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Ben Bernanke Loses More Money In One Day Than All Of LTCM Ever Did... Doubled
The ongoing collapse in bond prices is making John Meriwether blush with envy at the wholesale wanton destruction of capital undertaken by Ben Bernanke. Keep in mind LTCM - the organization which proved definitively that Nobel prizes in economics are given only to the most consummate destroyers of value, logic, reason and humility - lost "just" $4.6 billion from its peak before it became the biggest systemic risk in the world back in 1998 and had to be rescued by a consortium of banks. The bottom line: with about $10 billion in SOMA losses today alone, Ben Bernanke has generated more than double the losses that nearly destroyed western finance 13 short years ago. And nobody cares.
John Lohman explains:
Chairman Top Tick continues to crash and burn, losing $7.2 billion in Treasury and Agency paper in today’s bloodbath alone. Adding a rough estimate for the MBS holdings would put the session’s losses well over $10 billion. Indeed, a baker’s dozen of John Meriwethers couldn’t destroy this much capital in such a short period of time.
And with all of the usual caveats that accompany a simple modified duration analysis (ignoring convexity, assuming instantaneous parallel shifts, etc.), the table below estimates the Fed’s losses for various upward interest rate shocks. Again, keep in mind this does not include the massive MBS portfolio, which is extending in duration with every uptick in rates.
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PLEEEZE, these are paper losses. </sarcasm>
besides, i mean, like anyone "important" cares or is hurt? the peasants have to take the hit and pay it back....
The best part is that us Goyim peasants get to pay interest on the amount lost. Bernanke doesn't care, it's you and me paying for it.
whoa!!!!! no junks for using the "GOYIM" word! last time i used that word, the junks hit hard and heavy.........
Stay tuned, the hive behavior will kick in after their Megaphone software puts out the call.
:)
Perhaps they attacked you because we're not supposed to use the terms they use to describe all others?
if you make under USD$10,000,000,000.00, you are a peasant... and you're point being? Peasant.
JUST SO YA KNOW...I CARE!!
So what the fuck do you want me to do? I'm out of big banks - no accounts. I stopped shopping at the big stores. I do not accumulate any junk goods. I shop locally. I turned off the cable. I practice civil disobedience. I pay cash for everything. I diss any and all politicians and TBTF bankers at every opportunity.
I'm open to other suggestions besides spreading my cheeks and getting ass-raped by Bubba Bernank again!
You do use the computer though, don't you. isn't that a bit of a contradiction?
Yeah, yeah, yeah... you are out of big banks - no accounts. You do your shopping at big stores and do not accumulate any junk goods. You shop locally even if there are no 'imported' stickers on it. You diss any politicians and TBTF bankers at any opportunity.
So effing what.
You want to know how easy it is to be arrested in Las Vegas, you loser?
I will school you, peasant...
When the conventions come to town, try jaywalking. The LVMPD (Las Vegas Metropolitan Police Department) will be all over your ass and stick you in county. Why? Charges range from 'impeding the right away of pigeons' to the insane. That is enough to get you locked up in county for a few days until the convention is over.
Peasant. You are a peasant. P-E-A-S-A-N-T. Also, L-O-S-E-R; LOSER.
You think you are safe? Think again...
Put your crack away and keep up the good work. It's a seachange in lifestyle, not a fad. And be sure to ignore negative comments and criticisms from bungholes (-hole) like the 2 comments above. wtf?
...
If the wealth was never actualized, can its destruction be realized?
Tron sez cyber-beings have feelin's too! :>D
Privatize profits, socialize losses, as always.
Mark-to-market doesn't matter much when you can print your own financing.
Mark-to-whatever the fuck we say it is.
Abso-f*cking-lutly. I love the LOSERS on zerohedge who quote economics to justify the collapse of the current economic regime while saying that economics is a 'voodoo science'.
The pot calling the kettle black.
What a bunch of effing LOSERS. It is like saying "My ECONOMIC CHARTS say that the curren ECONOMIC SYSTEM is going to collapse." Using the 'Voodoo Science' of 'Economics' to justify why the current 'ECONOMIC SYSTEM' will collapse because my 'ECONOMIC SYSTEM CHARTS' sez it will.
You are all sucking the big, f**king teat of 'ECONOMICS' to justify why your 'ECONOMIC' (voodoo science) 'CHARTS' sez that the system will collapse.
WHAT A BUNCH OF BRAINWASHED LOSERS.
As for the gold-bugs, in a complete economic and societal collapse, you become 'PREY'. Hope your as good as a shot as I am, PREY. You just might be. If you are not, I own your gold.
Then you become the prey... suck it loser.
+$14 trillion
YOu are a tool. And I have drunk a litre of vodka in 1 hour. You are still a tool.
