Hapsburg line that is still active in Europe, although mostly hidden. In many modern European countries, the heirs of these bloodlines are immensely wealthy, but secretly hidden. They are the “power behind the throne”, if not the actual rulers.

 

Fear and Terror

From the lowest up to the highest levels, the Illuminati operate by the same means: instilling intense fear and terror to control their members. Accomplished through the fear of death, and at the core level, all members have undergone their training through the fear of dying which means their near death “death and resurrection” experiences, that have generated immense fear and blind obedience.

 

During these experiences, the very young children will be faced with intolerable choices: allowing themselves to be extinguished, or embracing the demonic and the beliefs of those in their bloodline parentage. This is alienation at its deepest level, since the desire to survive is one of the deepest instincts that God has given humanity. This desire to survive overrules intellect, cognition, and even well-thought out beliefs in an adult, although much less so in a very young child. When faced with the choice between life and certain death or terror, albeit at a price that is very high, each individual would almost certainly choose life.

 

Then the one who offers life to the aspirant becomes their “saviour”, and is worshipped virtually as a deity in the individual’s mind and heart for “saving” him or her in one of the most distressing circumstances imaginable.

 

In many cases, this sinister demon is one of the offspring’s parents, and most often, their biological father. The biological father may not be the person that the child consciously remembers raising them during childhood; and once again, this encourages deep detachment to the father.

 

Loyalty through trauma bonding

Identity confusion is also layered in. The name the child goes by during the daytime may be quite different from their “real” name, or even the name on their birth certificate. A child of high lineage may discover that they weren’t born in the United States, but in Europe, if the ties to the European bloodlines are great enough; or even that their American birth certificate has been forged, to cover their European offspring.

 

This terror during training, and the bonds of not only loyalty, but caring and nurturing that the child experiences through their true parentage, are often the most difficult and insidious to break. Deep terror combined with loving rescue and nurture create deep loyalty through trauma bonding, and breaking these ties at the core level is the most difficult task that many survivors face as it comprises an infringement upon their Law of Free Will.

 

Planet Earth is controlled through negative polarisation

In short, the negative polarisation of planet Earth is one of their greatest sources of power. For that reason, the MSM saturates peoples’ minds with unhealthy cocktails served up on their televisions and published in magazines and newspapers to get humanity addicted to violence, corruption, pornography, greed, hatred, selfishness, incessant ‘bad news’, fear and ‘terror’. When was the last time you stood still, to think of something beautiful and pure? The planet is the way it is, because of the collective thoughts about it. As the majority is still not awake, but are instead unconscious, they easily fall victim to our rulers’ manipulations. The Negative polarisation, and people’s unwitting unconsciousness is doing a fine job in helping our rulers to attain their sinister goals. For this they are very grateful to all the ignorant sleepers.


http://finalwakeupcall.info/en/2018/11/28/the-invisible-rulers/ (http://finalwakeupcall.info/en/2018/11/28/the-invisible-rulers/)
Title: 💸 The Fed Explains the Rate Hikes: To Prevent Financial Crisis 2
Post by: RE on December 04, 2018, 01:36:16 AM
https://wolfstreet.com/2018/12/02/the-fed-explains-why-its-raising-rates-to-prevent-financial-crisis-2/

The Fed Explains the Rate Hikes: To Prevent Financial Crisis 2

(https://pvnn.org/wp-content/uploads/2015/10/paulfed.png)

by Wolf Richter • Dec 2, 2018 • 71 Comments   
Instead of “bubble” or “collapse,” it uses “valuation pressures” and “broad adjustment in prices.” Business debt, not consumer debt, is the bogeyman this time.

Preventing another financial crisis – or “promoting financial stability,” as the Federal Reserve Board of Governors calls it – isn’t the new third mandate of the Fed, but a “key element” in meeting its dual mandate of full employment and price stability, according to the Fed’s first Financial Stability Report.

“As we saw in the 2007–09 financial crisis, in an unstable financial system, adverse events are more likely to result in severe financial stress and disrupt the flow of credit, leading to high unemployment and great financial hardship.”
Financial firms are OK-ish, except for hedge funds.

The largest banks are “strongly capitalized” and are better able to withstand “shocks” than they were before the Financial Crisis; and “credit quality of bank loans appears strong, although there are some signs of more aggressive risk-taking by banks,” the Financial Stability Report says.

Also, leverage at broker-dealers is “substantially below pre-crisis levels.” And “insurance companies have also strengthened their financial position since the crisis.”

A greater worry are hedge funds that are now being leveraged up to the hilt. “A comprehensive measure that incorporates margin loans, repurchase agreements (repos), and derivatives – but is only available with a significant time lag – suggests that average hedge fund leverage has risen by about one-third over the course of 2016 and 2017.”

“The increased use of leverage by hedge funds exposes their counterparties to risks [that would include banks and broker-dealers] and raises the possibility that adverse shocks would result in forced asset sales by hedge funds that could exacerbate price declines.”

But here is why they won’t get bailed out: “That said, hedge funds do not play the same central role in the financial system as banks or other institutions.”
Consumers are in pretty good shape, except…

In terms of their mortgage debt to GDP and income levels, consumers are in pretty good shape, the report said, but student loans – 90% of which are guaranteed by the government – and auto loans are out of whack, and there are some problems in the subprime segment.
But business debt, oh my!

The Fed finds that asset valuations are “generally elevated” as investors “exhibit a high tolerance for risk-taking, particularly with respect to assets linked to business debt.”

“Asset valuations appear high relative to their historical ranges in several major markets, suggesting that investor appetite for risk is elevated.” In this category of overvalued assets waiting for sharp price declines, it lists:

    Commercial real estate ($21.2 trillion in assets) – it has a lot to say about CRE valuations and risks – see below.
    Junk bonds and leveraged loans ($2.4 trillion combined) exhibit yield-spreads to Treasury securities that “are near the lower end of their historical range.”
    Investment-grade corporate bonds and commercial paper ($6.2 trillion) – see below.
    Stocks ($33.8 trillion in market capitalization) have seen rising P/E ratios since 2012 that are now “above their median values over the past 30 years despite recent price declines.”
    Farmland prices ($2.2 trillion total), though down from their 2016 peak, “remain very high by historical standards.”

Commercial real estate ($21.2 trillion in assets):

Though prices of commercial real estate (CRE) have been about flat compared to a year ago, they had been growing faster than rents for years. The chart below shows the index of CRE prices adjusted for inflation (via core CPI). These “real” CRE Prices are now higher than they were before it all blew up (I added the special effect in red):

(https://wolfstreet.com/wp-content/uploads/2018/12/US-Fed-real-CRE-prices.png)

These high prices have led to capitalization rates at the time of purchase that are, compared to 10-year Treasury securities, very low. In other words, “returns to CRE property investors thus reflect a relatively low premium over very safe alternative investments.” And this cannot last.

The chart below shows the three-months moving average of cap rates across the US on a square-footage basis for industrial (warehouses and the like), retail, office, and multifamily sectors:

(https://wolfstreet.com/wp-content/uploads/2018/12/us-fed-CRE-cap-rates.png)

Given the CRE-bubble of historic proportions, banks should tighten lending to curtail their risks. Instead they “have eased a bit over the past year.”
Borrowing by nonfinancial businesses ($17.1 trillion, excluding banks)

“Business-sector debt relative to GDP is historically high and there are signs of deteriorating credit standards,” the report warns – with debt “growing fastest at firms with weaker earnings and higher leverage.”

This $17.1 trillion in business debt includes:

    Corporate business credit: $9.4 trillion
    Noncorporate business debt: $5.4 trillion
    Commercial real estate debt: $2.4 trillion

The chart below (the original chart goes back to 1980) shows non-financial business debt and household debt in relationship to GDP. Due to the decline in mortgage debt in relationship to GDP, household debt overall is in pretty good shape, with a declining credit-to-GDP ratio. Before the Financial Crisis, it was household debt that was out of whack and that contributed to the Financial Crisis; now it is business debt:

(https://wolfstreet.com/wp-content/uploads/2018/12/US-Fed-household-v-business-debt.png)

Business debt has grown “faster than GDP through most of the current expansion.” This debt is “historically high,” and “total business-sector debt relative to GDP stands at a historically high level.” Even so, “risky debt issuance has picked up recently,” and “credit standards for some business loans appear to have deteriorated further.”
The Fed had a special word for leveraged loans:

“Credit standards for new leveraged loans appear to have deteriorated over the past six months.

“The share of newly issued large loans to corporations with high leverage – defined as those with ratios of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) above 6 – has increased in recent quarters and now exceeds previous peak levels observed in 2007 and 2014 when underwriting quality was notably poor.

“Moreover, there has been a recent rise in ‘EBITDA add backs,’ which add back nonrecurring expenses and future cost savings to historical earnings and could inflate the projected capacity of the borrowers to repay their loans.”

The Fed has been warning about leveraged loans for years. Most recently it pointed at specific practices, such as EBITDA add-backs, collateral stripping, incremental facilities, and cov-lite [The Fed Broadsides $1.3-Trillion “Leveraged Loan” Market].
And it warns about investment-grade bonds.

“The distribution of ratings among investment-grade corporate bonds has deteriorated. The share of bonds rated at the lowest investment-grade level (for example, an S&P rating of triple-B) has reached near-record levels. As of the second quarter of 2018, around 35 percent of corporate bonds outstanding were at the lowest end of the investment-grade segment, amounting to about $2¼ trillion.

“In an economic downturn, widespread downgrades of these bonds to speculative-grade ratings [to junk] could induce some investors to sell them rapidly, because, for example, they face restrictions on holding bonds with ratings below investment grade. Such sales could increase the liquidity and price pressures in this segment of the corporate bond market.”

These investors that might be forced to sell a large amount of bonds as they get downgraded to junk include investment-grade bond mutual funds.

Alas, bond and loan mutual funds “have more than doubled in the past decade to over $2 trillion.” But “the mismatch between the ability of investors in open-end bond or loan mutual funds to redeem shares daily and the longer time often required to sell corporate bonds or loans creates, in principle, conditions that can lead to runs [on the bond funds]….”

“If corporate debt prices were to move sharply lower, a rush to redeem shares by investors in open-end mutual funds could lead to large sales of relatively illiquid corporate bond or loan holdings, further exacerbating price declines and run incentives.”

“Moreover, as noted in earlier sections, business borrowing is at historically high levels, and valuations of high-yield bonds and leveraged loans appear high. Such valuation pressures may make large price adjustments more likely, potentially motivating investors to quickly redeem their shares.”




And here is what this would do to conservative-sounding investment-grade bond funds, which pack special risks & surprises that can entail a catastrophic loss for investors when there is a run on the fund.

This is further exacerbated as “leverage of some firms is near its highest level seen over the past two decades,” the Fed mused:

“An analysis of detailed balance sheet information of these firms indicates that, over the past year, firms with high leverage, high interest expense ratios, and low earnings and cash holdings have been increasing their debt loads the most.”

“High leverage has historically been linked to elevated financial distress and retrenchment by businesses in economic downturns. Given the valuation pressures associated with business debt noted in the previous section, such an increase in financial distress, should it transpire, could trigger a broad adjustment in prices of business debt.”

For now, risky credit for the riskiest companies is still cheap and plentiful, allowing them to refinance their debts, and so “corporate credit performance remains generally favorable.”

But this is precisely what the Fed has set out to change by raising rates and unwinding QE to bring up interest costs for junk-rated companies after the decade long binge. So good luck, the report is essentially saying.

It is also significant that the Fed is now communicating these issues with its first Financial Stability Report. It could have done this years ago, but it didn’t. I see it as an effort to justify rate hikes publicly and in one document: asset prices are inflated, business leverage is at historical levels, and if the Fed doesn’t try to tamp down on it now, it might preside over another financial crisis – and this one would be totally the Fed’s own creation.

Shedding light on Fed Chairman Jerome Powell’s “just below neutral” and the hullabaloo about the Fed suddenly turning “dovish.” Read…  My “Fed Hawk-O-Meter” Speaks
Title: 💸 The U.S. Yield Curve Just Inverted. That’s Huge.
Post by: RE on December 04, 2018, 03:01:10 PM
https://www.bloomberg.com/opinion/articles/2018-12-03/u-s-yield-curve-just-inverted-that-s-huge (https://www.bloomberg.com/opinion/articles/2018-12-03/u-s-yield-curve-just-inverted-that-s-huge)

The U.S. Yield Curve Just Inverted. That’s Huge.

The move ushers in fresh questions about the Fed and the economy.
By Brian Chappatta
December 3, 2018, 8:27 AM AKST

Strap in.

(https://assets.bwbx.io/images/users/iqjWHBFdfxIU/ikzC3vp9Mr1I/v1/1000x-1.jpg)
Photographer: Chris Ratcliffe/Bloomberg

Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.


The U.S. Treasury yield curve just inverted for the first time in more than a decade.

It’s a moment that the world’s biggest bond market has been thinking about for the past 12 months. I wrote around this time last year that Wall Street had come down with a case of flattening fever, with six of the 11 analysts I surveyed saying that the curve from two to 10 years would invert at least briefly by the end of 2019. That’s not exactly what happened Monday, though that spread did reach the lowest since 2007. Rather, the difference between three- and five-year Treasury yields dropped below zero, marking the first portion of the curve to invert in this cycle.
The First Inversion

After years of flattening, the yield difference between some Treasury notes falls below zero

Source: Bloomberg

The move didn’t come out of nowhere. In fact, I wrote a week ago that the spread between short-term Treasury notes was racing toward inversion, and Bloomberg News’s Katherine Greifeld and Emily Barrett noted the failed break below zero on Friday. Still, I wasn’t necessarily expecting this day to come so soon. Rate strategists have long said that being close doesn’t cut it when talking about an inverted yield curve and the well-known economic implications that come with it, namely that the spread between short- and long-term Treasury yields has dropped below zero ahead of each of the past seven recessions.

It’s important to keep in mind the timeline between inversion and economic slowdowns — it’s not instantaneous. The  yield curve from three to five years dipped below zero during the last cycle for the first time in August 2005, some 28 months before the recession began. That this is the first portion to flip isn’t too surprising, considering how much scrutiny bond traders place on the Federal Reserve’s outlook for rate increases. All it means is that the central bank will probably leave interest rates steady, or even cut a bit, in 2022 or 2023. I’d argue that’s not just possible, but probable, given that we’re already in one of the longest economic expansions in U.S. history.

Click here for a QuickTake on the yield curve

The more interesting question might be why this part of the yield curve won the race to inversion, rather than the spread between seven- and 10-year Treasuries, which looked destined to fall below zero earlier this year. One reason could be that the Fed’s balance-sheet reduction is putting more pressure on 10-year notes than shorter-dated maturities, which wasn’t the case during past periods of inversion. Indeed, policy makers have shown no signs of easing up on this stealth tightening.

On top of that, the Treasury Department is selling increasing amounts of debt, which disproportionately affects the longest-dated obligations because buyers have to consider the duration risk they’re absorbing. Remember the curve from five to 30 years, which fell below 20 basis points in July? That spread is about 46 basis points now, driven by stubbornly higher long-bond yields.

Given the recent pivot from the most important Fed leaders — Jerome Powell, Richard Clarida and John Williams — this flirtation with inversion among two-, three- and five-year Treasury notes probably isn’t going away. The bond market is fast approaching the point where traders have to ask themselves whether a rate hike now increases the chance of a cut in a few years. Other questions include “what is neutral?” and “can the Fed engineer a soft landing?” To say nothing about whether the assumed relationship between the labor market and inflation expectations is still intact.

Those are big questions without easy answers, and the first inversion of the U.S. yield curve offers only one clue. The Fed wants to be more data dependent going forward. Odds are the market will do the same.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on December 04, 2018, 03:28:22 PM
It's just flirting with inverting right now. As usual the media is rushing to predict the worst.

Today WAS a very shitty day in the stock market. Glad I rotated into cryptos.
Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on December 04, 2018, 04:17:34 PM
It's just flirting with inverting right now. As usual the media is rushing to predict the worst.

Today WAS a very shitty day in the stock market. Glad I rotated into cryptos.


Are you a long term playa' or drive by specialista....

Long term driveby'er til you get pinched  :icon_scratch:
Title: 💸 One part of the U.S. yield curve just inverted; what does that mean?
Post by: RE on December 06, 2018, 02:03:46 AM
https://www.reuters.com/article/us-usa-economy-yieldcurve-analysis/one-part-of-the-u-s-yield-curve-just-inverted-what-does-that-mean-idUSKBN1O50G1 (https://www.reuters.com/article/us-usa-economy-yieldcurve-analysis/one-part-of-the-u-s-yield-curve-just-inverted-what-does-that-mean-idUSKBN1O50G1)

One part of the U.S. yield curve just inverted; what does that mean?

(https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcTAMdaCzniB4IFbGUwW84D7mnyn9hdRDFQd8r43OXJB4dXVz7ZX)

December 5, 2018 / 9:07 PM / Updated 4 hours ago

One part of the U.S. yield curve just inverted; what does that mean?

NEW YORK (Reuters) - Part of the U.S. Treasury yield curve “inverted” this week, setting off debate over whether it is delivering a classic signal of oncoming recession or it has just developed a short-term kink that can be explained away by technical reasons.

FILE PHOTO: The north side of the U.S. Treasury Building in Washington February 22, 2001./File Photo

Whatever the reason, investors and economists ignore this message from the bond market at their peril: yield curve inversions - when shorter-dated securities yield more than longer maturities - have preceded every U.S. recession in recent memory by anywhere from 15 months to around two years. 

“The yield curve has sent a chill down investors’ spines in regard to the future outlook of the U.S. economy,” said Chad Morganlander, senior portfolio manager at Washington Crossing Advisors in New Jersey. “It’s the what-if scenario.”

To be sure, this week’s inversion has been limited so far to the front-end of the yield curve rather than more closely studied recession harbingers such as the gap between 2-year and 10-year note yields. In the current instance, yields on 5-year notes US5YT=RR have dropped below those on both 2-year US2YT=RR and 3-year US3YT=RR securities.

Still, in December 2005, for instance, a comparable inversion at the front of the curve was followed shortly afterward by an inversion between 2- and 10-year yields. The Great Recession began in December 2007.

That pattern was also evident in late 1988 in advance of the 1990 recession. Ahead of the 2001 recession, the entire curve dropped into inversion in sync in February 2000.

Sponsored

Reuters Graphic

TECHNICAL GLITCH OR FUNDAMENTAL WARNING?

In the current instance, investors and economists are debating whether this warns of economic weakness ahead or if it reflects other factors, such as a recent reversal of large speculative bets on declining bond prices and the Federal Reserve’s large holdings of Treasuries.

A central focus is whether it means the market is second guessing the Fed, which has been raising interest rates for three years and is expected to lift them further, including at their next meeting in two weeks.

Jeffrey Gundlach, chief executive officer of DoubleLine Capital and a closely watched bond investor, comes down on the side of it being a fundamental signal. It reflects “total bond market disbelief in the Federal Reserve’s prior plans to raise rates through 2019,” he told Reuters.

At the same time, this week’s move does coincide with an ongoing positioning shift in the Treasury market.

Hedge funds and other speculators had amassed a record level of bets on declines in Treasury prices through the futures market, with the heaviest bets lodged against 5-year maturities. But they have slashed those by more than half in the last few weeks, and that may have contributed to the out-sized rally in 5-year note prices in particular. Bond prices and yields move in opposite directions.

“A lot of it is momentum,” said John Canavan, market strategist with Stone & McCarthy Research Associates in New York. “I do think it’s overdone with short-covering and unwinding of money-losing positions.”

FILE PHOTO: United States one dollar bills are seen on a light table at the Bureau of Engraving and Printing in Washington November 14, 2014. REUTERS/Gary Cameron/File Photo

Another current factor that was absent in previous inversion episodes is the Fed’s $3.92 trillion stockpile of bonds accumulated to soften the effects of the 2008 financial crisis. While it has been shrinking its holdings for more than a year, its bond portfolio remains the world’s largest and is seen as a force in suppressing longer-dated yields.

Reuters Graphic

RECORD ECONOMIC EXPANSION

Those potential explanations aside, the U.S. economy is in the middle of its second-longest expansion on record, and economists and investors are mindful that a downturn is inevitable.

Markets plunge as Trump declares 'I'm a tariff man'

Some business sectors like auto and housing are flagging due partly to rising interest rates, while debt-laden companies have raised concerns whether they could keep up with their debt payments as borrowing costs are rising.

Fed officials have cited these developments that bear watching, but several of them have repeatedly cautioned about the inversion of yield curve as the most reliable indicator that a recession is on the horizon.

Some traders said the dramatic curve flattening may be overdone and may revert if the government’s November payrolls report out on Friday were to show solid jobs and wage growth.

While the risk of the entire yield curve inverting grows in anticipation of slower domestic growth, the economy appears on sure footing due to a solid job market and mild inflation.

Last year’s massive federal tax cut has bolstered business confidence, but trade tension between Washington and major U.S. trade partners looms as a possible economic drag, analysts said.

And, even if the latest kink in the yield curve is indeed the first signal of a downturn as many suspect, it does not indicate when it will actually begin nor how severe it will be.

“It’s a sloppy predictor because at some point after yield curve inversion you could get a recession that could be one year, two year, three years,” said Nicholas Colas, co-founder at DataTrek Research in New York. “And as far as what it means to markets, you could still have another very solid year after inversion.”

Reuters Graphic
Reuters Graphic

Reporting by Richard Leong; Additional reporting by Jennifer Ablan and Chuck Mikolajczak; editing by Dan Burns and Lisa Shumaker

Title: 🏦 Are You Ready for the Financial Crisis of 2019?
Post by: RE on December 11, 2018, 04:17:35 AM
https://www.nytimes.com/2018/12/10/style/2019-financial-crisis.html (https://www.nytimes.com/2018/12/10/style/2019-financial-crisis.html)

Are You Ready for the Financial Crisis of 2019?

Here are five ways things could get bad for everyone.

(https://static01.nyt.com/images/2018/12/08/style/07crash-1/07crash-temporary-slidesh-slide-1M56-superJumbo.jpg?quality=90&auto=webp)
That feeling when all the numbers are so bad!Credit Photo illustration by The New York Times; Spencer Platt/Getty Images (stock trader)

By Alex Williams

    Dec. 10, 2018

For moneyed Americans, most of the past year has felt like 1929 all over again — the fun, bathtub-gin-quaffing, rich-white-people-doing-the-Charleston early part of 1929, not the grim couple of months after the stock market crashed.

After a decade-long stock market party, which saw the stocks of the S. & P. 500 index create some $17 trillion in new wealth, the rich indulged in $1,210 cocktails at the Four Seasons hotel’s Ty Bar in New York, in $325,000 Rolls-Royce Cullinan sport-utility vehicles in S.U.V.-loving Houston and in nine-figure crash pads like Aaron Spelling’s 56,000-square-foot mansion in Los Angeles (currently on the market for $175 million, more than double what it fetched just five years ago).