Try 2 or 3 next time.
how much does a new liver cost?
it doesn't matter. he is a crack shot (even drunk). he owns our gold. we are losers. he is the ubermensch
And then change the definition of "mark to market" through control of the courts and politicians.
Jesus f*cking Christ.... you tools. Does anyone think this is the first time in 'history' that such fraud has ever happened in 9000 years of human history? What, do you think you are special? Oooooooohhhhh.... the very first time fraud or crime has ever happened?
Nah, of course not. You LOSERS want to think you are special. That this is the first time this has EVER HAPPENED... Hate to break it to you LOSERS, it is not. You think you are so intellectually advanced that this fraud HAS NEVER HAPPENED? Effing loser. Of course it has. The only difference is the magnitude. That is all. Other than that, this fraud is nomal. Everyday. Every century. Every millenium.
Nothing special. Just another person f*cking over another person in a normal way. You want to feel special.
You are not. You are just another peasant victim in a thousand (or few) year old scam. Another rube from a few thousand years ago. Sucker. Etc.
You want to feel special and think that this is the only time in human history that (you personally because your ancestors were primitives) you have been f*cked over in the same scam.
I have news for you.
You are nothing special. You are your ancestor from a thousand, or three thousand, or nine thousand, years ago. Another f*cking sucker who could not get their act together.
Which makes you, and everone, a tool.
Thank you for your participation.
Glad you feel yourself enlightened enough to pass judgment on someone else -- tell me, how much suffering did YOU alleviate today?
None, his job is the direct opposite. Another mid level peon upset his handlers are leaving.
It's pretty obvious he is feeling homesick for the old days when he was a player...
didn't the chairman say this was a positive (an increase in rates) in the minutes?
print-your-own
So is this what happens when you try to put a ceiling on risk by making the Fed the solar system's ultimate price-taker?
I have a one hundred trillion dollar note on my wall (Zim).
"Zeros don't matter" (You read it here first!)
When there are too many, cross out a dozen and start again....
Same here, wake up to it everyday staring at me. =)
I would trade ten federal reserve notes for one one trillion Zimbabwe dollar note.
Which makes me wonder....Perhaps Bernanke is on to something... LOL!
Zeros do matter when you make the mistake of electing them.
yeh, the 'Zeros' just keep adding 'zeros'.
Instead of "What Would Jesus Do?"
Ask yourself this:
"What Would Chavez Do?"
Venezuala, one of South America's oldes (if not the) democracies has succumbed to, well, totalitariansim. What makes The US so special? Not much.
Bummer, dude. But the way I sees it, if ya never had it in the first place, ya can't really lose it can you?
Ashes to ashes, dust to dust. Bonds went parabolic, and you went bust.
I am not an accountant or economist. But if you take a step back, you are looking at an irrelavent metric. The FED, with the power to create and remove money from the monetary base, does not care about their asset prices. They only care about changing the monetary base. The Bernank only sees his charts about CPI and monetary base and adjusts his foot pressure on the accelerator accordingly. Prices of the items he received in exchange for newly printed money is not a metric he watches. If monetary base gets too big (even for bernank) or CPI too high, he will sell treasuries at market value and pat himself on the back because he is removing liquidity from the system.
And what do you think will happen to yields once the FRB starts selling treasuries?
From the FED's point of view it does not matter. They are interested in increasing or shrinking the monetary base. They do that by buying and selling paper. Since they have the ability to fabricate FRNs, they do not look at profit/loss on these sales.
It WILL matter, as every business and consumer would have to pay through the nose in interest payments.
If you need credit, which only a fool needs.
Without credit, the system collapses.
That's the banksters talking.
But there comes a moment in life when one must decide whether to live among the human beings or not - a fool among fools or a fool alone.
dunno, ask the steer in the slaughter line....
high grade Kush - problems...nope, where's the nachos.
I like The Fed. They have been buying up MBS/CRE loans for full value by trading worthless pieces of paper for 'full value' of the mortgage at 2007 prices? F*cking awesome.
The Fed, for all you LOSERS, has been buying 'worthless' real estate with 'worthless' pieces of 'Federal Reserve Notes'. Uhhh... hmmm... does it not seem suspicious? Let me rephrase that... like this.
I give you fiat toilet paper (dollar, euro, yuan) in exchange for real estate deeds. You think I am a sucker and losing money. Yet, I contol the money supply called the 'dollar'. So, I devalue the 'dollar' (because I'm the printer and you hold my IOUs). Yet, I have the paper proving that I, as The Fed, own the land. And you, as the BEST SUCKERS AND EFFING CLOWNS & IDIOTS & LOSERS & PEASANTS IN THE WORLD, own a 'dollar' (which I can devalue at will), claim I (as The Fed) am f*cked.
Uhhh... who has all the deeds to the land (true wealth) and who is is left owning a bank account full of dollar (which I, as The Fed, devalues at will)? Ooohhh... well.... that would be you, the peasant dogs.