Will it last? Who knows. But in recent months, the anxiety that we could be in for a replay of 1929 — or 1987, or 2000, or 2008 — has become palpable not just for the Aspen set, but for any American with a 401(k).

Overall, stocks are down 1.5 percent this year, after hitting dizzying heights in early October. Hedge funds are having their worst year since the 2008 crisis. And household debt recently hit another record high of $13.5 trillion — up $837 billion from the previous peak, which preceded the Great Recession.

After a decade of low interest rates that fueled a massive run-up in stocks, real estate and other assets, financial Cassandras are not hard to find. Paul Tudor Jones, the billionaire investor, recently posited that we are likely in a “global debt bubble,” and Jim Rogers, the influential fund manager and commentator, has forewarned of a crash that will be “the biggest in my lifetime” (he is 76).

What might prove the pinprick to the “everything bubble,” as doomers like to call it? Could be anything. Could be nothing. Only time will tell if the everything bubble is a bubble at all. But, just a decade after the last financial crisis, here are five popular doom-and-gloom scenarios.

Go beyond the headlines.
Subscribe to The Times

Happy holidays!
5. Student Debt

Remember how the 2008 crisis was triggered by a bunch of people, who probably should not have been lent giant amounts of money in the first place, not making their mortgage payments? That was just the precipitating factor, but go back and stream “The Big Short” if none of this rings a bell.

Then fast-forward to 2018, where bad mortgages may not be the problem. Consider, instead, the mountain of student debt out there, which is basically a $1.5 trillion bet that a generation of underemployed young people will ever be able pay off a hundred grand in tuition loans in an economy where even hedge funders are getting creamed. Already, a lot of them aren’t paying and can’t pay. In a climate where “there are massive amounts of unaffordable loans being made to people who can’t pay them,” as Sheila Bair, the former head of the Federal Deposit Insurance Corporation, described the student debt problem in Barron’s earlier this year, nearly 20 percent of those loans are already delinquent or in default. That number could balloon to 40 percent by 2023, according to a report earlier this year by the Brookings Institution.

Now, lots of that debt is owed the federal government, so it’s unlikely to poison the banking system, as mortgages did a decade ago. But this burden of debt is already beginning to wipe out the next generation of home buyers and auto purchasers. As a result, a generation of well-educated and underemployed millennials, told to value a college education above all, could drag down an economy that never seemed to want them in the first place.
CreditPhoto illustration by The New York Times; Spencer Platt/Getty Images (stock trader)
Image
CreditPhoto illustration by The New York Times; Spencer Platt/Getty Images (stock trader)
4. China

You know who has racked up even more debt than hopeful 20-something ceramics-studies grads in the United States? Here’s a hint: It’s a not-exactly-Communist country in Asia that has been on such a wild debt-fueled building spree that it somehow used more cement in just three years earlier this decade than the United States did in the entire 20th century. Think about that. Now think about it some more. Over the past decade, China devoted mountains of cash to build airports, factories and entire would-be cities — now known as “ghost” cities, since the cities are populated by largely empty skyscrapers and apartment towers — all in the name of economic growth. And grow it did.

The result is a country with a supersized population (1.4 billion people) and supersized debt. Where things go from here is anyone’s guess. Optimists might argue that those trillions bought a 21st-century Asian equivalent of the American dream. Pessimists describe that massive debt as a “mountain,” a “horror movie,” a “bomb” and a “treadmill to hell,” all in the same Bloomberg article. One thing seems certain, though: If the so-called “debt bomb” in China explodes, it’s likely to sprinkle the global economy with ash. And with President Trump teasing a trade war that already seems to be threatening China’s massive, export-based economy, we may have our answer soon.
3. The End of Easy Money

Say you lived in the suburbs, and one day your neighbor suddenly pulled up her driveway in a new $75,000 Cadillac Escalade. A week later, she was tugging a new speedboat. A few weeks after that, it was Jet Skis. You might either think, “Wow, she’s rolling in it,” or “Golly, she hates glaciers.” (Hatred of glaciers may prove, actually, to be the real spark of the financial end times.) But what if it turned out that she bought all of those carbon-dioxide-spewing toys on credit, at crazy-low interest rates? And what if those rates suddenly started to spike? The result would likely be good news for the polar ice caps and bad news for her, when the repo man (not to cave to gender stereotypes about repo-persons) came calling.

O.K., overstretched metaphor alert: The “neighbor” is us. Ever since the Federal Reserve started printing money in the name of “quantitative easing” to pull us out of the last financial crisis, money has been cheap, and seemingly any American with a pulse and a credit line has been able to fake “rich” by bingeing on all sorts of indulgences — real estate (despite tighter lending standards), fancy watches and awesome gaming systems, to say nothing of the debt that corporations were racking up, which some market analysts think might be the biggest threat of all.

The problem is: The whole system is now running in reverse. The Fed has been hiking rates and spooking markets in order to stave off inflation and other potential ills. Is this an overdue fit of fiscal sanity, or the equivalent of taking away the punch bowl just as the party was getting started, then dumping it on our heads?

There is at least one person at 1600 Pennsylvania Avenue who thinks this could all end badly. “The United States should not be penalized because we are doing so well,” Mr. Trump tweeted on July 20, just one of a series of broadsides against the current Fed policy, adding, “Debt coming due & we are raising rates - Really?”
CreditPhoto illustration by The New York Times; Spencer Platt/Getty Images (stock trader)
Image
CreditPhoto illustration by The New York Times; Spencer Platt/Getty Images (stock trader)
2. Italexit

I know, it’s a crazy thought: Imagine that a bunch of neighboring countries with wildly different languages, customs, values, and priorities somehow failed to get along? We don’t have to rewind 70-something years to the last Pan-European shooting war. Just witness the continuing problems in the European Union. Ever since Britain voted to leave the union in the Brexit referendum of 2016, Europeans have been engaged in a dark parlor game, speculating on who might be next. Might it be a “Frexit” spurred by nationalists in France? A “Nexit” stoked by the anti-immigrant far right in the Netherlands? Lately, the fears have focused on Italy, where an “Italexit” — or “Quitaly,” if you can’t help yourself — has been bandied about by populist politicians as they threaten to abandon the euro, or leave the European Union altogether, over an ongoing tiff with European neighbors over deficit spending, migration and whatever else drums up votes.

The turmoil has already sent ripples through global markets during the past year. In recent months, Italian populists are still making veiled threats to break up the coalition, and the official denials are not 100 percent reassuring. Following the latest budget squabble with Brussels, the Italian Prime Minister Giuseppe Conte told news reporters: “Read my lips: For Italy there is no chance, no way to get ‘Italexit.’ There is no way to get out of Europe, of the eurozone.” Was he aware that “read my lips” is American political shorthand for a “broken promise”?
1. An Anti-Billionaire Uprising Across America

It could happen. Just sayin’.
Title: 🏦 US Bank Stocks Spiral Down
Post by: RE on December 14, 2018, 04:13:41 AM
https://wolfstreet.com/2018/12/11/us-bank-stocks-spiral-down/

US Bank Stocks Spiral Down
by Wolf Richter • Dec 11, 2018 • 82 Comments   
Something’s not right: Banks are heavily exposed to record business debt, as credit quality deteriorates.

(https://thumbs.gfycat.com/ShallowOblongAmericancreamdraft-size_restricted.gif)

On Tuesday, the US KBW Bank index, which tracks the largest 24 US banks and serves as a benchmark for the banking sector, dropped 1.2%, the fifth day in a row of declines, to the lowest close since September 7, 2017.The index is now back where it had been on December 1, 2016. Two years of big gains gone up in smoke. The past five trading days looked like this:

    Dec 11: -1.2%
    Dec-10: -2.1%
    Dec 07: -2.0%
    Dec 06: -1.6%
    Dec 05: -4.9%

But no, the index doesn’t include Goldman Sachs – which is big in other ways but not as a bank, and which has skidded 35% from its all-time peak in February. The index has now dropped 22.5% since the post-financial crisis peak on January 26:

(https://wolfstreet.com/wp-content/uploads/2018/12/US-KBW-banks-index-2016_2018-12-11.png)

So far in Q4, the index has dropped 14%. Unless a miraculous banking-Santa-Claus rally pulls banks out of their dive by the end of the quarter, a 14% decline would make it the worst quarterly decline since Q3 2011. If tax selling kicks in, given the losses bank-stock investors have taken so far this year, it could get worse in the coming days.

Not even in Q3 2015, during the oil bust, when investors were fearing that banks would take steep losses on their loans to the oil industry, did shares drop this much.

The index is now back where it had first been a couple of years before its crazy peak in February 2007. Said peak occurred about a year before Bear Stearns toppled. During the subsequent collapse of banks stocks, it looked like the index would hit zero.

After the bottom in March 2009, the Fed’s strategies to benefit the banks and those that owned them took hold, at the expense of depositors and other classes of US stake holders, such as renters or future home buyers. And it worked. But that era is now over. And the tax cut too has been baked in, and banks are left to fend for themselves:

(https://wolfstreet.com/wp-content/uploads/2018/12/US-KBW-banks-index-2006_2018-12-11.png)

Big banks are heavily exposed to business debt, and business debt, which includes commercial real estate debt, has ballooned to record levels, while credit quality has deteriorated. The Fed, in its recent Financial Stability Report, pointed out this issue as a major risk to financial stability.

But those are the biggest 24 banks in the US. What bout the regional banks?

Since the big-bank sell-off started in January, the regionalbanks actually performed quite well, and the KBW US Regional Bank Index climbedto new post-Financial Crisis highs the summer.

The story on Wall Street was that regional banks would be immune to the downdraft, and that investors needed to rotate from big banks into regional banks, etc. With immaculate timing, the KBW Regional Bank Index [KRX] peaked on June 8, wavered for a month, and in September started to spiral down. It too has plunged 22.3% by now, but in a much shorter time period than the large bank index:

(https://wolfstreet.com/wp-content/uploads/2018/12/US-KBW-regional-banks-2016_2018-12-11.png)

This is a new era for banks – the era the Fed arm-twisted them into preparing for: Building their loss-absorption capacity by building their capital buffer to have it nice and fat and ready to be eaten up by business loan losses over the next few years. But these are still the good times, loan losses are still low, and money is still flowing relatively cheaply and plentifully. The actual pain won’t start for a while.

Instead of “bubble” or “collapse,” the Fed uses “valuation pressures” and “broad adjustment in prices.” Business debt, not consumer debt, is the bogeyman this time. Read... The Fed Explains the Rate Hikes: To Prevent Financial Crisis 2
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on December 14, 2018, 05:34:43 AM
So... after being saved by the taxpayers and clocking big gains in equity for the last however many years, now the cycle has shifted and they're going to correct. If it's bad enough, they'll get bailed out again. Will the dollar die? Probably not. It's a rigged game. Using logic to predict macro trends is iffy. Using those trends as a go-by for you own financial planning is a Big French Mistake.

http://www.youtube.com/v/JMK6lzmSk2o&fs=1

Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on December 14, 2018, 05:42:58 AM
I'm disappointed in Wolf because, just like Gary Savage, he fails to get cryptos AT ALL. Two dimensional thinkers looking at two dimensional charts in a three dimensional world.

Anybody (almost) can read a fuckin' chart. If that was all it took, every trader would be rich.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on December 14, 2018, 05:57:47 AM
I'm disappointed in Wolf because, just like Gary Savage, he fails to get cryptos AT ALL. Two dimensional thinkers looking at two dimensional charts in a three dimensional world.

Anybody (almost) can read a fuckin' chart. If that was all it took, every trader would be rich.

Only Time will tell if you or Wolf is right.

http://www.youtube.com/v/IBSmgPxsIcA

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: azozeo on December 21, 2018, 08:06:48 AM

Is The Federal Reserve Actually TRYING To Cause A Stock Market Crash?

The Federal Reserve has decided not to come to the rescue this time.  All of the economic numbers tell us that the economy is slowing down, and on Wednesday Fed Chair Jerome Powell even admitted that economic conditions are “softening”, but the Federal Reserve raised interest rates anyway.  As one top economist put it, raising rates as we head into an economic downturn is “economic malpractice”.  They know that higher rates will slow down the economy even more, but it isn’t as if the Fed was divided on this move.  In fact, it was a unanimous vote to raise rates.  They clearly have an agenda, and that agenda is definitely not about helping the American people.

Early on Wednesday, Wall Street seemed to believe that the Federal Reserve would do the right thing, and the Dow was up nearly 400 points.  But then the announcement came, and the market began sinking dramatically.


http://theeconomiccollapseblog.com/archives/is-the-federal-reserve-actually-trying-to-cause-a-stock-market-crash (http://theeconomiccollapseblog.com/archives/is-the-federal-reserve-actually-trying-to-cause-a-stock-market-crash)
Title: Catherine Austin Fitts – Federal Government Running Secret Open Bailout
Post by: azozeo on January 14, 2019, 11:53:02 AM

Activist Post

By Greg Hunter

$21 trillion in “missing money” at the DOD and HUD that was discovered by Dr. Mark Skidmore and Catherine Austin Fitts in 2017 has now become a national security issue. The federal government is not talking or answering questions, even though the DOD recently failed its first ever audit. Fitts says,


https://www.activistpost.com/2019/01/catherine-austin-fitts-federal-government-running-secret-open-bailout.html (https://www.activistpost.com/2019/01/catherine-austin-fitts-federal-government-running-secret-open-bailout.html)
Title: 🏦 Nothing's Taboo for the New IMF Chief Economist
Post by: RE on January 23, 2019, 12:49:57 AM
A new Chief Economista at the IMF!  Just what we need!  ::)

At least she is good looking!  :icon_sunny:

RE

https://www.bloomberg.com/news/articles/2019-01-22/nothing-s-taboo-for-new-imf-chief-economist-first-woman-in-job (https://www.bloomberg.com/news/articles/2019-01-22/nothing-s-taboo-for-new-imf-chief-economist-first-woman-in-job)

economics
Nothing's Taboo for the New IMF Chief Economist
By Andrew Mayeda
January 21, 2019, 8:00 PM AKST

(https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iWTdTfdDPNpc/v0/-1x-1.jpg)
    An expert on FX regimes, Gopinath takes over at turbulent time
    She will ‘have to tread carefully,’ one predecessor says

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Full coverage at bloomberg.com/davos, on Twitter @business and via our special WhatsApp alerts.

Gita Gopinath has a knack for asking the kind of questions that, not so long ago, might have raised eyebrows inside the International Monetary Fund, where she just took over as chief economist.

What if more emerging markets actively managed their currencies, like China does? What if an influx of capital risks sapping a nation’s productivity, not boosting it?

Gita Gopinath
Photographer: Anindito Mukherjee/Bloomberg

Interrogating the data for answers, and using them to poke holes in the conventional playbooks for economic policy, was a hallmark of 47 year old Gopinath’s work at Harvard. Now she’ll be expected to recommend practical fixes –- at a turbulent moment when the free-market principles promoted by the Fund for decades are under attack.

Especially in borrower countries like Greece and Argentina, the IMF still gets portrayed as an enforcer of one-size-fits-all policies based on austerity and the unimpeded flow of goods and money. But that’s been out of date for a while now. Fund economists advocated debt relief in Greece. They’ve said capital controls can be useful, and cautiously backed redistributive taxes. When Argentina had to find budget savings, they insisted that the poor shouldn’t bear too much of the burden.
Don’t Be Dogmatic

The shift is likely to continue under Gopinath, who became the first woman to hold one of the most influential jobs in economics when she took over from Maurice Obstfeld this month. She’ll oversee the Fund’s research, including its closely watched growth forecasts at a time when uncertainty is mounting.

The IMF on Monday downgraded its global outlook for the second time in three months to show the weakest expansion this year since 2016. More than a decade since the IMF and other economists failed to predict the financial crisis, Gopinath used her debut press conference to highlight mounting risks, including the trade war and tightening credit.

In her new role, Gopinath plans to use the “broadest lens possible” in search of solutions. Part of her job will be to review the fund’s loan programs, giving her a voice in practical policy making.

“A rethink of globalization is pressing,’’ and it should address the distribution of benefits as well as the impact of new technologies, she said in an emailed response to questions.

In her academic career, Gopinath has been willing to follow the empirical evidence wherever it leads.

“What Gita’s thinking has pointed out is, let’s not be dogmatic,’’ said Mohamed El-Erian, chief economic adviser at Allianz SE and a former IMF economist. “With all the uncertainties that the global system is having to navigate, it’s reassuring that at the IMF, you have someone like Gita.’’

She’s an authority on one key part of that system: currency regimes. The Fund has tended to back floating exchange rates for reasons laid out by Milton Friedman. Allow the currency to fall, the theory goes, and exports become cheaper relative to imports, so the country can sell more goods abroad and boost growth.

Gopinath’s research suggests that reality is more complicated –- and dollar dominance is one reason why. For example, Japan-U.S. trade is overwhelmingly priced in greenbacks –- so a weaker yen doesn’t trigger a corresponding jump in Japanese exports.
Crawling Pegs

That undercuts the argument of those, like President Donald Trump, who accuse competitors of gaming their currencies to gain an edge. It also complicates matters for the IMF, whose charter requires members to avoid “discriminatory’’ currency practices.

The Fund has struggled to develop a consistent policy, said James Boughton, a senior fellow at the Centre for International Governance Innovation. In between fixed and floating currencies lies a bewildering range of options -- from Botswana’s “crawling peg’’ to China’s “stabilized arrangement.’’

“Gopinath’s research interests and expertise could really help,’’ said Boughton, who was the IMF’s official historian for two decades. “She’s been well grounded in the practical consequences of exchange-rate policies, without getting bogged down in ideology.’’

It’s far from an academic matter. Rising U.S. interest rates hammered emerging-market currencies last year. Argentina, whose peso collapsed, turned to the IMF for a record $56 billion bailout. The deal permits the central bank to intervene, but only outside a specified peso range -- an example of the hybrid approach backed by Gopinath’s work, according to El-Erian, who writes columns for Bloomberg Opinion.

“Exchange rates can overshoot, and overshoot for a long time,’’ he said. “We have to consider different ways of approaching that issue.’’
Communist Kerfuffle

Another Gopinath research topic is the impact of capital flows. She looked at southern Europe and found a “significant decline’’ in productivity because the money that poured in after the euro’s launch wasn’t allocated efficiently. The IMF, which once considered capital controls taboo, now sees them as potentially useful stabilizers when markets seesaw.

To Gopinath, these are technical questions, not articles of faith. She sees herself as not beholden to any political ideology. She was surprised when a kerfuffle broke out over her appointment in 2016 as a government adviser in the Indian state of Kerala -- run by a communist party. Some members voiced fears that Gopinath would impose “neoliberal’’ policies.

At the IMF, too, it won’t be easy to stay out of the political fray.

The Fund is a pillar of the global order enshrined after World War II and now showing signs of strain. Its headquarters are in Washington, three blocks from the White House -- where Trump issues periodic threats to pull America out of the multilateral institutions it created. Relations are tense: The IMF has slammed Trump’s trade war as a threat to world growth, while the U.S. Treasury has rejected a boost in IMF funding.

In that climate, Gopinath’s new job requires much more than insightful economic thinking, according to Raghuram Rajan, who held the post last decade. She’ll “find her way,’’ said Rajan, who’s also a former chief of India’s central bank. But she’ll have to be, if not a politician, then at least a diplomat.

“It’s not an easy situation for anyone, because of the political tensions,’’ he said. “It’s a very visible position. And she will have to tread carefully.’’
Title: 💸 Who Bought the Gigantic $1.5 Trillion of New US Government Debt
Post by: RE on February 02, 2019, 01:16:54 AM
https://wolfstreet.com/2019/01/31/who-bought-the-gigantic-1-5-trillion-of-new-us-government-debt-over-the-past-12-months/


Who Bought the Gigantic $1.5 Trillion of New US Government Debt Issued over the Past 12 Months?


 

Who Bought the Gigantic $1.5 Trillion of New US Government Debt Issued over the Past 12 Months?

China, Japan, other foreign entities dumped US Treasuries. But someone had to buy. Here’s who.

Under the impact of a stupendous spending binge peppered with juicy tax cuts, the Treasury Department has had to issue a flood of Treasury securities to fund the cash outflow. So, over the past 12 months, the US gross national debt has ballooned by $1.5 trillion to $22 trillion as of January 30, according to Treasury Department data. And these are the good times when the economy is hopping. At the next recession, this is going to get cute.

But who the heck is buying all this debt? That question will grow increasingly important and worrisome as we move forward with this gigantic ballooning debt, fueled by deficits that Fed chairman Jerome Powell calls “unsustainable” at every chance he gets:

So, who bought all this debt?

US government debt, as expensive as it is in terms of interest payments for US taxpayers, is a mildly income-producing asset for the creditors of the US. Somebody has to buy it, every last dollar of it. The US relies on it. So, who bought this pile of debt that got issued in 12 months? China, Japan, other foreign investors? Nope. They’re gradually unloading this debt.

All foreign investors combined slashed their holdings of marketable Treasury securities in November by $105 billion from November a year earlier, to $6.2 trillion, according to the Treasury Department’s TIC data released today.

The Treasury Department divides these foreign investors into two categories: “Foreign official” holders (foreign central banks and government entities) cut their holdings by $144 billion over the 12 months, to $3.9 trillion at the end of November. But private-sector investors (foreign hedge funds, banks, individuals, etc.) increased their holdings by $52 billion, to $2.3 trillion.

The two largest foreign creditors of the US — China and Japan — have both been unloading their Treasury securities:

  • China’s holdings fell by $55 billion from a year earlier to $1.12 trillion.
  • Japan’s holdings fell by $47 billion from a year earlier to $1.04 trillion, having now reduced its stash by 16% since the peak at the end of 2014 ($1.24 trillion).

Though China and Japan remain the largest foreign creditors to the US, their relative importance has declined.

Over the 12 months through November 30, as China and Japan reduced their holdings by $103 billion combined, the US gross national debt soared by $1.26 trillion, to $21.8 trillion. So, China holds just 5.1% of US gross national debt (red line in the chart below), and Japan holds 4.7% (blue line). Their combined holdings (green line) has now dropped below 10% of the US gross national debt.

Other Big Foreign Creditors of the US

To round off the top 10 largest holders of US Treasuries, here are the remaining eight. Most of them are tax havens for foreign corporate and/or individual entities. Belgium is the location of Euroclear that holds about $32 trillion in assets in fiduciary accounts. The value in parenthesis denotes the holdings in November 2017.

  • Brazil: $311 billion ($265 billion)
  • Ireland: $279 billion ($324 billion)
  • UK (“City of London”): $264 billion ($226 billion)
  • Switzerland: $227 billion ($251 billion)
  • Luxembourg: $226 billion ($218 billion)
  • Cayman Islands: $208 billion ($240 billion).
  • Hong Kong: $189 billion ($195 billion)
  • Belgium: $173 billion ($115 billion)

With Foreign Creditors Net Sellers, Who’s Buying?