You own gold? You own gold? You own guns? Well, I would own the government and the military. Your M16A1 versus my M1A2, 120mm Rheinmetal...?
YOU LOSE.
And if you dare mention Iraq and Afghanistan? You know nothing of Total War.
do da phrase "delusions of grandeur" strike a familiar note?
?
That is never going to happen. They are going to buy until there isn't a single bond left.
They are going to buy until there isn't a single bond left.
And then the Chairman is going to start a new market in tulip bulbs and South Seas resort properties. He knows a fiatsco when he sees one.
What Treasuries?
I have to agree with Dr. No. As far as the FED is concerned, it's a meaningless matrix. Most of the securities they bought are less than 7 year and they will hold them to maturity.
What's that you say? What if the economy starts to overheat? Not likely, but if it does, they sell it a loss and the loss sits on their books forever. It's not like the gov't is going to audit them.
"And nobody cares"
http://www.youtube.com/watch?v=L9EKqQWPjyo
The best f*cking comment on Zerohedge I have ever seen. The rest are snark comments made by peasants and dogs.
after LTCM the s&p doubled I think...45 dg
Ben needs to mark to market but no one will make him.
Well, it's not like it's real money or anything. Besides, The Bernank has an infinite checkbook, so it's impossible to take a loss on something that had no cost to begin with.
This is so mind boggling mad and crazy and the world cares not a bit....
Hopium overdose is very serious addiction!
That's because it isn't REAL! None of it is. Buying debt from ourselves with fake money! Yes, that is mind boggling...........
That's why my massive student loan will NEVER be repaid, because it never existed in the first place and the "education" I received, even at the doctoral level was constructed out of elmer's glue and used popsicle sticks. It ain't just the money that's fake...
Get a mind of your own. Hopium is so outdated.
Guess you know about that new drug out there: Sadistica (stay under-dosed, my friend!)
Talking about bonds...
"The European Commission will on Thursday press ahead with plans to spread the burden of EU bank failures to senior bondholders, marking the start of harsher times for Europe’s creditors." - http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8242275/EU-plans-for-bondholder-haircuts-unsettles-debt-markets.html
I'll believe it when I see it. I've seen this movie before, and I tell ya, it doesn't end as advertised.
"2007," the sequel....
So microscopic? F*ck that. 2007? Three years? F*ck that. People think they are special because they have computers and cell phones? F*ck that. 99.999999% of humanity are nothing more than a bunch of Chimpanzees who think they are special because they are more technoligically advanced.
F*ck me. Take most anyone today and put them in a society back in time (say 3,000 years) and they are toast. Dead man or woman walking. Would not know how to chuck a spear or smelt gold from ore. Hell, would not even know how to speak the language. Toast.
So much for our vaunted 'superiority'.
Let me tell you a little story about a man named Basil. Basil is Egyptian. He is Catholic and his faith uses a script (handwriting for you peasants) that is 2,000 years old. He is Egyptian. He, like many Egyptians, hates Arabs. He considers Arabs the cause of all of Egypts problems. Calls them barefoot sandn***ers with computers and cellphones. Without oil, they would be just that. A bunch of itenerant sandn*ggers.
You get the point? Probably not.
Didn't you forget track suits and AKs?
All talk. I'll believe it when I see it.
Plus, who the hell would want to buy junk bonds (aka PIIGS debt), knowing they'll probably need to take a haircut down the road?
Exactly. It's pure fantasyland stuff. The ECB will soon be auctioning off dragons and unicorns. I will have a couple of the unicorns, but my landlord would never accept a dragon.
I'm running a 2 dragons : 1 leprechaun exchange rate. You have to pay 3 unicorns per leprechaun, though.
I also accept Shrute bucks as collateral, but only if you wish to buy more Shrute bucks.
What are those prices in Quatloos? :>D
The best way to get fabulously wealthy is to sell things that either a) don't belong to you or b) don't exist
That's called central banking and religion.
Speaking of religion. I wonder when Tecusmseh will start his Version 2.0 of the Curse. He needs to make it every 8 years instead of 20.
Soon as the 'senior bondholders' feel the pinch, its on like donkeykong again, theyll pull the rug out.
Burning Benny, Bitchez!
It's the new normal... losses are gains. Remember? Bad is good. Up is down. You have to look at the charts while standing on your head.
Where does one exchange their FRN's for Zimbabwe dollars?
I've been sent there, and need some pocket money.
Thanks
ebay.
Sheesh, give it a rest. The Fed is holding to maturity so there is not going to be any lost principal.
The real story is bad enough without these silly tangents.
I am coming to believe ZH is a sort of op to spread disinformation.
It does remind me a bit of "RT" news station.
If you more comfortable watching Fox/MSNBC, there is certainly nothing stopping you from doing so.
Sorry sir, I'll shut up now.