This may turn out to be an increasingly hot question as the US gross national debt keeps ballooning and constantly needs new buyers. Over the 12-month period through November 30, this debt rose by $1.26 trillion, to $21.9 trillion. These are the entities who were net buyers or net sellers:

Foreign holders (official and private-sector), net seller, shed $105 billion — to $6.2 trillion, or to 28.4% of total US debt.

Federal Reserve, net seller, shed $204 billion — to $2.25 trillion through November 30, or to 10.3% of the total US national debt.

US government entities (pension funds, Social Security, etc.), net buyers, increased holdings by $20 billion — to 5.87 trillion, or 26.9% of the total US national debt. This “debt held internally” is owed the beneficiaries of those funds.

And who holds the Rest? The only entities left:

American banks (very large holders), hedge funds, pension funds, mutual funds, and other institutions along with individual investors in their brokerage accounts or at their accounts with the US Treasury were huge net buyers, while nearly everyone else was selling, increasing their holdings by $1.36 trillion over the 12-month period. These American entities combined owned the remainder of the US gross national debt, $7.5 trillion, or 34.4% of the total!

When that appetite among American banks and other big institutions for US Treasury debt wanes, yields will rise because buyers will have to be lured into this market to absorb this flood of new securities on a weekly basis. But so far, so good – with the enormous appetite among American entities pushing down the 10-year Treasury yield today to 2.63%.

“Patient” is the Fed’s new favorite word. During the Q&A at the post-meeting press conference, reporters tried to get Fed Chairman Jerome Powell to nail down what “patient” actually means, how long “patient” would last. But they walked out empty-handed. Read… Fed’s QE Unwind to Continue on Autopilot, Rate Hikes on Hold for “Common-Sense Risk Management”: Powell 

Title: Re: Da Fed: Central Banking According to RE
Post by: UnhingedBecauseLucid on February 03, 2019, 11:50:07 AM
Greetings everyone ! I think this is my second (?) post !
 :icon_scratch:

Anyway, just writing this to provide a little heads up to my fellow Doomers inclined to pay attention to the economics side of collapse, to what has been for all intents and purposes, "explicitly" revealed in the last few weeks.

We all knew it, but now it's been so blatantly exposed that the mere fact that this sentence will get repeated aloud will probably induce a phase change in the finance world and therefore, economic reality.

The sentence goes a little something like this:
The Fed is unambiguously trapped, the stock market is TBTF, so it is now blatantly, pretty much solely focused on asset prices. Data dependent means asset price dependent. No significant downswing can occur, and what is allowed can't be permitted to last long. Interest rate hike on pause, and QT is now ...flexible.


The rich will get paid to stay rich, and the proles will continue to eke out a living, their zombie employer graciously kept afloat by the Systems Operator.
Capitalism resorting to market rigging certainly is unheard of ... [cough]... so I'm sure libertarians will have a lot of fun blaming Powell & cie.
So there you have it: late stage, pre-collapse capitalism resorting to a hefty dose of central planning to manage a contrived, abstract ponzi wealth structure.

Say what you want, but the squirming of the System under duress is quite entertaining and quite frightening at the same time.

I still think the Empire and its vassals will at least initially be spared violent inflation, because it still holds the most of the Knowledge Tree, Industrial Capital Tree and accumulated wealth ; but once the oil shock that reveals a bit too much occurs, the vertigo induced by the freshly formed precipice will make a lot of people faint...

There will at some point be a competition for resources, but unfortunately [?] for anxious Doomers impatient to witness a spectacularly remarkable event, shale debt will be monetized to help keep oil price down and make sure Russia, Iran, Irak and cie remain on the edge, and the pushing over that edge of incompetent easy prey Venezuela will probably be over shortly so obviously the US will surely be thanked and accommodated for its helping with the "liberation".
If not, I heard China has some interests in the matter ...

None the less , I think it's important for us Doomers to have fun with the little, less spectacular event as well.
There still lots entertainment and humor to get out of it; remember;  It's a journey, it's an adventure !!!  :exp-wink:
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on February 03, 2019, 12:09:45 PM
There still lots entertainment and humor to get out of it; remember;  It's a journey, it's an adventure !!!  :exp-wink:

If I was a younger and healthier man, this would be the adventure of a lifetime, no...many lifetimes.  Only one generation in 100s or thousands gets to experience and *hopefully* survive the Zero Point of a true Civilization Collapse.  Sadly, I will not be one of those people, but it is OK since I had a good life overall and lived it MY WAY.  Now I just chronicle the last days of Industrial Civilization, as I myself live out my last days walking the earth.

Nice to C U here out of Lurkerville.  :icon_sunny:

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Surly1 on February 03, 2019, 12:26:56 PM
Greetings everyone ! I think this is my second (?) post !

Welcome! Back!!


There will at some point be a competition for resources, but unfortunately [?] for anxious Doomers impatient to witness a spectacularly remarkable event, shale debt will be monetized to help keep oil price down and make sure Russia, Iran, Irak and cie remain on the edge, and the pushing over that edge of incompetent easy prey Venezuela will probably be over shortly so obviously the US will surely be thanked and accommodated for its helping with the "liberation".
If not, I heard China has some interests in the matter ...

Interesting to see a new product line of the Project for a New American century be launched with so little fanfare or objection from within the US or its overseas vassals. Late stage capitalism with its teeth bared.
Title: Re: Da Fed: Central Banking According to RE
Post by: UnhingedBecauseLucid on February 03, 2019, 02:39:40 PM
Quote
If I was a younger and healthier man, this would be the adventure of a lifetime...

To be honest, I'll be 41 in a few weeks and sometime I'm beginning to think even I may not see the The Big Event.
Maybe a few precursor ones that'll confirm the Doomer's diagnosis and that'll even bring in a lot more people into awareness of the Situation.

But when I think about it, the most flavorful moment for the kind of Doomer I am may not be the Oil Shock That Reveals a Bit Too Much (OSTRaBTM), but the day you'll finally have a sense that a critical mass of smart enough people begin to sense the incredible strain the system is under just to pretend it's not in decline, let alone progressing.
The thing that currently makes this difficult is that all steps taken to be less dependent on fossil fuels are done under the umbrella of climate change policy. That'll make the proles (which I am a part of) go apeshit if France is any indication.
Should the truth ever emerge and gain enough acceptance, that look on MSMedias Mimbo & Bimbo's face as they get Reality explained to them ... those moment is what I can't wait for.
Then the moments the CEO's, bankers, fund managers, politicians deny, sqwirm and finally capitulate and a deep and heavy fog of despair, anxiety ... followed by sober alertness fills the air to the point of being palpable.

That will happen before the Singularity (ours not Kurtzweil's)... and that is a moment to live for.

Cheers.

Title: Re: Da Fed: Central Banking According to RE
Post by: UnhingedBecauseLucid on February 03, 2019, 03:47:57 PM
Quote

Welcome! Back!!

Thanks Surly !

Quote
Interesting to see a new product line of the Project for a New American century be launched with so little fanfare or objection from within the US or its overseas vassals. Late stage capitalism with its teeth bared.

You always see how a system was programmed when it hits boundaries, there's no two ways about it....
Title: Re: Da Fed: Central Banking According to RE
Post by: K-Dog on February 03, 2019, 11:06:15 PM
Quote

Welcome! Back!!

Thanks Surly !

Quote
Interesting to see a new product line of the Project for a New American century be launched with so little fanfare or objection from within the US or its overseas vassals. Late stage capitalism with its teeth bared.

You always see how a system was programmed when it hits boundaries, there's no two ways about it....

It's enough to frack a guy up.  How can there be fanfare when all people talk about is a stupid wall between swigs of Russian Kool-Aid.  The stupidification of America is complete.  Complains about plans to blend heavy Venezuela crude with jacked American frack will be dismissed by saying. 

That is what a superhero would do.

(http://2.bp.blogspot.com/_aYe0Dxz32rY/SZzYQbOK0fI/AAAAAAAAAvE/cVl4HftiihY/s320/PDVD_010.JPG)
Title: 💸 A World without Dollars? Approaching the End of America’s Financial Order
Post by: RE on February 04, 2019, 02:03:14 AM
https://www.globalresearch.ca/a-world-without-dollars-are-we-approaching-the-end-of-americas-financial-order/5667143 (https://www.globalresearch.ca/a-world-without-dollars-are-we-approaching-the-end-of-americas-financial-order/5667143)

A World without Dollars? Are We Approaching the End of America’s Financial Order?
By Timothy Alexander Guzman
Global Research, February 01, 2019
Region: Asia, Russia and FSU, USA
Theme: Global Economy

(https://www.globalresearch.ca/wp-content/uploads/2018/12/DollarTraingle1600-1030x438-768x327.jpeg)
For Washington, the U.S. dollar is leverage, a financial weapon to dominate the world economy, to impose its foreign policy agendas and to secure a steady flow of natural resources over sovereign countries who use the currency.

In the last decade or so, the reputation of the U.S. dollar has been widely discredited because it is viewed by many governments around the world as a risky asset since the U.S. economy holds more than $21 trillion in debt and if you add the unfunded liabilities in the form of promises to ensure payments to retirees associated with government pensions, entitlement programs and social security amounts to more than $200 trillion. The dollar is a fiat currency based on “faith” which is issued by the Treasury department and backed by the full weight of U.S. government, but countries who are routinely threatened by Washington with economic sanctions have lost faith in the dollar. The dollar is a debt instrument issued to the public with no real objective measure of the dollar’s true value. Since the Federal Reserve Bank was founded in 1913, the dollar has lost over 97% of its value. In 2018, rt.com reported that

    “the Russian president noted that there are risks in settlements in national currencies, but they could be minimized. “Risks exist everywhere and they need to be minimized, and in order to minimize them diversification is required.” Holding dollars is risky “According to Putin, the US dollar is also a risky financial tool. “US foreign debt amounts to $20 trillion. What will be next? Who knows?”

The U.S. will never be able to finance their debt even if they brought back their manufacturing base, reduce government spending and end all of their wars including those in Iraq and Afghanistan. Peter Schiff of Euro Pacific Capital recently told Rick Sanchez of RT News that

    “All the signs are already there. Look at what’s happening out there. The stock market is falling, Look at homebuilders, the housing stocks, the financials, the retailers – all these are the same things that were happening in 2007 leading to that crisis,” Schiff warned. “So, what you’ve got to do is get out of U.S. dollar assets. The dollar is going to be the biggest casualty along with the American standard of living.”

The U.S. and their allies including Saudi Arabia, Israel, NATO, Colombia and until recently Brazil under the new Presidency of the ultra-right wing fascist, Jair Balsonaro are preparing for a major war with Russia, China, Iran, Syria, Lebanon, Venezuela, Nicaragua and Cuba to basically regain control over the world by restoring the U.S. dollar to its global dominance it once had. The National Interest, an international affairs magazine founded by neoconservative thinker Irving Kristol and whose honorary chairman is one of the world’s most notorious war criminals, Henry Kissinger published an article written by Christopher Smart titled ‘The Future of the Dollar-And It’s Role in Financial Diplomacy’ on the role the dollar plays in what they call “financial diplomacy”:

    Financial diplomacy begins with the coordination of macroeconomic policy, investment regimes and banking regulation, but dollar dominance has given the United States a privileged role in a broad field of negotiations including debt restructuring, battles against terrorism and transborder crime. Most notably, targeted financial sanctions have dramatically bolstered political leverage to isolate bad actors like Venezuela over human rights or Russia over transborder aggression. Washington has sometimes failed to capitalize on all these tools due to poor political leadership or bureaucratic dysfunction, but that may make its accomplishments all the more remarkable across two broad areas. First, U.S. financial diplomacy has been the dominant voice in setting the rules and institutions that reinforce the openness and stability of the global financial system, and consequently support world economic prosperity. Second, the dollar’s dominance has opened conversation on a range of matters that raise global standards and improve cooperation beyond finance.

    The ability to impose order on unruly global markets is, in many ways, what distinguishes the dollar from other international currencies. It is the world’s safest asset whenever political or financial turmoil spikes. In many of the same ways that the overwhelming power of the U.S. military can force order onto a conflict zone, so the U.S. Federal Reserve and Treasury have played pivotal roles in stabilizing financial markets through swap lines and loans

The U.S. has essentially used its currency status, or what Christopher Smart described as the dollar having “a privileged role” of negotiating financial deals with the upper-hand when it comes to specific issues including debt restructuring or “targeted financial sanctions” with leverage (or in simple terms, a gun to your head!), and for all of those reasons that is why several countries had made significant moves away from the dollar. That is why the dollar has also been losing its position as the world’s reserve currency, so a war will be the only option they have to keep it intact. The dollar became the reserve currency of the world since 1971 when the Nixon administration abandoned the Bretton-Woods gold standard, then the federal reserve went into mass printing mode where dollars where created without nothing to back it. One other reason that the dollar became a reserve currency for the world is what we call the Petrodollar as a mechanism to control the oil markets when Washington made a deal with Saudi Arabia to standardize oil prices in dollars creating the “petrodollar system” which meant that oil exporting countries needed to use dollars in exchange for their oil imports, therefore making it essential for all oil-exporting countries to use dollars. So national incomes became dependent on the dollar’s value, so when the dollar falls in value, so did their economy.  U.S. trade partners must peg their currencies to the dollar, so if the value of the dollar falls, so does the price of their domestic goods and services fall.

Not only the U.S. made the dollar the dominant currency in the world for natural resources in terms of oil, it uses its currency status as a weapon against sovereign nations who dared to challenge U.S. hegemony. Several countries in the last decade, especially Russia and Iran have been slowly abandoning the U.S. dollar since they have been repeatedly sanctioned by Washington for not following Western standards of compliance within the world order.

Despite Trump calling for the withdrawal of U.S. troops from Syria and Afghanistan (I don’t believe Trump will make that happen in my opinion), it does not change the fact that the Military-Industrial Complex is planning the next major war to protect the dollar as it is losing its world reserve status, perhaps we can call it The Dollar War. Iraq’s Saddam Hussein decided to sell oil in Euros bypassing the dollar and Libya’s Muammar Gaddafi had planned on Africa using a gold-backed currency in dinars instead of the dollar. Soon after, a no-fly zone was imposed in both Iraq and Libya leading to a war which devastated both countries. Muammar Gaddafi also called for African nations to dump the dollar at a time when China’s growing economic ties with several African countries became a threat to Washington. Saddam Hussein and Muammar Gaddafi were eventually captured by U.S. and NATO backed forces and terrorist groups and executed.

As the World Moves From the U.S. Dollar, Chance of a Major War Increases

On August 6th, 2018, former Iranian President Mahmoud Ahmadinejad tweeted

    “The use of the US Dollar as the standard unit of currency in global markets and the world banking system is the key strength of the American Empire. Things need to change, current orders should be reordered. #Newworldorder #DollarDictatorship.”

Things do need to change. Russia, China and Iran are making moves to change the current system without the dollar. The mainstream- media is taking notes on the reality as Newsweek magazine published an interesting article last September titled ‘Russia and China Think U.S. Dollars are Ruining the World, So They’re Finding A New Way’ The title in itself speaks volumes.

    “Russia and China lashed out at U.S.’s control over the global financial system after being hit by fresh sanctions that have left the two rising powers increasingly frustrated.”

The article continued:

    “Russian Foreign Minister Sergey Lavrov said Friday that his country was making extensive efforts to distance itself entirely from the U.S.-dominated international financial system, much of which runs on the U.S. dollar, and urged others to do the same. Washington has taken advantage of its unmatched influence by enacting sanctions as a form of punishment against countries accused of wrongdoing, or to persuade them to alter policies that are unfavorable to the United States”

The Russian, Chinese and the Iranian governments and their citizens alike have been experiencing U.S. imposed sanctions for some time. Russia’s Foreign Minister Sergey Lavrov spoke on what Russia and their partners in Asia and Latin America were doing to be less depended on the U.S. dollar:

    “Referencing the U.S. and its Western allies that have joined in on sanctions against Russia, Lavrov said Russia was “doing everything necessary to not depend on those countries that do so with respect to their international partners. More and more of our partners in Asia and Latin America are beginning to come from the same approaches. I think that this movement will only grow stronger.”

Whether it’s Political or Just Plain Economics, Sovereign Countries Are Bypassing the U.S. Dollar

While more countries around the world grow frustrated with U.S. sanctions, there has been a number of important trade agreements by using their own currencies to bypass the dollar.

Here are some recent developments from 2017-2018:

China-Japan Buy Less U.S. Treasuries, What Does it Mean for the U.S. Dollar?

Two major economic powers, China and Japan have reduced their holdings of U.S. treasuries as of last August according to a report from October 2018 by rt.com “China’s holdings of US sovereign debt dropped to $1.165 trillion in August, from $1.171 trillion in July, marking the third consecutive month of declines as the world’s second-largest economy bolsters its national currency amid trade tensions with the US.” The report also said that Japan is following in the same footsteps of China by cutting their holdings of U.S. debt:

    Tokyo cut its holdings of US securities to $1.029 trillion in August, the lowest since October 2011. In July, Japan’s holdings were at $1.035 trillion. According to the latest figures from the country’s Ministry of Finance, Japanese investors opted to buy British debt in August, selling US and German bonds. Japan reportedly liquidated a net $5.6 billion worth of debt

The report mentioned others who are following the same strategy of reducing U.S. treasuries because of economic, financial and geopolitical tensions over the years:

    Liquidating US Treasuries, one of the world’s most actively-traded financial assets, has recently become a trend among major holders. Russia dumped 84 percent of its holdings this year, with its remaining holdings as of June totaling just $14.9 billion. With relations between Moscow and Washington at their lowest point in decades, the Central Bank of Russia explained the decision was based on financial, economic and geopolitical risks.

    Turkey and India have followed suit. Like Russia, Turkey has dropped out of the top-30 list of holders of American debt following a conflict with Washington over the attempted military coup in the country two years ago. While India remains among the top-30, the country has cut its US Treasury holdings for the fifth consecutive month, from $157 billion in March to $140 billion in August

At one point in history, China acquiring US debt offered a safe haven for what is known as ‘Chinese forex reserves’ where China offered loans to the US so that US consumers can buy Chinese goods as long as China had an export-driven economy which led to large-scale trade surpluses with the U.S. This allowed China to purchase U.S. debt over the years, but now that is no longer the case. China’s trade and geopolitical tensions with the U.S. has increased over the years especially since China’s economic power has grown. China’s ‘One Belt One Road’ Initiative has blocked Washington’s ambition to dominate the Asia-Pacific region.

An article by Schiffgold.com ‘Who Is Buying US Treasuries’ noted the fact that “the Japanese and Chinese aren’t buying US Treasuries. In fact, both countries reduced their holdings in April.” The article also says that China can use “US debt as a weapon” because they “can’t out-tariff Trump. The US imports far more products than the Chinese.” What is important for China’s strategy against U.S. pressure is the fact that “they could start more aggressively selling US Treasuries. If China starts dumping large amounts of debt on the market, interest rates will likely soar and the dollar would plunge.” According to Schiffgold.com

    “As Wolf Street noted, you can more clearly see that Japan and China are less eager to service US debt when you look at it in terms of the percentage of the US gross national debt” WolfStreet did say that the two reasons are that “the US gross national debt has soared” and that “the holdings of China and Japan have fallen over the past two years.”

With Washington’s support of Taiwanese independence and the U.S. Navy ready to expand its presence in the South China Sea, China will continue to sell U.S. treasuries and expand their markets around the world under the One-Belt, One-Road Initiative’ while building their military capabilities puts Washington in a tight spot. China , Russia, Japan and others are following similar strategies that require less dollars. Tensions between Beijing and Washington will intensify as long as China’s influence around the world gains traction while its economic growth continues to outpace the U.S. economy.

Russia & Syria to Use National Currencies for Mutual Settlements & Energy Exploration

In a strategic economic sense, Russia and Syria has agreed to bypass the dollar when it comes to “mutual settlements and energy exploration in Syria” which is an important development to consider. “Mutual settlements, transport and logistics – as far as I’m concerned these issues have been settled,” Vladimir Padalko, Vice-President of the Russian Chamber of Commerce and Industry told journalists on the sidelines of an annual meeting of the Russian-Syrian commission for trade, economic, scientific and technical cooperation, taking place in Damascus” according to an rt.com report ‘Russia & Syria to dump dollar in mutual trade, agree joint energy projects’ published last month.

    “The Russian official added that the countries have picked 200 Russian and Syrian companies to take part in joint projects for rebuilding the war-torn country. The parties are set to sign an agreement that includes 10 extensive focus areas for recovering the Syrian post-war economy”

The report also stated that “the parties have also clinched a number of commercial agreements on exploration and production of energy commodities in Syria, according to the Russian office.”

Iraq & Iran Remove U.S. Dollars from Trade

Another interesting development is the agreement between Iraq and Iran when it comes to mutual trade agreements in bypassing the dollar and using the Euro (that’s what got Iraqi President Saddam Hussein into trouble with Washington) and local currencies and even using a barter system for the trading of goods. A report published on September 10, 2018 by Presstv.com, an Iranian news source titled ‘Iraq officially removes US Dollar from Iran trade’said that Iraq and Iran “abandoned the greenback in their mutual trade.” The article stated the following:

    Reports emerged in early September that Iraq and Iran had abandoned the greenback in their mutual trade, giving way to the Euro and local currencies, as well as direct barter of goods.  “The US dollar has been removed from the list of currencies used by Iran and Iraq in their trade transactions and they are using Iranian Rial, euro and Iraqi dinar for financial transactions,” Yahya Ale-Eshagh, head of the Iran-Iraq Chamber of Commerce, was quoted as saying by local media

Not only the governments of Iraq and Iran were bypassing the dollar in trade, merchants were already engaging in barter operations:

    Apart from switching from the US dollar to alternative currencies, Iranian and Iraqi merchants have been engaging in barter operations, according to the official. The banking system, however, still needs improvements, since only a fraction of trade between the two countries actually goes through banks

One obstacle stands in the way from completely removing themselves from the dollar and that is the banking system:

    The banking system, however, still needs improvements, since only a fraction of trade between the two countries actually goes through banks.  “Resolving the banking system problem must be a priority for both Iran and Iraq, as the two countries have at least $8 billion in transactions in the worst times,” Ale-Eshagh was further quoted as saying by the website of Russia Today.

India & Iran Will Drop Dollars for Oil Trade

India is another country set on bypassing the dollar by paying for Iranian oil imports with rupees to avoid U.S. sanctions. According to rt.com who has been following these developments on countries dropping the dollar closely said that:

    Under the deal, the payments for oil will be made through India’s state-run UCO Bank, which has no US exposure. The countries are also discussing the barter-like system to avoid US sanctions, Sputnik reports.  Iranian Foreign Minister Mohammad Javad Zarif is on a visit to India this week, where he has met with Indian counterpart Sushma Swaraj. “During the talks, the two sides also exchanged views on a further expansion of ties in banking, energy, trade, insurance, shipping, use of national currencies, Chabahar projects and Chabahar-Zahedan railway,” Zarif said in a statement

India bought a record 27.2 million tons of Iranian crude last year, which according to Sputnik News “ended in March 2018.” It was calculated at a 114 percent increase.  India’s Swaraj said the country would ignore the US trade sanctions against Iran. “India will comply with UN sanctions and not any country-specific sanctions,” Swaraj said.

Pakistan and China’s ‘One Belt One Road Initiative’

Last December, Pakistan’s New Prime Minister, Imran Khan was interviewed by The Washington Post in regards to Pakistan’s relationship with the U.S. and their growing relationship with China ‘Pakistani leader to the U.S.: We’re not your ‘hired gun’ anymore.’  Khan was asked about Trump’s tweets and U.S. aid given to Pakistan over the years “What are you planning to do about your country’s relationship with the U.S., which has been deteriorating and has involved a social-media war with the president?” referring to Trump’s tweets on US aid to Pakistan and that safe havens that were given to terrorists. Trump wrote that “the United States has foolishly given Pakistan more than 33 billion dollars in aid over the last 15 years, and they have given us nothing but lies & deceit, thinking of our leaders as fools. They give safe haven to the terrorists we hunt in Afghanistan, with little help. No more!” Khan replied with “It was not really a Twitter war, it was just setting the record right.” later blaming “flawed U.S. policies — the military approach to Afghanistan.” Khan was asked about the future relationship with the U.S. and China and answered by stating the truth and facts of what was really happening in Pakistan, so he said that “I would never want to have a relationship where Pakistan is treated like a hired gun — given money to fight someone else’s war. We should never put ourselves in this position again. It not only cost us human lives, devastation of our tribal areas, but it also cost us our dignity.”Khan expanded his idea on Pakistan’s growing relationship with China saying that it is not “one-dimensional” and that “It’s a trade relationship between two countries. We want a similar relationship with the U.S.” What was interesting was what The Washington Post said to Khan regarding his anti-U.S. stand and Khan replied with “If you do not agree with U.S. policies, it does not mean you’re anti-American. This is a very imperialistic approach: “You’re either with me or against me.”

On December 17th, 2017, an article by Reuters ‘Pakistan considering plan to use yuan in trade with China’ explains how Pakistan is considering a proposal to replace the dollar with Chinese Yuan’s in the near future:

    Pakistan is considering a proposal to replace the U.S. dollar with the Chinese yuan for bilateral trade between Pakistan and China, the English-language daily newspaper Dawn reported on Tuesday.  Bilateral trade between the countries totaled $13.8 billion in 2015 to 2016

What is troubling for Washington is the cooperation between China and Pakistan and what it involves in terms of the China Pakistan Economic Corridor (CPEC):

    The long-term plan highlighted key cooperation areas between the neighboring states including road and rail connections, information network infrastructure, energy, trade and industrial parks, agriculture, poverty alleviation and tourism.  The plan marks the first time the two countries have said how long they plan to work together on the project, known as the China Pakistan Economic Corridor (CPEC,)taking the economic partnership to at least 2030.  China has already committed to investing $57 billion in Pakistan to finance CPEC as part of Beijing’s “Belt and Road” initiative to build a new Silk Road of land and maritime trade routes across more than 60 countries in Asia, Europe and  Africa.

European Union to Create Own Payment System Independent of the U.S. Dominated SWIFT System? Don’t Count on it

Some countries within the European Union would be more than willing to move away from the dollar at least according to the author of ‘Currency Wars’, Jim Rickards. Rickards wrote an interesting article on actions the European Union is considering to establish a new E.U. based payments system that is independent from the U.S. dominated SWIFT (Society for Worldwide Interbank Financial Telecommunication) payment system. The article was published in The Daily Reckoning titled ‘The World Is Ganging up Against the Dollar’, Rickards said that “the U.S. has been highly successful at pursuing financial warfare, including sanctions. But for every action, there is an equal and opposite reaction.” Stating the facts on how the U.S. uses its dollar, the world is responding with its own actions. Rickards warned “As the U.S. wields the dollar weapon more frequently, the rest of the world works harder to shun the dollar completely.” he continued “I’ve been warning for years about efforts of nations like Russia and China to escape what they call “dollar hegemony” and create a new financial system that does not depend on the dollar and helps them get out from under dollar-based economic sanctions.”

A new financial system was mention by German Foreign Minister Heiko Maas who “recently called for a new EU-based payments system independent of the U.S. and SWIFT (Society for Worldwide Interbank Financial Telecommunication) that would not involve dollar payments” to obviously bypass Iranian sanctions imposed by the U.S. Jim Rickards describes the SWIFT system the “nerve center of the global financial network. All major banks transfer all major currencies using the SWIFT message system. Cutting a nation off from SWIFT is like taking away its oxygen.”

Given the fact that Europe is Washington’s lap dog when it comes to foreign policy and economics, Europe would be balancing itself on a tightrope if they decided to create a new payments system without angering Washington. So don’t count on them on creating a system that would damage Washington’s economic hegemony over European markets.

However, Russia has already made that move away from the SWIFT payment system to SPFS (System for Transfer of Financial Messages). According to rt.com:

    Russia’s money transfer system, developed as an alternative to SWIFT is now more popular than the global network, said Anatoly Aksakov, head of the Russian parliamentary committee on financial markets.  He explained that Moscow is already engaged in talks with Chinese, Turkish and Iranian financial regulators on integrating its System for Transfer of Financial Messages (SPFS) with financial messaging systems of those countries

The report went on to mention that the SPFS has more users than SWIFT:

    “The number of users of our internal financial messages’ transfer system is now greater than that of those using SWIFT. We’re already holding talks with China, Iran and Turkey, along with several other countries, on linking our system with their systems,” Aksakov said. “They need to be properly integrated with each other in order to avoid any problems with using the countries’ internal financial messaging systems”

Russia created the SPFS payment system which “began in 2014 in response to Washington’s threats of disconnecting Russia from SWIFT. The first transaction on the SPFS network involving a non-bank enterprise was held in December 2017″ the report said.

SWIFT is a system that allows financial institutions to either send and receive information concerning financial transactions in a secure environment which is based on the dollar system. However, the SWIFT system is a tool used by the U.S. against other countries to enforce their foreign policy agendas. For example, between 2014 and 2015, the U.S. blocked several Russian banks from SWIFT since US-Russia relations where at an all-time low. In 2018, the U.S. threatened to ban China from using the system if it did not follow UN sanctions on North Korea.

With these actions taken by the U.S., it has also pushed China and Russia to purchase gold reserves over the years to minimize their exposure to the dollar and avoid any problems that may come up concerning their financial transactions with a payment system solely dominated by the U.S. So who can blame them?

Will Washington Launch the Next Major War to Save the U.S. Dollar?

World War III will be based on maintaining the power of the U.S. dollar. The interests of major corporations, the establishment from Washington and London, the banks and an interesting tribe whose seeds were planted in the Middle East back in 1948 are based on the dollar’s strength.

The dollar is the backbone, the tool that allows Washington to continue its geopolitical dominance backed with its military power over the world’s economy and its natural resources. The dollar allows Washington to intimidate sovereign countries with economic sanctions as a way to influence or directly control their politics and economy in Washington’s favor, nothing more and certainly, nothing less, and that’s a major reason the acceleration of dumping the U.S. dollar around the world will lead us into a major world war that may start with a country that has plenty of oil which two come to mind, and that is Venezuela and Iran.

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This article was originally published on the author’s blog site: Silent Crow News.

Timothy Alexander Guzman is a frequent contributor to Global Research.
Title: Goodbye to the Dollar
Post by: Surly1 on February 04, 2019, 03:40:03 AM
Found this companion piece while working on the paper this morning-- "The inept and corrupt presidency of Donald Trump has unwittingly triggered the fatal blow to the American empire—the abandonment of the dollar as the world’s principal reserve currency." And when this unwinds, the only people who will pay are those whose assets are denominated in dollars. With the result of “soaring prices, ever-rising unemployment, and a continuing decline in real wages throughout the 2020s, domestic divisions widen into violent clashes and divisive debates, often over symbolic, insubstantial issues.”


Goodbye to the Dollar (https://www.truthdig.com/articles/goodbye-to-the-dollar/)

Mr. Fish / Truthdig

The inept and corrupt presidency of Donald Trump has unwittingly triggered the fatal blow to the American empire—the abandonment of the dollar as the world’s principal reserve currency. Nations around the globe, especially in Europe, have lost confidence in the United States to act rationally, much less lead, in issues of international finance, trade, diplomacy and war. These nations are quietly dismantling the seven-decade-old alliance with the United States and building alternative systems of bilateral trade. This reconfiguring of the world’s financial system will be fatal to the American empire, as the historian Alfred McCoy and the economist Michael Hudsonhave long pointed out. It will trigger an economic death spiral, including high inflation, which will necessitate a massive military contraction overseas and plunge the United States into a prolonged depression. Trump, rather than make America great again, has turned out, unwittingly, to be the empire’s most aggressive gravedigger.

The Trump administration has capriciously sabotaged the global institutions, including NATO, the European Union, the United Nations, the World Bank and the IMF, which provide cover and lend legitimacy to American imperialism and global economic hegemony. The American empire, as McCoy points out, was always a hybrid of past empires. It developed, he writes, “a distinctive form of global governance that incorporated aspects of antecedent empires, ancient and modern. This unique U.S. imperium was Athenian in its ability to forge coalitions among allies; Roman in its reliance on legions that occupied military bases across most of the known world; and British in its aspiration to merge culture, commerce, and alliances into a comprehensive system that covered the globe.”

When George W. Bush unilaterally invaded Iraq, defying with his doctrine of preemptive war international law and dismissing protests from traditional allies, he began the rupture. But Trump has deepened the fissures. The Trump administration’s withdrawal from the 2015 Iranian nuclear agreement, although Iran had abided by the agreement, and demand that European nations also withdraw or endure U.S. sanctions saw European nations defect and establish an alternative monetary exchange system that excludes the United States. Iran no longer accepts the dollar for oil on international markets and has replaced it with the euro, not a small factor in Washington’s deep animus to Teheran. Turkey is also abandoning the dollar. The U.S. demand that Germany and other European states halt the importation of Russian gas likewise saw the Europeans ignore Washington. China and Russia, traditionally antagonistic, are now working in tandem to free themselves from the dollar. Moscow has transferred $100 billion of its reserves into Chinese yuan, Japanese yen and euros. And, as ominously, foreign governments since 2014 are no longer storing their gold reserves in the United States or, as with Germany, removing them from the Federal Reserve. Germany has repatriated its 300 tons of gold ingots. The Netherlands repatriated its 100 tons.

The U.S. intervention in Venezuela, the potential trade war with China, the withdrawal from international climate accords, leaving the Intermediate-Range Nuclear Forces (INF) Treaty, the paralysis in Washington and disruptive government shutdown and increased hostilities with Iran bode ill for America. American foreign and financial policy is hostage to the bizarre whims of stunted ideologues such as Mike Pompeo, John Bolton and Elliott Abrams. This ensures more global chaos as well as increased efforts by nations around the globe to free themselves from the economic stranglehold the United States effectively set in place following World War II. It is only a question of when not if the dollar will be sidelined. That it was Trump, along with his fellow ideologues of the extreme right, who destroyed the international structures put in place by global capitalists, rather than socialists these capitalists invested tremendous resources to crush, is grimly ironic.

The historian Ronald Robinson argued that British imperial rule died “when colonial rulers had run out of indigenous collaborators.” The result, he noted, was that the “inversion of collaboration into noncooperation largely determined the timing of the decolonization.” This process of alienating traditional U.S. allies and collaborators will have the same effect. As McCoy points out, “all modern empires have relied on dependable surrogates to translate their global power into local control—and for most of them, the moment when those elites began to stir, talk back, and assert their own agendas was also the moment when you knew that imperial collapse was in the cards.”

The dollar, because of astronomical government debt now at $21 trillion, a debt that will be augmented by Trump’s tax cuts costing the U.S. Treasury $1.5 trillion over the next decade, is becoming less and less trustworthy. The debt-to-GDP ratio is now more than 100 percent, a flashing red light for economists. Our massive trade deficit depends on selling treasury bonds abroad. Once those bonds decline in value and are no longer considered a stable investment, the dollar will suffer a huge devaluation. There are signs this process is underway. Central-bank reserves hold fewer dollars than they did in 2004. There are fewer SWIFT payments–the exchange for interbank fund transfers–in dollars than in 2015. Half of international trade is invoiced in dollars, although the U.S. share of international trade is only 10 percent.

“Ultimately, we will have reserve currencies other than the U.S. dollar,” the Bank of England Gov. Mark Carney announced last month.

Sixty-one percent of foreign currency reserves are in dollars. As these dollar currency reserves are replaced by other currencies, the retreat from the dollar will accelerate. The recklessness of America’s financial policies will only exacerbate the crisis. “If unlimited borrowing, financed by printing money, were a path to prosperity,” Irwin M. Stelzer of the Hudson Institute said recently, “then Venezuela and Zimbabwe would be top of the growth tables.”

McCoy explains what a world financial order untethered from the dollar would look like:

For the majority of Americans, the 2020s will likely be remembered as a demoralizing decade of rising prices, stagnant wages, and fading international competitiveness. After years of swelling deficits fed by incessant warfare in distant lands, in 2030 the U.S. dollar eventually loses its special status as the world’s dominant reserve currency.

Suddenly, there are punitive price increases for American imports ranging from clothing to computers. And the costs for all overseas activity surges as well, making travel for both tourists and troops prohibitive. Unable to pay for swelling deficits by selling now-devalued Treasury notes abroad, Washington is finally forced to slash its bloated military budget. Under pressure at home and abroad, its forces begin to pull back from hundreds of overseas bases to a continental perimeter. Such a desperate move, however, comes too late.

Faced with a fading superpower incapable of paying its bills, China, India, Iran, Russia, and other powers provocatively challenge U.S. dominion over the oceans, space, and cyberspace.

The collapse of the dollar will mean, McCoy writes, “soaring prices, ever-rising unemployment, and a continuing decline in real wages throughout the 2020s, domestic divisions widen into violent clashes and divisive debates, often over symbolic, insubstantial issues.” The deep disillusionment and widespread rage will give an opening to Trump, or a Trump-like demagogue, to lash out, perhaps by inciting violence, against scapegoats at home and abroad. But by then the U.S. empire will be so diminished its threats will be, at least to those outside its borders, largely meaningless.

It is impossible to predict when this flight from the dollar will take place. By the second half of the 19th century, the U.S. economy had overtaken Britain, but it was not until the middle of the 20th century that the dollar replaced the pound sterling to become the dominant currency in international trade. The pound sterling’s share of currency reserves among international central banks fell from around 60 percent in the early 1950s to less than 5 percent by the 1970s. Its value declined from more than 4 dollars per pound at the end of WWII to near-parity with the dollar. The British economy went into a tailspin. And that economic jolt marked for the British, as it will for us, the end of an empire.

Title: Re: Goodbye to the Dollar
Post by: RE on February 04, 2019, 03:57:09 AM
Found this companion piece while working on the paper this morning-- "The inept and corrupt presidency of Donald Trump has unwittingly triggered the fatal blow to the American empire—the abandonment of the dollar as the world’s principal reserve currency." And when this unwinds, the only people who will pay are those whose assets are denominated in dollars. With the result of “soaring prices, ever-rising unemployment, and a continuing decline in real wages throughout the 2020s, domestic divisions widen into violent clashes and divisive debates, often over symbolic, insubstantial issues.”

Without global military hegemony, the Dollar was Doomed, although Trumpovetsky certainly accelerated the process.  However, it remains the best dog in the pound and unwinding out of it will be quite difficult.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 04, 2019, 05:12:27 AM
It should happen at some point.  The banks are apparently hedging for it with gold, like there's no tomorrow (imagine that). Everything is is lined up now.....but Uncle Buck is a stubborn cuss. And the signs of the dollar collapse are pretty subtle.

1 Year Chart of DXY Index
1 Year Chart of DXY Index

Does that look like a collapse?

For the intellectually challenged who might still be wondering, the answer is no.

With that said, when it does go, it's likely to happen fairly quickly. Not like the British Pound Sterling, which took 20 years to collapse.
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on February 04, 2019, 05:23:06 AM
Greetings everyone ! I think this is my second (?) post !
 :icon_scratch:

Anyway, just writing this to provide a little heads up to my fellow Doomers inclined to pay attention to the economics side of collapse, to what has been for all intents and purposes, "explicitly" revealed in the last few weeks.

We all knew it, but now it's been so blatantly exposed that the mere fact that this sentence will get repeated aloud will probably induce a phase change in the finance world and therefore, economic reality.

The sentence goes a little something like this:
The Fed is unambiguously trapped, the stock market is TBTF, so it is now blatantly, pretty much solely focused on asset prices. Data dependent means asset price dependent. No significant downswing can occur, and what is allowed can't be permitted to last long. Interest rate hike on pause, and QT is now ...flexible.


The rich will get paid to stay rich, and the proles will continue to eke out a living, their zombie employer graciously kept afloat by the Systems Operator.
Capitalism resorting to market rigging certainly is unheard of ... [cough]... so I'm sure libertarians will have a lot of fun blaming Powell & cie.
So there you have it: late stage, pre-collapse capitalism resorting to a hefty dose of central planning to manage a contrived, abstract ponzi wealth structure.

Say what you want, but the squirming of the System under duress is quite entertaining and quite frightening at the same time.

I still think the Empire and its vassals will at least initially be spared violent inflation, because it still holds the most of the Knowledge Tree, Industrial Capital Tree and accumulated wealth ; but once the oil shock that reveals a bit too much occurs, the vertigo induced by the freshly formed precipice will make a lot of people faint...

There will at some point be a competition for resources, but unfortunately [?] for anxious Doomers impatient to witness a spectacularly remarkable event, shale debt will be monetized to help keep oil price down and make sure Russia, Iran, Irak and cie remain on the edge, and the pushing over that edge of incompetent easy prey Venezuela will probably be over shortly so obviously the US will surely be thanked and accommodated for its helping with the "liberation".
If not, I heard China has some interests in the matter ...

None the less , I think it's important for us Doomers to have fun with the little, less spectacular event as well.
There still lots entertainment and humor to get out of it; remember;  It's a journey, it's an adventure !!!  :exp-wink:

Fun beats the alternative, in my view.

I'm beginning to think the world can end with cheap oil not quite gone. Oil is subject to extend and pretend. Climate is not.

Apparently the  goal of the USMIC and the war bucks guys, is to not run out of enemies who can't fight back. If we ever go full stupid and jump into a little dust-up with a China or a Russia, the nukes will fly, and collapse will come to a neighborhood near you at flank speed.

Which Horseman will get us? I'm not sure, but one of them will, and you'll live to see it, even if us old farts don't.
Title: The utterly unbelievable scale of U.S. debt right now
Post by: azozeo on February 20, 2019, 11:44:32 AM
All the gold ever mined would only pay off the debt accumulated under Obama

Just with the money it spends on interest, the U.S. could run Canada or Mexico


This week, the United States national debt ticked above US$22 trillion for the first time, an amount equivalent to $67,000 per U.S. citizen.

The U.S. federal government owes more money than any other institution in the history of human civilization. And it’s just getting worse. According to the Congressional Budget Office, in only 10 years the U.S. debt-to-GDP ratio will be higher than any point since the Second World War.

Below, a few factoids about just how eye-wateringly, bone-chillingly large the U.S. debt has become.

U.S. debt is now higher than the combined market value of the Fortune 500



https://nationalpost.com/news/the-utterly-unbelievable-scale-of-u-s-debt-right-now
Title: 🏦 “Shadow Banks” Dominate Mortgage Lending by Piling on Risks
Post by: RE on February 28, 2019, 03:39:07 AM
Another accident waiting to happen.  ::)

RE

https://wolfstreet.com/2019/02/27/shadow-banks-take-on-largest-mortgage-risks-federal-housing-administration-fha-on-the-hook/ (https://wolfstreet.com/2019/02/27/shadow-banks-take-on-largest-mortgage-risks-federal-housing-administration-fha-on-the-hook/)

“Shadow Banks” Dominate Mortgage Lending by Piling on Risks. Federal Housing Administration (FHA) on the Hook

“Shadow Banks” Dominate Mortgage Lending by Piling on Risks. Federal Housing Administration (FHA) on the Hook

But deposit-taking banks have pulled back.

Lovingly known as “shadow banks,” nonbanks have come to dominate the mortgage market. And they originate the riskiest mortgages. The government — mostly the Federal Housing Administration (FHA) — is on the hook. Nonbanks do not take deposits and are not regulated by banking regulators (Federal Reserve, FDIC, and OCC). Their funding is derived mostly from selling the mortgages they originate, but also from bank loans and other sources. During the mortgage crisis, a slew of them got in trouble and, because they did not hold deposits, were allowed to collapse unceremoniously.

Today, there’s a new generation of shadow banks dominating mortgage lending. According to a February 2019 report by the Mortgage Bankers Association, the share of mortgage originations by nonbank lenders has surged from 24% in 2008 to 54% in 2017, while the share of large banks has plunged:

The largest nonbank mortgage lender, Quicken Loans, originated an estimated $86 billion in mortgages in 2017, according to the MBA’s February 2019 report, giving it a market share of just under 5% of all mortgages written during the year.

These shadow banks are unlikely to get bailed out in a crisis, and investors will take the loss. From that perspective, taxpayers are off the hook. But their counterparties are also at risk of losses – with the government by far the most exposed. These counterparties fall into two groups:

Large banks extending “warehouse financing” (short-term credit lines secured by mortgages) to nonbanks to fund the mortgages temporarily until they’re sold into the secondary market.

The US government, through government agencies such as the FHA which specializes in riskier mortgages that it insures and guarantees but does not buy, or Ginnie Mae which buys and guarantees mortgages; and government sponsored enterprises Fannie Mae and Freddie Mac which buy and guarantee mortgages.

In its wide-ranging report and briefing materials (February 25, 184 page PDF) on the housing market and government involvement in it, the American Enterprise Institute (AEI) outlines how surging home prices push lenders to take ever greater risks. And as deposit-taking banks have pulled back from those risks, shadow banks have plowed ever deeper into them.

I will focus on a small aspect of the report: The increasing role of shadow banks in the mortgage business and the exploding role of the FHA in insuring and guaranteeing their mortgages that are becoming riskier and riskier.

FHA insures mortgages on single-family and multifamily homes to high-risk borrowers. It operates on the revenues it receives from the mortgage insurance premiums that borrowers pay upfront and monthly. To qualify for FHA insurance, mortgages must meet certain requirements. When homeowners default on their mortgages, the FHA covers 100% of the lender’s loss. It currently insures nearly 8 million single-family mortgages and about 14,500 apartment buildings.

The chart below by the AEI shows how nonbanks completely dominate FHA-guaranteed “purchase mortgages” (we’ll get to “refinance mortgages” in a moment). The chart excludes mortgages by State Housing Finance Agencies and Credit Unions, accounting for 4% of the FHA purchase-mortgage market. In November, the share of originations by nonbanks of FHA-insured mortgages surged to 85%:

In terms of FHA-insured refinance mortgages, the shift to nonbanks is even more striking. In 2012, nonbanks and banks originated about the same volume. By November 2018, nonbanks originated 94% of all FHA-insured refi mortgages:

“Migration to nonbanks has boosted overall risk levels, as nonbanks are willing to originate riskier FHA loans than large banks,” the AEI says. This is shown by two risk measures.

The first is the Mortgage Risk Index (MRI), a stress test that measures how the mortgages that were originated in a given month would perform if subjected to the same stress situation as mortgages originated in 2007, which experienced the highest default rates as a result of the Great Recession.

The AEI’s chart shows how risks of FHA-insured purchase mortgages, as measured by the MRI, have risen across the board, but much less at large banks than at nonbanks:

The second risk measure the AEI uses is the National Mortgage Risk Index (NMRI), a standardized quantitative index for mortgage default risk based on the performance of the 2007 vintage loans with similar characteristics. NMRI is expressed in a percentage, the “stressed default rate”:

The composite NMRI (black line in the chart below) has been trending up since mid-2013, with all agencies except the RHS drifting higher. While Fannie and Freddie guaranteed mortgages are at the bottom with stressed default rates of 8% and 6%, the stressed default rate for FHA-insured mortgages have surged, including a 7.6-percentage-point jump over the past 12 months, to 28.5% (click to enlarge):

Since nonbanks originated most of the FHA-insured mortgages over the past few years – in November, 94% of all FHA refi mortgages and 85% of all FHA purchase mortgages – the “stressed default rate” for the FHA reflects mostly the risks of mortgages originated by nonbanks.

The debt-to-income (DTI) ratio shows a similar scenario. It gauges the ability of a borrower to repay a mortgage by measuring the income consumed by servicing all outstanding debts of that borrower.

The upper limit of the DTI ratio for “qualified mortgages” (QM) under the Dodd-Frank Act is 43%. A mortgage that meets the QM requirements provides legal protection for lenders against a claim that the mortgage was made without due consideration of the borrower’s ability to repay. But Fannie Mae, Freddie Mac, FHA, VA, and RHS are exempt mostly from the QM requirements, and so here we go:

So there are two dynamics that would be needed for future support of the housing market, according to the AEI:

The first has been arriving too slowly and has been outpaced by home price inflation; and the second – increased leverage – would have to happen at the low end of the household-income scale where the FHA and shadow banks are most active, and where the risks are already the highest, and the borrowers the most vulnerable.

The San Francisco Bay Area and Seattle lead with biggest multi-month drops in home prices since 2012; San Diego, Denver, Portland, Los Angeles also show declines according to the Case-Shiller Index. Others have stalled. A few eked out records. Read…  The Most Splendid Housing Bubbles in America Get Pricked

Title: 🏦 US Banks Report $251 billion of “Unrealized Losses” on Securities Investments
Post by: RE on March 13, 2019, 03:51:20 AM
Only $251B?  Chump Change!

RE

https://wolfstreet.com/2019/03/12/us-banks-unrealized-losses-on-securities-investments-balloon-to-251-billion-in-2018-the-most-since-2008-fdic/

US Banks Report $251 billion of “Unrealized Losses” on Securities Investments in 2018, the Most Since 2008: FDIC
by Wolf Richter • Mar 12, 2019 • 10 Comments • Email to a friend   
And other juicy banking nuggets.

Net income in Q4 2018 among all 5,406 FDIC-insured banks and thrifts more than doubled year-over-year to $59 billion, due to “higher net operating revenue” and “lower income tax expenses”; and full-year net income rose 44% to $237 billion, the FDIC reported today in its Quarterly Banking Profile. But over the same period, “unrealized losses” on investment securities – losses that are not included in the “net income” figures above – ballooned to $251 billion, the largest unrealized losses since 2008.

“Unrealized losses” are losses on securities that dropped in value but that the banks have not yet sold. In other words, they’re “paper losses.” Every quarter in 2018 brought steep unrealized losses: Q1: $55 billion; Q2: $66 billion; Q3: $84 billion; and Q4: $46 billion (chart via FDIC, red marks added):

(https://wolfstreet.com/wp-content/uploads/2019/03/US-FDIC-Banks-unrealized-losses-2018-Q4.png)

Banks designate these securities either as “held-to-maturity” securities, valued at “amortized cost” or book value (light blue in the chart above) and “available-for-sale” securities valued at “fair value,” such as market value (dark blue).

These securities holdings are concentrated in bonds. When yields rise, as they did during much of 2018, bond prices fall. This is where a large part of these losses come from.

When banks hold bonds to maturity, the bonds are redeemed at face value, and banks are paid face value for those bonds. If banks didn’t pay a premium when they bought those bonds, they will not lose money on them, and the “unrealized losses” go away. Also, if bond prices rise, as they have been in the current quarter, some of the unrealized losses will be reversed.

But if banks are forced to sell those bonds during a liquidity crunch, as happened during the Financial Crisis, the “unrealized losses” become real losses.
Other juicy banking nuggets from the FDIC:

Banks gobbled up US Treasuries: In Q4, banks added $93 billion to their securities holdings, bringing their securities holdings to $3.72 trillion. That $93 billion included $55 billion in Treasury securities, the largest dollar increase since Q4 2014. Their total Treasury holdings now amount to nearly $500 billion!

Total assets rose by $270 billion among those banks and thrifts, to $17.94 trillion, the most ever.

Declared dividends in Q4 rose to $52.7 billion, the most ever.

Average cost of funding – total interest expense paid on deposits, bonds, and other borrowed money as a percentage of average earning assets – rose to 0.91%. This is still so low because a lot of deposits earn zero or close to zero in interest. However, it’s up from 0.54% a year ago.

Net interest margin in Q4 rose to 3.48% the highest since 2012. In other words, banks have raised the interest rates they charge on loans more quickly than their cost of funding has ticked up.

Banks set aside $14 billion in loan-loss provisions in Q4. These are losses that banks anticipate they’d experience on their loans. It was the largest amount since Q4 2012. About 40% of all banks reported increases in their loan-loss provisions.

Net Charge offs were $13 billion from loans banks deemed uncollectable. From Q3 to Q4, charge-offs for credit cards increased by $348 million and for commercial and industrial (C&I) loans by $523 million. For other categories, including mortgages, charge-offs fell. And overall, charge offs ticked down a little from Q3.

Loan-loss reserves rose by $1 billion to $125 billion in Q4 from Q3. This increase is the result of banks charging off $13 billion and setting aside $14 billion in new loan-loss provisions. 58% of the banks increased their loan-loss provisions.

Loans 90 days or more past due declined by $1 billion in Q4 from Q3. This quarter-over-quarter decline was mostly a result of two opposing factors: declines of past-due balances on residential mortgages (-$2 billion) and C&I loans (-$554 million); and increases of past-due balances on credit cards ($1.6 billion). These rising credit card delinquencies are starting to crop up everywhere.

So, it’s still a good time to be a bank – especially since $251 billion “paper losses” don’t need to be included in net income. But loan-loss provisions are starting to indicate that the credit cycle has turned, and that banks are preparing little by little for the next phase in the cycle.

Unless there is a sudden catastrophic event, hiring trends don’t go from awesome to shitty in just one month. Read.…  Why I’m Not in Panic Yet About the Lousy “20,000 Jobs Created”
Title: 🏦 Inside the Fed's balance sheet in four charts
Post by: RE on March 21, 2019, 12:47:56 AM
https://www.reuters.com/article/us-usa-fed-balancesheet-graphic/inside-the-feds-balance-sheet-in-four-charts-idUSKCN1R130J (https://www.reuters.com/article/us-usa-fed-balancesheet-graphic/inside-the-feds-balance-sheet-in-four-charts-idUSKCN1R130J)

Business News
March 20, 2019 / 4:04 PM / Updated 6 hours ago
Inside the Fed's balance sheet in four charts
Dan Burns

4 Min Read

WASHINGTON (Reuters) - The Federal Reserve will remain the top holder of U.S. Treasuries for the foreseeable future after the central bank said it would stop shrinking its $4 trillion balance sheet by the end of September.

(https://si.wsj.net/public/resources/images/BN-VO303_3fham_OR_20171012102221.jpg?width=620&height=420)
FILE PHOTO: U.S. Federal Reserve Chairman Jerome Powell holds a news conference following the two-day Federal Open Market Committee (FOMC) policy meeting in Washington, U.S., March 20, 2019. REUTERS/Jonathan Ernst

So just what is inside this vast holding of assets?

Before the financial crisis struck in late 2007, the Fed’s balance sheet was less than a quarter of its current size and consisted almost entirely of Treasury securities.

Then, to help foster an economic recovery, the Fed went on a buying binge that ran from the end of 2008 to late 2014 in three phases, a program known as quantitative easing (QE). It bought a mix of Treasuries and mortgage-backed securities (MBS) and over those six years its balance sheet mushroomed nearly five-fold.

Today, Treasuries account for just 55 percent of the assets on the Fed’s balance sheet. The other big chunk is MBS at about 40 percent. The remainder is a hodge-podge of other assets, including gold.

The Fed would like to get back to a balance sheet consisting mostly of Treasuries.

(GRAPHIC: The Federal Reserve's balance sheet - tmsnrt.rs/2ULcay0)

But not all Treasuries are the same. These securities range in maturity from 1-month bills to 30-year bonds, and the Fed has held a different mix of these over time.

Ahead of the crisis, its preference was for short-term securities such as T-bills, which mature in a year or less, and shorter-dated notes, typically maturing in no more than five years.

The needs of the QE program changed that, and the program’s priorities also shifted over time. The result was that the composition of the Treasuries portfolio is markedly different today than it was a decade ago.

(GRAPHIC: How the Fed's Treasury portfolio has changed - tmsnrt.rs/2HzaYdX)

Before the crisis, for instance, notes maturing between five and 10 years accounted for just 7 percent of the Fed’s Treasury holdings, and the longest-term securities, maturing in 10 years or more, were around 10 percent of that portfolio.

The five-to-10 year sector shot up to as much as 52 percent of the portfolio by early 2013 when the Fed was making a concerted effort to lengthen its maturity profile to pressure long-term bond yields lower and boost the housing market. The longest-dated bonds grew to account for 25 percent, and its holding of T-bills dropped to effectively zero.

Today, the Fed’s stash of five-to-10 year paper is again its smallest bucket, just over 11 percent. Interestingly it has kept its holdings of long-dated bonds steady, and as the balance sheet has shrunk the share has risen to nearly 30 percent.

(GRAPHIC: The Fed's Treasury holdings by maturity - tmsnrt.rs/2Hv6Iwd)

In his press conference detailing the Fed’s plans for its balance sheet over the long term, Fed Chairman Jerome Powell said he would like to see the overall balance sheet continue to shrink a bit more relative to the U.S. economy.
FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

At its peak, the balance sheet was the equivalent of roughly 25 percent of annual U.S. economic output compared with around 6 percent before the crisis.

As a percentage of nominal gross domestic output, the balance sheet today is just 20 percent of the nearly $21 trillion U.S. economy.

Powell and his colleagues at the Fed would like to see it get down to about 17 percent, at which time they would likely begin growing the portfolio again at a pace to maintain that balance sheet-to-GDP ratio over the long term.

(GRAPHIC: The Fed's balance sheet was a quarter of GDP - tmsnrt.rs/2HvdrGt)
Title: Re: Da Fed: Central Banking According to RE
Post by: K-Dog on March 21, 2019, 09:14:31 AM
Forever FED financial talk has been about 'ratios' and the need to get them right.  I think the only ratio that is really being tuned here is the ratio of smoke to air they want to blow up our ass.
Title: 📉 Stocks Indexes Drop As Bond Market Flashes Recession Warning
Post by: RE on March 23, 2019, 12:06:03 AM
https://www.npr.org/2019/03/22/706073410/stocks-indexes-drop-as-bond-market-flashes-recession-warning (https://www.npr.org/2019/03/22/706073410/stocks-indexes-drop-as-bond-market-flashes-recession-warning)

Business
Stocks Indexes Drop As Bond Market Flashes Recession Warning

March 22, 20199:48 PM ET
Scott Horsley 2010

(https://media.npr.org/assets/img/2019/03/22/gettyimages-1137624930-79a5b04aa4ec3403e7fab1f6d44f2dafe561ffaf-s800-c85.jpg)

Major U.S. stock indexes fell Friday as short-term Treasury yields exceeded those on long-term bonds, in what some analysts consider a sign that a recession may be coming.
Spencer Platt/Getty Images

The stock market tumbled Friday as investors digested an ominous warning sign: Interest rates on long-term government debt fell below the rate on short-term bills. That's often a signal that a recession is on the horizon.

The Dow Jones Industrial Average fell more than 460 points Friday, or about 1.8 percent. The broader S&P 500 index fell 1.9 percent.

Ordinarily, the yield on long-term debt is higher, just as 10-year certificates of deposit tend to pay higher interest rates than 3-month CDs.
Are We Ready For A Recession?
Planet Money
Are We Ready For A Recession?

Bond watchers get nervous when that typical pattern is turned on its head.

"We don't see that occur that often, but when it does, it's almost always bad news," said Campbell Harvey, a professor of finance at Duke University.

That's why warning lights started flashing Friday morning when the yield on the 10-year Treasury note slipped below that of the three-month bill. The last time that happened was just before the Great Recession.

Harvey's been keeping a close eye on these rare, "inverted" yield curves for more than 30 years, and treats them as a kind of early warning signal.

"My indicator has successfully predicted four of the last four recessions," he said, "including a pretty important call before the global financial crisis."

Harvey won't actually forecast a recession unless the yield curve stays inverted for at least three months. But even a flat curve — in which long-term yields are just slightly above short-term yields — could be an indicator the economy is losing steam.
Fed Signals Rate Hikes May Be Over For 2019
Economy
Fed Signals Rate Hikes May Be Over For 2019

"It might be that we dodge a recession, but the economic growth will be lower — much lower," Harvey said.

On Wednesday, the Federal Reserve lowered its own forecast of economic growth, to just over 2 percent for the year and signaled that it was unlikely to raise interest rates in 2019.

Fed Chairman Jerome Powell said slowing growth in China and Europe present "headwinds" for the U.S. economy. And ongoing trade disputes are not helping. "There's a fair amount of uncertainty," Powell said.

The unemployment rate is at a low 3.8 percent, but the economy added only 20,000 jobs in February. That was far less than projected by economists and the smallest gain since September 2017.
Title: Re: 📉 Stocks Indexes Drop As Bond Market Flashes Recession Warning
Post by: Eddie on March 23, 2019, 09:54:24 AM
https://www.npr.org/2019/03/22/706073410/stocks-indexes-drop-as-bond-market-flashes-recession-warning (https://www.npr.org/2019/03/22/706073410/stocks-indexes-drop-as-bond-market-flashes-recession-warning)

Business
Stocks Indexes Drop As Bond Market Flashes Recession Warning

March 22, 20199:48 PM ET
Scott Horsley 2010

(https://media.npr.org/assets/img/2019/03/22/gettyimages-1137624930-79a5b04aa4ec3403e7fab1f6d44f2dafe561ffaf-s800-c85.jpg)

Major U.S. stock indexes fell Friday as short-term Treasury yields exceeded those on long-term bonds, in what some analysts consider a sign that a recession may be coming.
Spencer Platt/Getty Images

The stock market tumbled Friday as investors digested an ominous warning sign: Interest rates on long-term government debt fell below the rate on short-term bills. That's often a signal that a recession is on the horizon.

The Dow Jones Industrial Average fell more than 460 points Friday, or about 1.8 percent. The broader S&P 500 index fell 1.9 percent.

Ordinarily, the yield on long-term debt is higher, just as 10-year certificates of deposit tend to pay higher interest rates than 3-month CDs.
Are We Ready For A Recession?
Planet Money
Are We Ready For A Recession?

Bond watchers get nervous when that typical pattern is turned on its head.

"We don't see that occur that often, but when it does, it's almost always bad news," said Campbell Harvey, a professor of finance at Duke University.

That's why warning lights started flashing Friday morning when the yield on the 10-year Treasury note slipped below that of the three-month bill. The last time that happened was just before the Great Recession.

Harvey's been keeping a close eye on these rare, "inverted" yield curves for more than 30 years, and treats them as a kind of early warning signal.

"My indicator has successfully predicted four of the last four recessions," he said, "including a pretty important call before the global financial crisis."

Harvey won't actually forecast a recession unless the yield curve stays inverted for at least three months. But even a flat curve — in which long-term yields are just slightly above short-term yields — could be an indicator the economy is losing steam.
Fed Signals Rate Hikes May Be Over For 2019
Economy
Fed Signals Rate Hikes May Be Over For 2019

"It might be that we dodge a recession, but the economic growth will be lower — much lower," Harvey said.

On Wednesday, the Federal Reserve lowered its own forecast of economic growth, to just over 2 percent for the year and signaled that it was unlikely to raise interest rates in 2019.

Fed Chairman Jerome Powell said slowing growth in China and Europe present "headwinds" for the U.S. economy. And ongoing trade disputes are not helping. "There's a fair amount of uncertainty," Powell said.

The unemployment rate is at a low 3.8 percent, but the economy added only 20,000 jobs in February. That was far less than projected by economists and the smallest gain since September 2017.

Pretty much right on time for my prediction of the last five years...that 2020-2021 would be a bottom, maybe the next crash.

The thing that is different now was pointed out by Marty Armstrong some months ago....there is nowhere for big money to hide now, so a lot of it stays in stocks, more than we used to see.

Crypstos will change that.
Title: 💰 Stephen Moore Gets Something Right: It’s Capitalism vs. Democracy
Post by: RE on April 21, 2019, 03:53:50 AM
https://www.counterpunch.org/2019/04/19/stephen-moore-gets-something-right-its-capitalism-vs-democracy/ (https://www.counterpunch.org/2019/04/19/stephen-moore-gets-something-right-its-capitalism-vs-democracy/)

April 19, 2019
Stephen Moore Gets Something Right: It’s Capitalism vs. Democracy
by Paul Street

(https://uziiw38pmyg1ai60732c4011-wpengine.netdna-ssl.com/wp-content/dropzone/2017/08/IMG_8810.jpg)
Photo by Nathaniel St. Clair

Capitalism is a lot more important than democracy. I’m not even a big believer in democracy.

– Stephen Moore, a potential future member of the Federal Reserve Board

The dominant American ideology has long claimed that capitalism is about democracy. It isn’t – and one need not be an anti-capitalist “radical” to know better. My old copy of Webster’s New Twentieth Century Dictionary defines capitalism as “the economic system in which all or most of the means of production and distribution … are privately owned and operated for profit, originally under fully competitive conditions: it has been generally characterized by a tendency toward concentration of wealth and, [in] its latter phase, by the growth of great corporations, increased government controls, etc.”

There’s nothing—nada, zero, zip—about popular self-rule (democracy) in that definition. And there shouldn’t be. “Democracy and capitalism have very different beliefs about the proper distribution of power,” liberal economist Lester Thurow noted in the mid-1990s: “One [democracy] believes in a completely equal distribution of political power, ‘one man, one vote,’ while the other [capitalism] believes that it is the duty of the economically fit to drive the unfit out of business and into extinction. … To put it in its starkest form, capitalism is perfectly compatible with slavery. Democracy is not.”

Thurow might have added that capitalism is perfectly compatible with fascism, racism, nativism, sexism, militarism, and imperialism among other authoritarian and anti-democratic forces and formations. More than being merely compatible with slavery, moreover, U.S.-American capitalism arose largely on the basis of the Black cotton slave system in the nation’s pre-Civil War South. This is demonstrated at length in historian Edward Baptist’s prize-winning study The Half Has Never Been Told: Slavery and the Making of American Capitalism.

“We must make our choice,” onetime Supreme Court Justice Louis Brandeis is reputed to have said or written: “We may have democracy in this country, or we may have wealth concentrated in the hands of a few, but we cannot have both.” This statement (whoever made it) was perhaps unintentionally anti-capitalist. Consistent with Webster’s(above), the historically astute French economist Thomas Piketty has shown that capitalism has always been inexorably pulled toward the concentration of wealth into ever fewer hands.

Anyone who thinks capitalism is about democracy ought to take a working-class job and report back on how much they and their fellow workers’ opinions matter in the design and execution of their work, the compensation they receive, and the overall management and conduct of their employers’ firms. As Alexandria Ocasio-Cortez has remarked, people living under the “irredeemable” (her word) system of capitalism “check [their] rights at the door when they cross the threshold into the workplace.”  Karl Marx wrote brilliantly about the “hidden abode” and veiled “despotism” of the capitalist workplace, where employees perform typically narrow and alienating, life-shortening tasks conceived and devised with no higher purpose in mind than the upward transfer of wealth to the investor class. There’s no democracy on an Iowa Beef Processors killing floor or a Wal-Mart check-out line.

The tyranny continues beyond the workplace. Workers who do or say anything their employers don’t like off as well as on the job put their employment and the benefits associated with their hire – commonly including their health insurance and that of their families (no small matter) – at risk.

Public opinion on numerous key issues is largely irrelevant under American capitalism.  Most U.S.-Americans have long wanted the progressive and social-democratic agenda advanced by Bernie Sanders and Alexandria Ocasio-Cortez: guaranteed free and quality health care for all; a drastically increased minimum wage; a significant reduction of the nation’s extreme economic inequalities; free college tuition; the removal of private money from public elections; large-scale green jobs programs to provide decent employment and help avert environmental catastrophe; massive investment in public schools and housing, and more.  Most U.S.-Americans would go beyond Sanders and agree to drastic reductions in the U.S. Pentagon budget to help (along with increased taxes on the preposterously wealthy and under-taxed Few) pay for these and other good things. Most U.S.-Americans think public opinion ought to influence policy every day, not just on those occasional and brief, savagely time-staggered moments when “we the people” supposedly get meaningful egalitarian “input” by marking ballots filled with the names of major party candidates who have generally been pre-approved by the nation’s unelected dictatorship of money.

But so what? Who cares? The commoners don’t call the shots under capitalism.  They never have and they never will. Universal suffrage was granted in the West only with the understanding that commoners’ participation in “democratic” politics would not challenge the underlying persistence of bourgeois class rule. That rule is guaranteed through elite corporate and financial sector control and manipulation of various power levers (please see Chapter 5, titled “How They Rule: The Many Modes of Moneyed Class Power” in my 2014 book They Rule: The 1% v. Democracy) including but hardly limited to campaign contributions, lobbying, media ownership, and the investment and “job creation” function.

How curious it is, then, to behold corporate cable news talking heads seem stunned to report that the openly authoritarian real estate mogul and creeping fascist U.S. president Donald Trump has nominated someone for the Federal Reserve Board who believes that “capitalism is more important than democracy.” The nominee, Stephen Moore, was recently featured as follows in a disapproving CNN report:

“Moore, who President Donald Trump announced last month as his nominee for the Federal Reserve Board of Governors, has a history of advocating self-described ‘radical’ views on the economy and government….In speeches and radio interviews reviewed by CNN’s KFile, Moore advocated for eliminating the corporate and federal income taxes entirely, calling the 16th Amendment that created the income tax the ‘most evil’ law passed in the 20th century.”

“Moore’s economic worldview envisions a slimmed down government and a rolled back social safety net. He has called for eliminating the Departments of Labor, Energy and Commerce, along with the IRS and the Consumer Finance Protection Bureau. He has questioned the need for both the Department of Housing and Urban Development and the Department of Education. He has said there’s no need for a federal minimum wage, called for privatizing the ‘Ponzi scheme’ of Social Security and said those on government assistance lost their dignity and meaning.”

“…Moore has repeatedly said he believes capitalism is more important than democracy. In an interview for Michael Moore’s 2009 film Capitalism: A Love Story, Moore said hewasn’t a big believer in democracy. ‘Capitalism is a lot more important than democracy,’ Moore said. ‘I’m not even a big believer in democracy. I always say that democracy can be two wolves and a sheep deciding on what to have for dinner. Look, I’m in favor of people having the right to vote and things like that…Speaking on the Thom Hartmann Show in 2010…Moore … [said] …Saudi Arabia wouldn’t be better off as a democracy.

“‘I think [that without] capitalism, without free market capitalism, countries don’t get rich,’ Moore said, when asked if capitalism was more important than democracy. ‘And so I would rather have a country that’s based on, you know, a free enterprise system of property rights and free exchange of free trade of low tax rates’…Moore told CNN’s KFile, ‘I believe in free market capitalism and representative government. It is what has made America the greatest nation…on earth’” (emphasis added).

Many U.S.-Americans would feel painful cognitive dissonance after reading this news item. “What,” these indoctrinated citizens could exclaim: “he says he prefers capitalism to democracy?  What’s that’s about? Capitalismisdemocracy.”

No, it is not. Not at all. And, to repeat, you don’t have to be a radical critic of capitalism (like the present writer) to acknowledge this.  You can get it and be a prominent liberal academic like the late Lester Thurow (who wasn’t too critical of wealth-concentrating capitalism to charge $30,000 per speaking engagementin his heyday) or a right-wing political hacklike Stephen Moore.

(Many American capitalist “elites” and propagandists who routinely conflate the profits system with democracy probably know it’s a false equation but have learned to pretend otherwise. Some have likely learned so well that they’ve have crossed over into actually believing in the bogus conflation.)

Whether out of clumsiness or out of heartfelt candor, the clownish Moore publicly drops the doctrinal pretense that capitalism and democracy are the same thing. (Note that he supports “people having the right to vote” even as he states his preference for capitalism over democracy.  That is an acknowledgement that universal suffrage and periodic elections don’t necessarily translate into any real popular threat to his beloved regime of class rule.  This goes back to the birth of so-called bourgeois democracy: widespread voting is fine as long as the electoral partaking of the common people doesn’t threaten real capitalist authority.)

Moore drops the ball, however, when he identifies the profits system with the “free market.” Capitalism has never been about the “free market.”  It has always involved the owners and managers of capital exercising control over the state, using it to make themselves richer and to thereby (since wealthis power, as Louis Brandeis or someone pretending to be him knew) deepen their grip on politics and policy. The profits system is so dependent on and enmeshed with governmental protection, subsidy, and giveaways that one might half-reasonably question the accuracy of calling it capitalism: it is state-capitalismat the very least. Big Business today relies on a sweeping array of oligarchic government protectionsthat are ubiquitous across governments: patent, trademark and copyright laws that monopolize profitable knowledge; multiple and many-sided direct and indirect subsidies; ubiquitous regressive tax breaks, credit shelters and loopholes; regressive austerity measures; multiple and often complex debt mechanisms; economic, environmental and social deregulation, and ubiquitous privatization; control of central government banks.

One key part of the U.S.-American capitalist state is the Federal Reserve, on whose board Moore may soon sit. As the left economist Michael Hudson has explained, the Fed influences interest rates by “creating bank reserves at low give-away charges” and thereby “enables banks to make easy gains simply by borrowing from it and leaving the money on deposit to earn interest (which has been paid since the 2008 crisis to help subsidize the banks, mainly the largest ones). The effect is to fund the asset markets – bonds, stocks and real estate – not the economy at large”

Stephen “free market” Moore isn’t against government per se. He’s against any and all parts of government that serve the working-class majority, the poor, and the common good over the holy profits of the wealthy Few.  He’s all for those parts of government that expand those profits.

As anyone with political knowledge and common sense knows, moreover, Moore’s mission on the Fed board – the reason that Trump has nominated him – would be to advance  Trump’s political re-election agenda by pushing the president’s absurd claim that the Fed is pursuing a “tight money” (high interest rate) policy. The Fed is doing no such thing, but Trump says it is in what The Washington Post’s editorial board has rightly called “an anticipatory blame game for any economic slowdown that may develop.”

Still, give Stephen Moore some credit: he doesn’t mind going public with an elementary if sadly scandalous fact of social and political life past and present: capitalism and democracy work at cross purposes with each other.  Imagine that!
Title: Re: 💰 Stephen Moore Gets Something Right: It’s Capitalism vs. Democracy
Post by: Eddie on April 21, 2019, 07:18:09 AM
https://www.counterpunch.org/2019/04/19/stephen-moore-gets-something-right-its-capitalism-vs-democracy/ (https://www.counterpunch.org/2019/04/19/stephen-moore-gets-something-right-its-capitalism-vs-democracy/)

April 19, 2019
Stephen Moore Gets Something Right: It’s Capitalism vs. Democracy
by Paul Street

(https://uziiw38pmyg1ai60732c4011-wpengine.netdna-ssl.com/wp-content/dropzone/2017/08/IMG_8810.jpg)
Photo by Nathaniel St. Clair

Capitalism is a lot more important than democracy. I’m not even a big believer in democracy.

– Stephen Moore, a potential future member of the Federal Reserve Board

The dominant American ideology has long claimed that capitalism is about democracy. It isn’t – and one need not be an anti-capitalist “radical” to know better. My old copy of Webster’s New Twentieth Century Dictionary defines capitalism as “the economic system in which all or most of the means of production and distribution … are privately owned and operated for profit, originally under fully competitive conditions: it has been generally characterized by a tendency toward concentration of wealth and, [in] its latter phase, by the growth of great corporations, increased government controls, etc.”

There’s nothing—nada, zero, zip—about popular self-rule (democracy) in that definition. And there shouldn’t be. “Democracy and capitalism have very different beliefs about the proper distribution of power,” liberal economist Lester Thurow noted in the mid-1990s: “One [democracy] believes in a completely equal distribution of political power, ‘one man, one vote,’ while the other [capitalism] believes that it is the duty of the economically fit to drive the unfit out of business and into extinction. … To put it in its starkest form, capitalism is perfectly compatible with slavery. Democracy is not.”

Thurow might have added that capitalism is perfectly compatible with fascism, racism, nativism, sexism, militarism, and imperialism among other authoritarian and anti-democratic forces and formations. More than being merely compatible with slavery, moreover, U.S.-American capitalism arose largely on the basis of the Black cotton slave system in the nation’s pre-Civil War South. This is demonstrated at length in historian Edward Baptist’s prize-winning study The Half Has Never Been Told: Slavery and the Making of American Capitalism.

“We must make our choice,” onetime Supreme Court Justice Louis Brandeis is reputed to have said or written: “We may have democracy in this country, or we may have wealth concentrated in the hands of a few, but we cannot have both.” This statement (whoever made it) was perhaps unintentionally anti-capitalist. Consistent with Webster’s(above), the historically astute French economist Thomas Piketty has shown that capitalism has always been inexorably pulled toward the concentration of wealth into ever fewer hands.

Anyone who thinks capitalism is about democracy ought to take a working-class job and report back on how much they and their fellow workers’ opinions matter in the design and execution of their work, the compensation they receive, and the overall management and conduct of their employers’ firms. As Alexandria Ocasio-Cortez has remarked, people living under the “irredeemable” (her word) system of capitalism “check [their] rights at the door when they cross the threshold into the workplace.”  Karl Marx wrote brilliantly about the “hidden abode” and veiled “despotism” of the capitalist workplace, where employees perform typically narrow and alienating, life-shortening tasks conceived and devised with no higher purpose in mind than the upward transfer of wealth to the investor class. There’s no democracy on an Iowa Beef Processors killing floor or a Wal-Mart check-out line.

The tyranny continues beyond the workplace. Workers who do or say anything their employers don’t like off as well as on the job put their employment and the benefits associated with their hire – commonly including their health insurance and that of their families (no small matter) – at risk.

Public opinion on numerous key issues is largely irrelevant under American capitalism.  Most U.S.-Americans have long wanted the progressive and social-democratic agenda advanced by Bernie Sanders and Alexandria Ocasio-Cortez: guaranteed free and quality health care for all; a drastically increased minimum wage; a significant reduction of the nation’s extreme economic inequalities; free college tuition; the removal of private money from public elections; large-scale green jobs programs to provide decent employment and help avert environmental catastrophe; massive investment in public schools and housing, and more.  Most U.S.-Americans would go beyond Sanders and agree to drastic reductions in the U.S. Pentagon budget to help (along with increased taxes on the preposterously wealthy and under-taxed Few) pay for these and other good things. Most U.S.-Americans think public opinion ought to influence policy every day, not just on those occasional and brief, savagely time-staggered moments when “we the people” supposedly get meaningful egalitarian “input” by marking ballots filled with the names of major party candidates who have generally been pre-approved by the nation’s unelected dictatorship of money.

But so what? Who cares? The commoners don’t call the shots under capitalism.  They never have and they never will. Universal suffrage was granted in the West only with the understanding that commoners’ participation in “democratic” politics would not challenge the underlying persistence of bourgeois class rule. That rule is guaranteed through elite corporate and financial sector control and manipulation of various power levers (please see Chapter 5, titled “How They Rule: The Many Modes of Moneyed Class Power” in my 2014 book They Rule: The 1% v. Democracy) including but hardly limited to campaign contributions, lobbying, media ownership, and the investment and “job creation” function.

How curious it is, then, to behold corporate cable news talking heads seem stunned to report that the openly authoritarian real estate mogul and creeping fascist U.S. president Donald Trump has nominated someone for the Federal Reserve Board who believes that “capitalism is more important than democracy.” The nominee, Stephen Moore, was recently featured as follows in a disapproving CNN report:

“Moore, who President Donald Trump announced last month as his nominee for the Federal Reserve Board of Governors, has a history of advocating self-described ‘radical’ views on the economy and government….In speeches and radio interviews reviewed by CNN’s KFile, Moore advocated for eliminating the corporate and federal income taxes entirely, calling the 16th Amendment that created the income tax the ‘most evil’ law passed in the 20th century.”

“Moore’s economic worldview envisions a slimmed down government and a rolled back social safety net. He has called for eliminating the Departments of Labor, Energy and Commerce, along with the IRS and the Consumer Finance Protection Bureau. He has questioned the need for both the Department of Housing and Urban Development and the Department of Education. He has said there’s no need for a federal minimum wage, called for privatizing the ‘Ponzi scheme’ of Social Security and said those on government assistance lost their dignity and meaning.”

“…Moore has repeatedly said he believes capitalism is more important than democracy. In an interview for Michael Moore’s 2009 film Capitalism: A Love Story, Moore said hewasn’t a big believer in democracy. ‘Capitalism is a lot more important than democracy,’ Moore said. ‘I’m not even a big believer in democracy. I always say that democracy can be two wolves and a sheep deciding on what to have for dinner. Look, I’m in favor of people having the right to vote and things like that…Speaking on the Thom Hartmann Show in 2010…Moore … [said] …Saudi Arabia wouldn’t be better off as a democracy.

“‘I think [that without] capitalism, without free market capitalism, countries don’t get rich,’ Moore said, when asked if capitalism was more important than democracy. ‘And so I would rather have a country that’s based on, you know, a free enterprise system of property rights and free exchange of free trade of low tax rates’…Moore told CNN’s KFile, ‘I believe in free market capitalism and representative government. It is what has made America the greatest nation…on earth’” (emphasis added).

Many U.S.-Americans would feel painful cognitive dissonance after reading this news item. “What,” these indoctrinated citizens could exclaim: “he says he prefers capitalism to democracy?  What’s that’s about? Capitalismisdemocracy.”

No, it is not. Not at all. And, to repeat, you don’t have to be a radical critic of capitalism (like the present writer) to acknowledge this.  You can get it and be a prominent liberal academic like the late Lester Thurow (who wasn’t too critical of wealth-concentrating capitalism to charge $30,000 per speaking engagementin his heyday) or a right-wing political hacklike Stephen Moore.

(Many American capitalist “elites” and propagandists who routinely conflate the profits system with democracy probably know it’s a false equation but have learned to pretend otherwise. Some have likely learned so well that they’ve have crossed over into actually believing in the bogus conflation.)

Whether out of clumsiness or out of heartfelt candor, the clownish Moore publicly drops the doctrinal pretense that capitalism and democracy are the same thing. (Note that he supports “people having the right to vote” even as he states his preference for capitalism over democracy.  That is an acknowledgement that universal suffrage and periodic elections don’t necessarily translate into any real popular threat to his beloved regime of class rule.  This goes back to the birth of so-called bourgeois democracy: widespread voting is fine as long as the electoral partaking of the common people doesn’t threaten real capitalist authority.)

Moore drops the ball, however, when he identifies the profits system with the “free market.” Capitalism has never been about the “free market.”  It has always involved the owners and managers of capital exercising control over the state, using it to make themselves richer and to thereby (since wealthis power, as Louis Brandeis or someone pretending to be him knew) deepen their grip on politics and policy. The profits system is so dependent on and enmeshed with governmental protection, subsidy, and giveaways that one might half-reasonably question the accuracy of calling it capitalism: it is state-capitalismat the very least. Big Business today relies on a sweeping array of oligarchic government protectionsthat are ubiquitous across governments: patent, trademark and copyright laws that monopolize profitable knowledge; multiple and many-sided direct and indirect subsidies; ubiquitous regressive tax breaks, credit shelters and loopholes; regressive austerity measures; multiple and often complex debt mechanisms; economic, environmental and social deregulation, and ubiquitous privatization; control of central government banks.

One key part of the U.S.-American capitalist state is the Federal Reserve, on whose board Moore may soon sit. As the left economist Michael Hudson has explained, the Fed influences interest rates by “creating bank reserves at low give-away charges” and thereby “enables banks to make easy gains simply by borrowing from it and leaving the money on deposit to earn interest (which has been paid since the 2008 crisis to help subsidize the banks, mainly the largest ones). The effect is to fund the asset markets – bonds, stocks and real estate – not the economy at large”

Stephen “free market” Moore isn’t against government per se. He’s against any and all parts of government that serve the working-class majority, the poor, and the common good over the holy profits of the wealthy Few.  He’s all for those parts of government that expand those profits.

As anyone with political knowledge and common sense knows, moreover, Moore’s mission on the Fed board – the reason that Trump has nominated him – would be to advance  Trump’s political re-election agenda by pushing the president’s absurd claim that the Fed is pursuing a “tight money” (high interest rate) policy. The Fed is doing no such thing, but Trump says it is in what The Washington Post’s editorial board has rightly called “an anticipatory blame game for any economic slowdown that may develop.”

Still, give Stephen Moore some credit: he doesn’t mind going public with an elementary if sadly scandalous fact of social and political life past and present: capitalism and democracy work at cross purposes with each other.  Imagine that!

 Universal suffrage was granted in the West only with the understanding that commoners’ participation in “democratic” politics would not challenge the underlying persistence of bourgeois class rule.

We don't have bourgeois class rule. We have rule by the corporate elites and the USMIC. You old commies need to lose the Marx rhetoric. It does not apply.
Title: Re: 💰 Stephen Moore Gets Something Right: It’s Capitalism vs. Democracy
Post by: RE on April 21, 2019, 07:35:38 AM
We don't have bourgeois class rule. We have rule by the corporate elites and the USMIC. You old commies need to lose the Marx rhetoric. It does not apply.

I didn't write that article.  I have no control over his choice of terminology.  Personally, you won't find that stuff in my writing, because I am not a "Marxist", although as I like to say I am further "left" than Che Fucking Guevara. lol.  However, the spirit of what he writes is basically correct.

Insofar as rule by the Corporate Elites versus "petty bourgeois" is concerned,  I'm not going to go down that road because I know where it leads with you.  Suffice it to say, the petty bourgeois are enablers of the rule by the corporate elite and they profit from that position.

RE
Title: Re: Da Fed: Central Banking According to RE
Post by: Eddie on April 21, 2019, 07:42:22 AM
The bourgeosisie are the ones keeping this Titanic afloat. Yeah, they're mostly elite wannabes, but being bourgeois is not in itself a crime, and what we have is far from rule by the bourgeoisie.

These commies just can't turn loose of their Marx. Stupid if you ask me.
Title: Re: Da Fed: Central Banking According to RE
Post by: RE on April 21, 2019, 09:12:07 AM
These commies just can't turn loose of their Marx. Stupid if you ask me.

I'm not asking you.  Maybe somebody else will though.

Capitalist Pigs don't turn loose of Adam Smith, Gold Bugs don't turn loose of Von Mises, Buddhists don't turn loose of Alan Watts, anti-SJWs don't turn loose of Jordan Peterson, Fundies don't turn loose of Jesus etc.  Most people have some acknowledged "expert" they rely on to explain their beliefs.  I'm not one of those people.  I do my own explaining.

RE
Title: 🏦 Deutsche Bank Cuts Full-Year Revenue Outlook After Ending Merger Talks
Post by: RE on May 01, 2019, 12:24:27 AM
I wonder how DBank's shares will do after they release Trumpovetsky's records?   ???   :icon_scratch:

RE

http://www.youtube.com/v/YQUV2J2lHDM
Title: 📉 The Apparent Surge in America’s Rate of Economic Growth (GDP): The Facts
Post by: RE on May 01, 2019, 12:41:38 AM
https://www.globalresearch.ca/us-1st-quarter-gdp-analysis-facts/5676033 (https://www.globalresearch.ca/us-1st-quarter-gdp-analysis-facts/5676033)

The Apparent Surge in America’s Rate of Economic Growth (GDP): The Facts Behind the Hype
By Dr. Jack Rasmus
Global Research, April 30, 2019
Region: USA
Theme: Global Economy


(https://www.globalresearch.ca/wp-content/uploads/2019/04/US-GDP.jpg)
Last week’s US GDP for the 1st quarter 2019 preliminary report (2 more revisions coming) registered a surprising 3.2% annual growth rate. It was forecast by all the major US bank research departments and independent macroeconomic forecasters to come in well below 2%. Some banks forecast as low as 1.1%. So why the big difference?

One reason may be the problems with government data collection in the first quarter with the government shutdown that threw data collection into a turmoil. First preliminary issue of GDP stats are typically adjusted significantly in the second revision, coming in future weeks. (The third revision, months later, often is little changed).

There are many problems with GDP accuracy reflecting the real trends and real GDP that many economists have discussed at length elsewhere. My major critique is the redefinition in 2013 that added at least 0.3% (and $500b a year) to GDP totals by simply redefining what constituted investment. Another chronic problem is how the price index, the GDP Deflator as it’s called, grossly underestimates inflation and thus the price adjustment to get the 3.2% ‘real’ GDP figure reported. In this latest report, the Deflator estimated inflation of only 1.9%. If actual inflation were higher, which it is, the 3.2% would be much lower, which it should. There are many other problems with GDP, such as the government including in their calculation totals the ‘rent’ that 50 million homeowners with mortgages reputedly ‘pay to themselves’.

Apart from these definitional issues and data collection problems in the first quarter, underlying the 3.2% are some red flags revealing that the 3.2% is the consequence of temporary factors, like Trump’s trade war, which is about to come to an end next month with the conclusion of the US-China trade negotiations. How does the trade war boost GDP temporarily?

(https://www.bea.gov/system/files/inline-images/gdp1q19_adv.png)
Real GDP: Percent change from preceding quarter
Source: US Bureau of Economic Analysis

Two ways at least. First, it pushes corporations to build up inventories artificially to get the cost of materials and semi-finished goods before the tariffs begin to hit. Second, trade disputes initially result in lower imports while negotiations are underway. In the latest US GDP analysis reported last week, lower imports resulted in what’s called higher ‘net exports’ (i.e. the difference between imports and exports). Net exports contribute to GDP. The US economy could be slowing in terms of output and exports, but if imports decline faster it appears that ‘net exports’ are rising and therefore so too is GDP from trade.
Trump at the UN: Lies, Damn Lies, & Statistics

Looking behind the 1st quarter numbers it is clear that the 3.2% is largely due to excessive rising business inventories and rising net exports contributions to GDP.

Net exports contributed 1.03% to the 3.2% and inventories another 0.65% to the 3.2%. That is, over half.  Even the Wall St. Journal reported that without these temporary contributions (both will abate in future months sharply), US GDP in the quarter would have been only 1.3%. (And less if adjusted more accurately for inflation and if the 2013 phony redefinitions were also ‘backed out’).

US GDP in reality probably grew around the 1.1% forecasted by the research departments of the big US banks.

This analysis is supported by the fact that around 75% of the US economy and GDP is due to business investment and household consumption typically. And both consumption and investment are by far the primary sources of GDP. (The rest is from government spending and ‘net exports).

Consumer spending (68% of GDP) rose only by 1.2% last quarter and thereby contributed only 0.82% of the 3.2%. That’s only one fourth of the 3.2%, when consumption, given its size in the economy, should contribute 68%!

Durable manufactured goods collapsed by -5.3% and autos sales are in freefall. And all this during tax refund season which otherwise boosts spending. (Thus confirming middle class refunds due to Trump tax cuts have been sharply reduced due to Trump’s 2018 tax act).

Similarly private business investment contributed only a tepid 0.27% of the 3.2%, well below its average for GDP share.

Business investment is composed of building structures (including housing), private equipment, software and the nebulously defined ‘intellectual property’, and of course the business inventories previously mentioned. The structures and equipment categories are by far the largest categories of business investment. However, in the first quarter 2019, structures declined by -0.8%, housing by -2.8% and equipment investment rose only a statistically insignificant 0.2%.

This poor contribution of business investment contributing only 2.7% to GDP, when the long term historical average is about 8-10% normally, is all the more interesting given that Trump projected a 30% boost to GDP is his business-investor-multinational corporate heavy 2018 tax cuts were passed. 2.7% is a long way off 30%! The tax cuts for business didn’t flow into real investment, in other words. (They went instead into stock buybacks, dividend payments, and mergers and acquisitions of competitors). And they compressed household consumer spending to boot.

Since Trump’s tax cuts, there’s been virtually no increase in the rate of Gross private domestic investment in the US. It’s held steady at around 5% of GDP on average since mid-2017. Within that 5%, housing and business equipment contributions have been falling, while IP (hard to estimate) and inventories have been rising.

In short, both Consumer spending and core business investment contributions to US GDP have been slowing, and that’s true within the recent 1st quarter US 3.2% GDP.

In other words, 1st quarter GDP rose  due to the short term, and temporary contributions to inventories and net exports–both driven artificially by Trump’s trade wars.

The only other major contribution to first quarter GDP is, of course, Trump war spending which rose by 4.1% in 1st quarter GDP. (Conversely, nondefense spending was reduced -5.9% in the first quarter GDP).

Going forward in 2019, no doubt war spending will continue to increase, but business inventories and household consumption will continue to weaken. Meanwhile, business investment on structures, housing, and equipment and household consumption will continue to remain weak at best.

Trump is betting on his 2020 re-election and preventing the next recession now knocking at the US and global economy door. He will keep defense spending growing by hundreds of billions of dollars. He’ll hope that concluding his trade wars will give the economy a temporary boost. And he’ll up the pressure on the Federal Reserve to cut interest rates before year end.

Summing up, beneath the surface of the US economy the major categories of US GDP–business structures, housing, business equipment, and household consumer spending (especially on durables and autos)–will continue to weaken. Whether war spending, the Fed, and trade deals can offset these more fundamental weakening forces remains to be seen.

Bottom line, therefore, the 3.2% GDP is no harbinger of a growing economy. Quite the contrary. It is artificial and due to temporary forces that are likely about to change. It all depends on further war spending, browbeating the Fed into further submission to lower rates, and what happens with the trade negotiations.
Title: 📉 Federal Reserve Chair Jerome Powell may have just killed the stock market mel
Post by: RE on May 03, 2019, 12:42:55 AM
https://finance.yahoo.com/news/federal-reserve-chair-jerome-powell-may-have-just-killed-the-stock-market-meltup-164314401.html (https://finance.yahoo.com/news/federal-reserve-chair-jerome-powell-may-have-just-killed-the-stock-market-meltup-164314401.html)

Federal Reserve Chair Jerome Powell may have just killed the stock market melt-up
Brian Sozzi
Editor-at-Large
Yahoo Finance May 2, 2019

http://www.youtube.com/v/Vo3yVdp7xK4

Federal Reserve Chair Jerome Powell — forever a market mover — may have just put a dagger right through the heart of the bulls that are blindly buying stocks right now at dangerously higher valuations.

Powell’s comments on Fed day may have set a short-term top in markets, explained Miller Tabak equity strategist Matt Maley on Yahoo Finance’s The First Trade.

“The market could see a breather here,” Maley added.

While the Fed lived up to expectations on Wednesday by leaving interest rates unchanged, it was Powell’s somewhat hawkish comments on inflation that could upset the bull thesis that has enveloped the market in recent weeks.

“We suspect transitory factors may be at work,” Powell told reporters after the Fed’s rate decision. The word “transitory” was viewed by traders as a sign that the Fed would not deliver the interest rate cut later this year that had been priced into stock valuations.

The Dow Jones Industrial Average fell 162 points on Wednesday following Powell’s remarks. Selling pressure persisted into Thursday, with the Dow reversing early gains to drop by 150 points by midday trading.

Investors rotated into more defensive names such as McDonald’s, Procter & Gamble, Verizon Communications and Merck.

That rotation is counter to the action for most of April, where riskier areas of the market were bid up. It was just a few days ago that Microsoft and Apple touched trillion dollar market caps again, a combination of good first quarter results and the specter of low interest rates well into 2020.

Obviously, the reduced prospect of a rate cut theoretically should dent the case to buy stocks at much higher valuations than earlier this year.

Watch that VIX Index, people.

Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
Title: Starting In 2024, All US Debt Issuance Will Be Used To Pay For Interest On Debt
Post by: azozeo on May 03, 2019, 09:54:44 AM


While it is common knowledge that the US budget deficit is soaring even though the US economy is allegedly growing at a brisk, mid-2% pace, resulting in recurring bond trader nightmares about funding the growing twin US deficits (Budget and Current Account), what few people know is the increasingly ominous composition of this budget deficit.

As we first pointed out one month ago, when looking at the US 'income statement', most concerning by far is that for the first four months of fiscal year 2019, interest payments on the U.S. national debt hit $221 billion, 9% more than in the same five-month period last year, with the rate of increase breathtaking (see chart below). As a reminder, according to the Treasury's conservative budget estimates, interest on the U.S. public debt is on track to reach a record $591 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to almost 3% of estimated GDP, the highest percentage since 2011.

https://www.zerohedge.com/news/2019-05-01/minsky-moment-starting-2024-all-us-debt-issuance-will-be-used-pay-interest-debt (https://www.zerohedge.com/news/2019-05-01/minsky-moment-starting-2024-all-us-debt-issuance-will-be-used-pay-interest-debt)
Title: 💩 Deutsche Bank to set up 50 billion euro bad bank: FT
Post by: RE on June 17, 2019, 12:13:24 AM
D-Bank scrambling for survival.  But tell me, WTF is going to buy any of the DOGSHIT 💩they are loading into the "Bad Bank"?  ???   :icon_scratch:

RE

https://www.reuters.com/article/us-deutsche-bank-restructuring-usa/deutsche-bank-to-set-up-50-billion-euro-bad-bank-ft-idUSKCN1TH0S7 (https://www.reuters.com/article/us-deutsche-bank-restructuring-usa/deutsche-bank-to-set-up-50-billion-euro-bad-bank-ft-idUSKCN1TH0S7)

June 16, 2019 / 12:15 PM / Updated 7 hours ago
Deutsche Bank to set up 50 billion euro bad bank: FT

(https://image.cnbcfm.com/api/v1/image/103989532-GettyImages-545058656.jpg?v=1532564018&w=630&h=420)

(Reuters) - Deutsche Bank is planning to overhaul its trading operations by creating a “bad bank” to hold tens of billions of euros of assets and shrinking or shutting its U.S. equity and trading businesses, the Financial Times reported on Sunday.

The bad bank would house or sell assets valued at up to 50 billion euros ($56.06 billion)- after adjusting for risk - and comprise mainly long-dated derivatives, the FT reported, citing four people briefed on the plan.

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With the creation of the bad bank, Chief Executive Officer Christian Sewing is shifting the German lender away from investment banking and focusing on transaction banking and private wealth management, the newspaper said.

As part of the restructuring, the lender’s equity and rates trading units outside continental Europe will be shrunk or closed entirely, the report said.

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The bank is planning cuts at its U.S. equities business, including prime brokerage and equity derivatives, to win over shareholders unhappy about its performance, four sources familiar with the matter told Reuters in May.

“As we said at the AGM on May 23, Deutsche Bank is working on measures to accelerate its transformation so as to improve its sustainable profitability. We will update all stakeholders if and when required,” Deutsche Bank said in an emailed statement on Sunday in response to the FT report.

Sewing could announces announce the changes along with Deutsche Bank’s half-year results in late July, the FT reported.

Reporting by Ishita Chigilli Palli and Kanishka Singh in Bengaluru; Editing by Sonya Hepinstall and Peter Cooney
Title: 🏦 Is the G20 a platform for cooperation or division? | Inside Story
Post by: RE on June 30, 2019, 03:37:07 AM
It's a platform for making sure the Rich stay Rich and the Poor stay Poor.

RE

http://www.youtube.com/v/kbE00WGmRFo
Title: 🏦 Deutsche Bank will exit global equities business and slash 18,000 jobs in sw
Post by: RE on July 08, 2019, 05:40:30 AM
The Kraut Zombie Bank lives on!

RE

https://www.cnbc.com/2019/07/07/deutsche-bank-will-exit-its-global-equities-business-and-scale-back-investment-bank.html (https://www.cnbc.com/2019/07/07/deutsche-bank-will-exit-its-global-equities-business-and-scale-back-investment-bank.html)

Deutsche Bank will exit global equities business and slash 18,000 jobs in sweeping overhaul
Published an hour agoUpdated Moments Ago
Spencer Kimball @spencekimball   
   
Key Points

    Deutsche Bank announced Sunday that it will pull out of its global equities sales and trading business as part of a sweeping restructuring plan to improve its profitability.
    Deutsche will also slash 18,000 jobs for a global headcount of around 74,000 employees by 2022. The bank aims to reduce costs by 6 billion euros to 17 billion euros in coming years.
    All told, Deutsche expects its restructuring plan to cost 7.4 billion euros by the end of 2022.
    The German bank also expects to report a net loss of 2.8 billion euros in the second quarter of 2019. It will release its second quarter results on July 25, 2019.

(https://image.cnbcfm.com/api/v1/image/104463974-GettyImages-610516442.jpg?v=1532563846&w=740&h=493)
Deutsche Bank headquarters
Photo by Hannelore Foerster

Deutsche Bank announced Sunday that it will pull out of its global equities sales and trading business as part of a sweeping restructuring plan to improve its profitability.

Deutsche will also slash 18,000 jobs for a global headcount of around 74,000 employees by 2022. The bank aims to reduce costs by 6 billion euros to 17 billion euros in coming years.

The German bank announced plans to scale back investment banking, just two days after investment banking chief Garth Ritchie stepped down by “mutual agreement.”

All told, Deutsche expects its restructuring plan to cost 7.4 billion euros by the end of 2022.

The German bank also expects to report a net loss of 2.8 billion euros in the second quarter of 2019. It will release its second quarter results on July 25, 2019.

Deutsche Bank’s supervisory board met on Sunday to hash out the restructuring plan. The bank’s CEO, Christian Sewing, had broadcast “tough cutbacks” during a shareholders’ meeting in May.

The German lender once sought to compete with America’s big banks on Wall Street, but has been pummeled by scandals, investigations and massive fines stemming from the financial crisis and other issues in recent years.
Title: Treasury Secy Confirms US Risks Defaulting On Its $22 Trillion Debt in 2 months
Post by: azozeo on July 18, 2019, 11:58:11 AM


Last week, a Washington-based think tank warned of "potentially devastating economic consequences" for the US and global economies if Congress didn't pass a debt limit extension in the weeks to come.


https://sputniknews.com/us/201907141076242600-treasury-secretary-confirms-us-government-risks-default-in-as-little-as-two-months/
Title: 💵 The World Is Dedollarizing
Post by: RE on July 28, 2019, 12:54:48 AM
https://www.globalresearch.ca/world-dedollarizing/5684049 (https://www.globalresearch.ca/world-dedollarizing/5684049)

The World Is Dedollarizing
By Peter Koenig
Global Research, July 19, 2019
Region: USA
Theme: Global Economy

(https://www.globalresearch.ca/wp-content/uploads/2016/10/Russie-dollar.jpg)
What if tomorrow nobody but the United States would use the US-dollar? Every country, or society would use their own currency for internal and international trade, their own economy-based, non-fiat currency. It could be traditional currencies or new government controlled crypto-currencies, but a country’s own sovereign money. No longer the US-dollar. No longer the dollar’s foster child, the Euro. No longer international monetary transactions controlled by US banks and – by the US-dollar controlled international transfer system, SWIFT, the system that allows and facilitates US financial and economic sanctions of all kinds – confiscation of foreign funds, stopping trades between countries, blackmailing ‘unwilling’ nations into submission. What would happen? – Well, the short answer is that we would certainly be a step close to world peace, away from US (financial) hegemony, towards nation states’ sovereignty, towards a world geopolitical structure of more equality.

We are not there yet. But graffities are all over the walls signaling that we are moving quite rapidly in that direction. And Trump knows it and his handlers know it – which is why the onslaught of financial crime – sanctions – trade wars – foreign assets and reserves confiscations, or outright theft – all in the name of “Make America Great Again”, is accelerating exponentially and with impunity. What is surprising is that the Anglo-Saxon hegemons do not seem to understand that all the threats, sanctions, trade barriers, are provoking the contrary to what should contribute to American Greatness. Economic sanctions, in whatever form, are effective only as long as the world uses the US dollar for trading and as reserve currency.

Once the world gets sick and tired of the grotesque dictate of Washington and the sanction schemes for those who do no longer want to go along with the oppressive rules of the US, they will be eager to jump on another boat, or boats – abandoning the dollar and valuing their own currencies. Meaning trading with each other in their own currencies – and that outside of the US banking system which so far even controls trading in local currencies, as long as funds have to be transferred from one nation to another via SWIFT.

Many countries have also realized that the dollar is increasingly serving to manipulate the value of their economy. The US-dollar, a fiat currency, by its sheer money mass, may bend national economies up or down, depending in which direction the country is favored by the hegemon. Let’s put the absurdity of this phenomenon in perspective.

Today, the dollar is based not even on hot air and is worth less than the paper it is printed on. The US GDP is US$ 21.1 trillion in 2019 (World Bank estimate), with current debt of 22.0 trillion, or about 105% of GDP. The world GDP is projected for 2019 at US$ 88.1 trillion (World Bank). According to Forbes, about US$ 210 trillion are “unfunded liabilities” (net present value of future projected but unfunded obligations (75 years), mainly social security, Medicaid and accumulated interest on debt), a figure about 10 times the US GDP, or two and a half times the world’s economic output.

This figure keeps growing, as interest on debt is compounded, forming part of what would be called in business terms ‘debt service’ (interest and debt amortization), but is never ‘paid back’. In addition, there are about one to two quadrillion dollars (nobody knows the exact amount) of so-called derivatives floating around the globe. Aderivative is a financial instrument which creates its value from the speculative difference of underlying assets, most commonly derived from such inter-banking and stock exchange oddities, like ‘futures’, ‘options’, ‘forwards’ and ‘swaps’.

This monstrous debt is partly owned in the form of treasury bonds as foreign exchange reserves by countries around the world. The bulk of it is owed by the US to itself – with no plans to ever “pay it back” – but rather create more money, more debt, with which to pay for the non-stop wars, weapon manufacturing and lie-propaganda to keep the populace quiet and in lockstep.

This amounts to a humongous worldwide dollar-based pyramid system. Imagine, this debt comes crashing down, for example because one or several big (Wall Street) banks are on the brink of bankruptcy, so, they claim their outstanding derivatives, paper gold (another banking absurdity) and other debt from smaller banks. It would generate a chain reaction that might bring down the whole dollar-dependent world economy. It would create an exponential “Lehman Brothers 2008” on global scale.

The world is increasingly aware of this real threat, an economy built on a house of cards – and countries want to get out of the trap, out of the fangs of the US-dollar. It’s not easy with all the dollar-denominated reserves and assets invested abroad, all over the globe. A solution may be gradually divesting them (US-dollar liquidity and investments) and moving into non-dollar dependent currencies, like the Chinese Yuan and the Russian Ruble, or a basket of eastern currencies that are delinked from the dollar and its international payment scheme, the SWIFT system. Beware of the Euro, it’s the foster child of the US-dollar!

There are increasingly blockchain technology alternatives available. China, Russia, Iran and Venezuela are already experimenting with government-controlled cryptocurrencies to build new payment and transfer systems outside the US-dollar domain to circumvent sanctions. India may or may not join this club – whenever the Modi Government decides which way to bend – east or west. The logic would suggest that India orients herself to the east, as India is a significant part of the huge Eurasian economic market and landmass.
Venezuela – A Risk to Dollar Hegemony – Key Purpose Behind “Regime Change”

India is already an active member of the Shanghai Cooperation Organization (SCO) – an association of countries that are developing peaceful strategies for trade, monetary security and defense, comprising China, Russia, India, Pakistan, most Central Asian countries and with Iran waiting in the wings to become a full-fledged member. As such, SCO accounts for about half of the world population and a third of the world’s economic output. The east has no need for the west to survive. No wonder that western media hardly mention the SCO which means that the western average public at large has no clue what the SCO stands for, and who are its members.

Government-controlled and regulated blockchain technology may become key to counter US coercive financial power and to resist sanctions. Any country is welcome to join this new alliance of countries and new but fast-growing approach to alternative trading – and to finding back to national political and financial sovereignty.

In the same vein of dedollarization are Indian “barter banks”. They are, for example, trading Indian tea for Iranian oil. Such arrangements for goods to be exchanged against Iranian petrol are carried out through Indian “barter banks”, where currencies, i.e. Iranian rials and Indian rupees, are handled by the same bank. Exchange of goods is based on a list of highest monetary volume Indian trade items, against Iranian hydrocarbon products, for example, Iran’s large import of Indian tea. No monetary transaction takes place outside of India, therefore, US sanctions may be circumvented, since no US bank or US Treasury interference can stop the bilateral trade activities.

At this point, it might be appropriate to mention Facebook’s attempt to introduce a globe-spanning cryptocurrency, the Lira. Little is known on how exactly it will (or may) function, except that it would cater to billions of facebook members around the world. According to Facebook, there are 2.38 billion active members. Imagine, if only two thirds – about 1.6 billion – opened a Libra account with Facebook, the floodgate of libras around the world would be open. Libra is or would be a privately-owned cryptocurrency – and – coming from Facebook – could be destined to replace the dollar by the same people who are now abusing the world with the US-dollar. It may be projected as the antidote to government-controlled cryptocurrencies, thus, circumventing the impact of dedollarization. Beware of the Libra!

Despite US and EU sanctions, German investments in Russia are breaking a 10-year record in 2019, by German business pouring more than €1.7 billion into the Russian economy in the first three months of 2019. According to the Russian-German Chamber of Commerce, the volume of German companies’ investments in Russia is up by 33% – by € 400 million – since last year, when total investments reached € 3.2 billion, the largest since 2008. Despite sanctions which amounted to about € 1 billion combined for 140 German companies surveyed and registered with the Chamber of Commerce, and despite western anti-Russia pressure, Russia-German trade has increased by 8.4 percent and reached nearly € 62 billion in 2018.

In addition, notwithstanding US protests and threats with sanctions, Moscow and Berlin continue their Nord Stream 2 natural gas pipeline project which is expected to be finished before the end of 2019. Not only is the proximity of Russian gas a natural and logical supply source for Germany and Europe, it will also bring Europe independence form the bullying sales methods of the United States. And payments will not be made in US dollars. In the long-run, the benefits of German-Russian business and economic relations will far outweigh the illegal US sanctions. Once this awareness has sunk in, there is nothing to stop Russian-German business associations to flourish, and to attract other EU-Russian business relations – all outside of the dollar-dominated banking and transfer system.

President Trump’s trade war with China will eventually also have a dedollarization effect, as China will seek – and already has acquired – other trading partners, mostly Asian, Asian-Pacific and European – with whom China will deal in other than dollar-denominated contracts and outside the SWIFT transfer system, for example using the Chinese International Payment System (CIPS) which, by the way, is open for international trade by any country across the globe.

This will not only circumvent punishing tariffs on China’s exports (and make US customers of Chinese goods furious, as their Chinese merchandise is no longer available at affordable prices, or no longer available at all), but this strategy will also enhance the Chinese Yuan on international markets and boost the Yuan even further as a reliable reserve currency – ever outranking the US-dollar. In fact, in the last 20 years, dollar-denominated assets in international reserve coffers have declined from more than 90% to below 60% and will rapidly decline further as Washington’s coercive financial policies prevail. Dollar reserves are rapidly replaced by reserves in Yuan and gold, and that even in such staunch supporters of the west as is Australia.

Washington also has launched a counter-productive financial war against Turkey, because Turkey is associating and creating friendly relations with Russia, Iran and China – and, foremost, because Turkey, a NATO stronghold, is purchasing the Russian S-400 cutting-edge air defense system – a new military alliance which the US cannot accept. As a result, the US is sabotaging the Turkish currency, the Lira which has lost 40% since January 2018.

Turkey will certainly do whatever it can to get out from under the boot of the US-dollar stranglehold and currency sanctions – and further ally itself with the East. This amounts to a double loss for the US. Turkey will most likely abandon all trading in US dollars and align her currency with, for example, the Chinese Yuan and the Russian ruble, and, to the detriment of the Atlantic alliance, Turkey may very likely exit NATO. Abandoning NATO will be a major disaster for the US, as Turkey is both strategically, as well as in terms of NATO military power one of the strongest – if not the strongest – nation of the 29 NATO members, outside of the US.

If Turkey exits NATO, the entire European NATO alliance will be shaken and questioned. Other countries, long wary of NATO and of storing NATO’s nuclear weapons on their soils, especially Italy and Germany, may also consider exiting NATO. In both Germany and Italy, a majority of the people is against NATO and especially against the Pentagon waging wars form their NATO bases in their territories in Germany in Italy.

To stem against this trend, the former German Defense Minister, Ursula von der Leyen, from the conservative German CDU party, is being groomed to become Jean-Claude Juncker’s successor as President of the European Commission. Mr. Juncker served since 2014. Ms. Von der Leyen was voted in tonight, 17 July, with a narrow margin of 9 votes. She is a staunch supporter of NATO. Her role is to keep NATO as an integral part of the EU. In fact, as it stands today, NATO is running the EU. This may change, once people stand up against NATO, against the US vassal, the EU Administration in Brussels, and claim their democratic rights as citizens of their nation states.

Europeans sense that these Pentagon initiated and ongoing wars and conflicts, supported by Washington’s European puppet allies, may escalate into a nuclear war, their countries’ NATO bases will be the first ones to be targeted, sinking Europe for the 3rdtime in 100 year into a world war. However, this one may be all-destructive nuclear – and nobody knows or is able to predict the damage and destruction of such a catastrophe, nor the time of recovery of Mother Earth from an atomic calamity.

So, let’s hope Turkey exits NATO. It would be giant step towards peace and a healthy answer to Washington’s blackmail and sabotage against Turkey’s currency. The US currency sanctions are, in the long run, a blessing. It gives Turkey a good argument to abandon the US dollar and gradually shift towards association with eastern moneys, mainly the Chinese Yuan, thereby putting another nail in the US-dollar’s coffin.

However, the hardest blow for Washington will be when Turkey exits NATO. Such a move will come sooner or later, notwithstanding Ms. Von der Leyen’s battle cries for NATO. The breaking up of NATO will annihilate the western power structure in Europe and throughout the world, where the US still maintains more than 800 military bases. On the other hand, the disbanding of NATO will increase the world’s security, especially in Europe – for all the consequences such an exit will bear. Exiting NATO and economically exiting the US-dollar orbit is a further step towards dedollarization, and a blow to US financial and military hegemony.

Finally, investments of the Chinese Belt and Road Initiative (BRI), also called the New Silk Road, will be mostly made in Yuan and local currencies of the countries involved and incorporated in one or more of the several BRI land and maritime routes that eventually will span the globe. Some US-dollar investments may serve the People’s Bank of China, China’s Central Bank, as a dollar-divesting tool of China’s huge dollar reserves which currently stands at close to two trillion dollars.

The BRI promises to become the next economic revolution, a non-dollar economic development scheme, over the coming decades, maybe century, connecting peoples and countries – cultures, research and teaching without, however, forcing uniformity, but promoting cultural diversity and human equality – and all of it outside the dollar dynasty, breaking the nefarious dollar hegemony.

*

Note to readers: please click the share buttons above or below. Forward this article to your email lists. Crosspost on your blog site, internet forums. etc.

This article was originally published on New Eastern Outlook.

Peter Koenig is an economist and geopolitical analyst. He is also a water resources and environmental specialist. He worked for over 30 years with the World Bank and the World Health Organization around the world in the fields of environment and water. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research; ICH; RT; Sputnik; PressTV; The 21st Century; TeleSUR; The Saker Blog, the New Eastern Outlook (NEO); and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance. He is a Research Associate of the Centre for Research on Globalization.
Title: 🏦 'Collared' By The Fed And Trump's Trade War
Post by: RE on August 05, 2019, 05:46:12 AM
https://seekingalpha.com/article/4281393-collared-fed-trumps-trade-war (https://seekingalpha.com/article/4281393-collared-fed-trumps-trade-war)

'Collared' By The Fed And Trump's Trade War
Aug. 4, 2019 11:42 AM ET|

(https://www.freightwaves.com/wp-content/uploads/2019/05/shutterstock_1131501650.jpg)

The last three days were manic, to say the least, and by the time the dust settled, this was the worst week for US stocks of 2019.

The market is now at risk of being "collared" by a circular dynamic between the Fed and President Trump's trade war.

If the Fed doesn't play ball, things could get materially worse for stocks.

During what was variously described as a disastrous press conference on Wednesday, Jerome Powell said trade tensions nearly "boiled over" in May and June but "returned to a simmer" in July.

The Fed Chair made a number of mistakes over the course of his press conference, and that was one of them.

Not only did it suggest, to markets, that the Fed assessed trade tensions as likely to ease further, thereby reducing uncertainty and mitigating the need to cut rates further, it also signaled, to President Trump, that convincing policymakers to ease aggressively would likely require the instigation of more trade drama.

On Wednesday evening, Trump said this on Twitter:

    What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world. As usual, Powell let us down.

Hold that thought.

Powell also let the market down. The Chair's description of the July rate cut as a "mid-cycle adjustment" and his subsequent contention that "this isn't the start of a long series of rate cuts" were the opposite of what markets wanted to hear. The curve flattened the most since March of 2018 (a reflection of disappointment and a lack of faith in the idea that a single 25bp cut would be sufficient to inoculate the US economy from the trade frictions and global manufacturing slump) and, worse, the dollar moved sharply higher, a development that was starkly at odds with what the White House wanted to see and also with what the market needed (USD funding markets are still tight and the forthcoming Treasury supply deluge isn't going to help).

(https://static.seekingalpha.com/uploads/2019/8/3/47439673-15648365840056703.png)
(Heisenberg)

The "reviews" (if you will) of Powell's performance were bad, and analysts generally implored market participants to focus on the underlying message. Here, for example, is a quick bit from BofA's front-end rates team:

    FOMC communications this week, especially Chair Powell’s press conference, reflected a confused and muddled message. We encourage investors to look through the noise and focus on the underlying message from the Fed: they are uncertain, in risk management mode, and worried about low inflation. Elevated risks surrounding trade (i.e. potential 10% increase in China tariffs on Sept 1) and global developments leaves us still expecting lower US rates, a steeper curve, and favoring ways to position for an out of consensus uptick in inflation risk premium.

Here's an easy way to visualize the "worried about low inflation" bit:

(https://static.seekingalpha.com/uploads/2019/8/3/47439673-15648371994039073.png)
(Heisenberg)

As far as the trade concerns go, less than 24 hours after Powell told reporters that trade tensions had "returned to a simmer", Trump huddled with Steve Mnuchin, Mick Mulvaney and Larry Kudlow in the Oval Office.

According to Bloomberg's Jennifer Jacobs, Mnuchin attempted to convince the president to give the Chinese a heads-up before threatening more tariffs. Mnuchin had, after all, just gotten back from talks in Shanghai the previous day.

According to Jacobs, Trump overruled Mnuchin and sent the tweets threatening to impose a 10% tariff on the remaining $300 billion in Chinese goods while everyone was still sitting in the Oval Office.

The rest is history. Stocks, which had bounced nicely on Thursday morning following the Powell-inspired selloff the previous afternoon, plunged. 10-year yields dove to their lowest since early November 2016. And most importantly, traders began to price back in more Fed cuts. In other words, if Powell was hoping to push back against expectations for the kind of "aggressive" (to quote the President) cutting cycle that Trump and the market wants, the trade broadside negated that effort.

(https://static.seekingalpha.com/uploads/2019/8/3/47439673-15648384466068835.png)
(Heisenberg)

One of the most important takeaways from what Nomura's Charlie McElligott called "one of the most manic 36 hours of trading I've seen in my 18-year career," is that to the extent President Trump was attempting to engineer more Fed cuts (where the most immediate concern would be ensuring that September is a "go", so to speak), it puts us right back in a familiar loop. Here's a simple illustration:

(https://static.seekingalpha.com/uploads/2019/8/3/47439673-15648385472626908.png)
(Heisenberg)

That's something BofA warned about in June. Other desks (including Deutsche and JPMorgan) have produced similar analysis. "If the ‘Powell Put’ and ‘Trump Call’ are strong enough, they could create an ever-escalating trade war matched by an ever lower funds rate," BofA cautioned less than two months prior to the latest trade broadside, adding that "the stock market would be left in a range-bound ‘collar’ trade, with its upside and downside capped by the trade war and the Fed, respectively."

This was always the risk for the Fed in getting roped into implicitly underwriting the trade war. If Powell continues to play the game, he risks perpetuating trade tensions until things get so bad that the inflationary effects become impossible to mitigate no matter how hard Bob Lighthizer tries by fiddling with the list of affected products.

Consider this. Nearly two thirds of goods that will be affected in the next prospective round of tariffs are consumer goods, with apparel, footwear, toys and cellphones all in play. Have a look:

(https://static.seekingalpha.com/uploads/2019/8/3/47439673-15648396005934608_origin.png)
(Heisenberg)

See the problem? According to Goldman's estimates, the proposed next round of tariffs (i.e., what Trump threatened on Thursday) would boost PCE inflation 20bps by year-end and exert another 0.1-0.2% drag on GDP, with that latter figure coming in addition to a 0.2% hit from tariffs already imposed.

Do note that the latest read on core CPI was the hottest since January of 2018 and the July jobs report showed wage growth coming in hot.

No, a sudden breakout of inflation to the upside isn't likely (a disinflationary quagmire is still the base case for most folks, including the Fed, even if they won't readily acknowledge it). But the point is simply that as the trade war worsens, it puts the Fed in an impossible position. If the tariffs continue (and Trump indicated he would be willing to go above 25% on all Chinese goods if that's what it takes to extract the concessions he wants), it will eventually threaten to exert material upward pressure on consumer prices, while serving as a drag on GDP. There is no adequate monetary policy response to that. If you cut rates to offset the GDP hit, you risk worsening the inflation issue. If you stand pat or hike to head off inflation, you chance making the hit to growth worse.

This is complicated immeasurably by the fact that we are headed into an election year, so any action the Fed does take (or doesn't take) will be viewed through the lens of politics. President Trump's public calls for rate cuts make that dynamic even more acute.

As far as the near-term outlook is concerned, there are two possibilities. Either the Fed bends the proverbial knee in the face of trade tensions and indicates that a September cut is all but a sure bet, thereby putting us squarely in the "collar" dynamic illustrated in the flow chart above, or else policymakers attempt to stick to their guns and remain reluctant to explicitly countenance markets' efforts to price in additional rate cuts.

In that latter scenario, the dollar will remain stubbornly resilient, potentially exacerbating any squeeze in USD funding markets, stocks will struggle mightily and volatility will probably spike into an already favorable seasonal (see below).

(https://static.seekingalpha.com/uploads/2019/8/3/47439673-1564840357311255.png)
(Bloomberg, Nomura's annotation)

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Title: 🏦 'Crazy inverted yield curve' vexes Fed, with no clear resolution
Post by: RE on August 16, 2019, 04:23:03 AM
https://www.reuters.com/article/us-usa-fed-yieldcurve-graphic/crazy-inverted-yield-curve-vexes-fed-with-no-clear-resolution-idUSKCN1V52LF (https://www.reuters.com/article/us-usa-fed-yieldcurve-graphic/crazy-inverted-yield-curve-vexes-fed-with-no-clear-resolution-idUSKCN1V52LF)

August 15, 2019 / 3:34 PM / Updated 6 hours ago
'Crazy inverted yield curve' vexes Fed, with no clear resolution

(https://fingfx.thomsonreuters.com/gfx/mkt/12/4812/4769/Pasted%20Image.jpg)

7 Min Read

WASHINGTON (Reuters) - Amid the recent financial market volatility, the interest rates on some long-dated government bonds have fallen below the level for short-term debt.
FILE PHOTO: A trader looks at screens as he works on the floor at the New York Stock Exchange, August 13, 2019. REUTERS/Eduardo Munoz

Called a “yield curve inversion,” this has been a traditional warning sign for the economy: If smart investors see more risk two years ahead than 10 years down the road, it can’t be good for near-term growth.

In response, President Donald Trump and others have upped demands for a U.S. Federal Reserve rate cut.

So do U.S. central bankers care about what Trump called the “crazy inverted yield curve” or not?

Policymakers have been trying to get a handle on the issue for a while, with no consensus on whether a curve inversion today means the same thing it did in the past.

Here are selected comments of Fed policy makers over the last two years on the issue:

Dec. 1, 2017: “There is a material risk...if the (Federal Open Market Committee) continues on its present course” - St. Louis Federal Reserve President James Bullard.

He was off by a few months, expecting a yield curve inversion late in 2018, but Bullard as well as Dallas Fed President Robert Kaplan flagged early on what might happen if the Fed continued to hike, as it did throughout last year.
Reuters Graphic

 Aug. 20, 2018: “I pledge to you I will not vote for anything that will knowingly invert the curve and I am hopeful that as we move forward I won’t be faced with that.” - Atlanta Federal Reserve President Raphael Bostic.

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The comment captured the Fed’s dilemma at that point. The economy was growing faster than expected and seemed robust enough to warrant rate increases. Bostic voted for two more by the end of the year. Yet through the year, bond spreads narrowed.
Reuters Graphic

 Sept. 6, 2018: “I don’t see the flat yield curve or inverted yield curve as being the deciding factor in terms of where we should go with policy.” - New York Fed President John Williams

Williams was among the most vocal in saying that in the “new normal” economy, when all rates and the spreads between them were inherently lower, a yield curve inversion may be a product of structural changes in markets, and not the scary signal it used to be.
Reuters Graphic

 Sept. 12, 2018: Lower overall rates and changing investor behavior “may temper somewhat the conclusions that we can draw from historical yield curve relationships.” - Fed Governor Lael Brainard.

Some members of the Fed board agreed that the yield curve may not be as meaningful as in the past.
Reuters Graphic

 March 24, 2019: “Some of this is structural, having to do with lower trend growth, lower real interest rates...In that environment, it’s probably more natural that yield curves are somewhat flatter.” - Chicago Fed President Charles Evans.

March 25, 2019: “I don’t take nearly as much information from the shape of the yield curve as some people do.” - Boston Fed President Eric Rosengren.

March 26, 2019: “I’m not freaked out.” - San Francisco Fed President Mary Daly.

That month, the spread between the three-month Treasury note and the 10-year bond, closely watched by some at the Fed, did invert. There remained division about what it meant and reluctance to read it as a sign of economic weakness.
Reuters Graphic

June 4, 2019: “We are early into it. It’s certainly something we’ll keep looking at.” - Fed Vice Chair Richard Clarida.

The Fed by this point was preparing for rate cuts, but even its leadership was not fully ready to put the yield curve at the center of its thinking. In Clarida’s view, time matters: If the curve stayed upside down, he said he would take it “seriously.”
Reuters Graphic

June 25, 2019: “We do, of course, look at the yield curve ... it’s one financial condition among many ... There’s no one thing in the broad financial markets that we see as the dominant thing.” – Fed Chairman Jerome Powell.

The Fed did cut rates in July. The key, 10-year to two-year portion of the yield curve nevertheless inverted just two weeks later. It seemed a reaction to broader problems, including a sense that the U.S.-China trade war was becoming a bigger threat than thought, and the spread quickly moved back above zero.

But will that brief inversion be read as a warning?

The central bank next meets on Sept. 17-18.
Reuters Graphic

Reporting by Howard Schneider in Washington; Ann Saphir in San Francisco; Trevor Hunnicutt in New York; Editing by Dan Burns and Cynthia Osterman
Title: Re: 🏦 'Crazy inverted yield curve' vexes Fed, with no clear resolution
Post by: azozeo on August 16, 2019, 06:10:33 AM
https://www.reuters.com/article/us-usa-fed-yieldcurve-graphic/crazy-inverted-yield-curve-vexes-fed-with-no-clear-resolution-idUSKCN1V52LF (https://www.reuters.com/article/us-usa-fed-yieldcurve-graphic/crazy-inverted-yield-curve-vexes-fed-with-no-clear-resolution-idUSKCN1V52LF)

August 15, 2019 / 3:34 PM / Updated 6 hours ago
'Crazy inverted yield curve' vexes Fed, with no clear resolution

(https://fingfx.thomsonreuters.com/gfx/mkt/12/4812/4769/Pasted%20Image.jpg)

7 Min Read

WASHINGTON (Reuters) - Amid the recent financial market volatility, the interest rates on some long-dated government bonds have fallen below the level for short-term debt.
FILE PHOTO: A trader looks at screens as he works on the floor at the New York Stock Exchange, August 13, 2019. REUTERS/Eduardo Munoz

Called a “yield curve inversion,” this has been a traditional warning sign for the economy: If smart investors see more risk two years ahead than 10 years down the road, it can’t be good for near-term growth.

In response, President Donald Trump and others have upped demands for a U.S. Federal Reserve rate cut.

So do U.S. central bankers care about what Trump called the “crazy inverted yield curve” or not?

Policymakers have been trying to get a handle on the issue for a while, with no consensus on whether a curve inversion today means the same thing it did in the past.

Here are selected comments of Fed policy makers over the last two years on the issue:

Dec. 1, 2017: “There is a material risk...if the (Federal Open Market Committee) continues on its present course” - St. Louis Federal Reserve President James Bullard.

He was off by a few months, expecting a yield curve inversion late in 2018, but Bullard as well as Dallas Fed President Robert Kaplan flagged early on what might happen if the Fed continued to hike, as it did throughout last year.
Reuters Graphic

 Aug. 20, 2018: “I pledge to you I will not vote for anything that will knowingly invert the curve and I am hopeful that as we move forward I won’t be faced with that.” - Atlanta Federal Reserve President Raphael Bostic.

Advertisement

The comment captured the Fed’s dilemma at that point. The economy was growing faster than expected and seemed robust enough to warrant rate increases. Bostic voted for two more by the end of the year. Yet through the year, bond spreads narrowed.
Reuters Graphic

 Sept. 6, 2018: “I don’t see the flat yield curve or inverted yield curve as being the deciding factor in terms of where we should go with policy.” - New York Fed President John Williams

Williams was among the most vocal in saying that in the “new normal” economy, when all rates and the spreads between them were inherently lower, a yield curve inversion may be a product of structural changes in markets, and not the scary signal it used to be.
Reuters Graphic

 Sept. 12, 2018: Lower overall rates and changing investor behavior “may temper somewhat the conclusions that we can draw from historical yield curve relationships.” - Fed Governor Lael Brainard.

Some members of the Fed board agreed that the yield curve may not be as meaningful as in the past.
Reuters Graphic

 March 24, 2019: “Some of this is structural, having to do with lower trend growth, lower real interest rates...In that environment, it’s probably more natural that yield curves are somewhat flatter.” - Chicago Fed President Charles Evans.

March 25, 2019: “I don’t take nearly as much information from the shape of the yield curve as some people do.” - Boston Fed President Eric Rosengren.

March 26, 2019: “I’m not freaked out.” - San Francisco Fed President Mary Daly.

That month, the spread between the three-month Treasury note and the 10-year bond, closely watched by some at the Fed, did invert. There remained division about what it meant and reluctance to read it as a sign of economic weakness.
Reuters Graphic

June 4, 2019: “We are early into it. It’s certainly something we’ll keep looking at.” - Fed Vice Chair Richard Clarida.

The Fed by this point was preparing for rate cuts, but even its leadership was not fully ready to put the yield curve at the center of its thinking. In Clarida’s view, time matters: If the curve stayed upside down, he said he would take it “seriously.”
Reuters Graphic

June 25, 2019: “We do, of course, look at the yield curve ... it’s one financial condition among many ... There’s no one thing in the broad financial markets that we see as the dominant thing.” – Fed Chairman Jerome Powell.

The Fed did cut rates in July. The key, 10-year to two-year portion of the yield curve nevertheless inverted just two weeks later. It seemed a reaction to broader problems, including a sense that the U.S.-China trade war was becoming a bigger threat than thought, and the spread quickly moved back above zero.

But will that brief inversion be read as a warning?

The central bank next meets on Sept. 17-18.
Reuters Graphic

Reporting by Howard Schneider in Washington; Ann Saphir in San Francisco; Trevor Hunnicutt in New York; Editing by Dan Burns and Cynthia Osterman

I saw this yesterday. Glad you posted this....
Title: 🏦 FDIC approves Volcker revamp, in latest move to roll back bank rules
Post by: RE on August 21, 2019, 01:31:03 AM
https://www.politico.com/story/2019/08/20/volcker-rule-joseph-otting-banks-1672620 (https://www.politico.com/story/2019/08/20/volcker-rule-joseph-otting-banks-1672620)

FDIC approves Volcker revamp, in latest move to roll back bank rules

By KATY O'DONNELL
08/20/2019 12:50 PM EDT
Updated 08/20/2019 04:09 PM EDT

(https://static.politico.com/dims4/default/4aa15c3/2147483647/resize/1160x/quality/90/?url=https%3A%2F%2Fstatic.politico.com%2F1d%2Fb2%2F939e7c4a4b819794389c95f493f5%2F190820-joseph-otting-gty-773.jpg)
Comptroller of the Currency Joseph Otting signed the revised Volcker rule Tuesday. Three other agencies — the Federal Reserve, Securities and Exchange Commission and Commodity Futures Trading Commission — must still approve it. | Chip Somodevilla/Getty Images

The Federal Deposit Insurance Corp. board voted 3-1 Tuesday to give big banks more leeway to make risky short-term bets in financial markets by loosening a landmark but highly contentious regulation known as the Volcker rule.

The FDIC and four other independent agencies have dropped their proposal to tie the rule to a strict accounting standard — a move that banks argued would have made it more burdensome by subjecting additional trades to heightened supervision. Instead, regulators will give banks the benefit of the doubt on a much wider range of trades, according to the text of the final rule.

Democrats immediately slammed the Trump administration for loosening the rule, which was mandated by the 2010 Dodd-Frank Act in an effort to protect depositors' money from being used by banks to turn a quick profit on short-term price changes in stocks, bonds and other financial assets.

The rewrite “will not only put the U.S. economy at risk of another devastating financial crisis, but it could potentially leave taxpayers at risk of having to once again foot the bill for unnecessary and burdensome bank bailouts,” House Financial Services Chairwoman Maxine Waters (D-Calif.) said in an email.

“The final rule published today would curtail prohibitions in a manner that Congress never intended and allow Wall Street megabanks to gamble with the same types of risky loan securitizations that turned toxic in 2008, at a time when these risky products are once again on the rise,” Waters added.

The Volcker rule — a 2013 regulation named after former Federal Reserve Board Chairman Paul Volcker, who came up with the concept — bars banks from making risky trades on their own behalf and restricts them from owning hedge funds or private equity funds. It has long come under fire for its complexity and has been a source of dissatisfaction for the regulators themselves.
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The rewrite is an attempt to clarify what kinds of activity would be exempt from the proprietary trading ban for market-making, hedging or underwriting purposes. Regulators aim to introduce a separate revamp of the covered-funds provision of the rule this fall.

Comptroller of the Currency Joseph Otting on Tuesday signed the revised rule. Three other agencies — the Federal Reserve, Securities and Exchange Commission and Commodity Futures Trading Commission — must still approve it.

The new rule — the latest step by President Donald Trump's regulators to roll back post-financial crisis rules — would go into effect Jan. 1. Banks will have until Jan. 1, 2021, to become compliant but may opt in earlier.

Among other provisions, the revamp would create a presumption of compliance for trades held for longer than 60 days, the inverse of the current version of the rule, which presumes that any investment held for less than 60 days is banned, with the onus on banks to argue that a given trade is exempt.

The accounting standard that regulators proposed last year was meant to clear up ambiguity surrounding the intent standard under the 60-day provision, which ties the legitimacy of a bank’s position to its intent in making the short-term trade.

Under the final rule, the short-term intent prong will only apply to banks that are not subject to the market risk capital rule or that do not elect to apply the market risk capital standard.

The inclusion of the accounting provision in the original Volcker 2.0 proposal had been key in securing the support of Martin Gruenberg, then FDIC chairman and now a regular board member at the agency.

Gruenberg, an Obama appointee, voted against the revised rule Tuesday morning, saying it would “effectively undo” the Volcker rule’s ban on proprietary trading.

As amended, “the Volcker rule will no longer impose a meaningful constraint on speculative and proprietary trading by banks and bank-holding companies benefiting from the public safety net” of insured deposits, Gruenberg said.

Banks, meanwhile, applauded the new rule.

“The changes in the new rule will help reduce the incidental damage the original rule has done to responsible banking activity and legitimate market making activity, and the massive and needless compliance costs it imposed,” said Greg Baer, president and CEO of the Bank Policy Institute.

The Office of Financial Research issued a report this month that appeared to support industry complaints about the current rule with its finding that the rule led to “significant adverse liquidity effects on covered firms’ corporate bond trading.”

Victoria Guida contributed to this report.
Title: 🏦 Opinion: The Federal Reserve’s math problem with interest-rate cuts
Post by: RE on August 21, 2019, 01:44:40 AM
https://www.marketwatch.com/story/the-federal-reserves-math-problem-with-interest-rate-cuts-2019-08-20 (https://www.marketwatch.com/story/the-federal-reserves-math-problem-with-interest-rate-cuts-2019-08-20)

Opinion: The Federal Reserve’s math problem with interest-rate cuts

Published: Aug 20, 2019 2:11 p.m.

(https://ei.marketwatch.com/Multimedia/2019/08/19/Photos/ZH/MW-HP742_Powell_20190819163542_ZH.jpg?uuid=e9db4f18-c2c0-11e9-86fe-9c8e992d421e)