Unless he lives in england or canada and his ISP blocks him.
td - why was my post in the 2011 thread deleted?
That's an interesting thought. So essentially the claim is that the Fed will never shrink its balance sheet (i.e. have to sell the bonds on its balance sheet) and thus never reduce liquidity? If that is your null hypothesis you are absolutely right. Just making sure that that is what you were implying because your argument otherwise is completely and utterly wrong...
Hold to maturity does not mean never sell. However, rollover will still need to occur.
Please explain how you hold to maturity a portfolio of x duration if you are in charge of controlling money supply on an instantaneous basis, when buying and selling of securities in the portfolio is explicit.
I am not a PhD, nor Man-of-the-Year (a foolish oversight), but I would start by nibbling off the short end of the ladder, and hold on to the longer end like there is no tomorrow, 'cause there wouldn't be.
Anything held to maturity is inflationary by definition. Anything sold back to PDs (i.e. exiting QE) will only occur if inflation and/or growth is rising. In that scenario, expect the Treasury market to be quite inhospitable.
The Fed could certainly skip the PDs and go with direct monetization, thus setting the price and therefore the interest rate. Managing a rollover at maturity much in the way you would if you loan money to your spouse or child for tax reasons.
Things are so screwed up now, I don't even know if that would affect the forex markets beyond what could be controlled by manipulation.
They're not allowed to do so by law, according to Murray Rothbard.
Well, I'm not sure that's even a crime anymore, there've been a lot of changes in the law.
http://www.youtube.com/watch?v=35xQLfQXRmY&feature=related
And also by Rothbard is the admission of ex-post facto laws that have legalized their previous criminal behavior, so the law is of little value, in the case of the Fed.
Not Applicable?
Sometimes, I like to sit in my hot tub with a bottle of Champagne and a bowl of chocolate chips and imagine the media spin should the Fed buy ALL the treasuries, then default. It just makes me dizzy, but it probably gives Beltway lawyers a hard-on.
You may sit in the tub and imagine, but thats what I'm counting on.
The FED is the bad bank.
My conclusion as well. End The Fed may have been the plan from the beginning.
doesn't the fed charter expire in 2013?
Yes. That's why the largest consolidation of wealth in the history of the world had to happen just before that.
That was rich, they aren't allowed to do that by law. Who is going to stop them, the crazy guy from Texas in his subcommittee hearing room? He can howl you are breaking the law all he wants to. His own party thinks he is a nut and the President is an accessory to this nonsense.
Law, that is something for people living outside of the gated communities of D.C and Manhattan.
Help me with the connection. If the FED buys a newly issued piece of paper (gives the treasury money for the promise to pay) and waits to maturity (treasury has to pay back the FED with money + interest), how is that inflationary? The FED took money out of the system at maturity. Now if the treasury needs to sell more bonds to pay back the FED, well....ponzi
And who pray tell will buy these debts when the US has to roll them? It's not like money on hand will be available to retire the debt. So either we have years of assets rolling off the books and pressure on an ever increasing deficit spending into a decreasing monetary supply in a planet saturated with debt. Yeah that will totally work.
If the Fed retires the debt then the US will face a massive increase in interest rates. Now look at an average of 5% to fund this pig. The carry cost is pretty brutal, now project that into a future with ever more debt, and as the US is less and less able to pay it would put rates higher and higher.
There is no way out. The Fed eats up all the debt and eventually massive inflation via expansion of their balance sheet or rates will climb to the point where it's Greek like and there is a default as no one will lend enough money for the US to even roll the debt. Well unless the US can balance it's budget, but that simply will not happen. Not even the most crazed lunatic believes that the US can balance their budget any time soon, and we have 10 years or less before total meltdown based on our trajectory.
Help me Tyler. It would seem that this profit/loss thing matters to all entities except one: The one entity in the world that actually makes the money - The FED. Lossing money doesn't matter to them.
What Yikes said.
The original complaint was:
And Tyler's response accurately kills the complaint, to be sure.
But let me rephrase the complaint.
"Sheesh, give it a rest. The Fed does not need to have any FRNs to give FRNs. It could buy a bubblegum wrapper from Goldman on Monday for $1B, sell it to Goldman on Tuesday for $1, and then buy it again on Wednesday for a reasonable $1,000B.
"The real story is bad enough without these silly 'Top Tick Bernanke just lost more money than LTCM doubled' stories."
The Fed is the banking cartel's magic money machine. They built it. Their hands are on the levers. They are increasingly using it as both a dumping ground and a counterfeiting machine in broad daylight to suit their needs.
http://www.zerohedge.com/article/must-see-howard-davidowitz-destroys-recovery-illusion-debunks-consumer-renaissance#comment-842014
Explicit in the sense that they state that they do it, or explicit in the sense that they actually do it?
Regarding the hold to maturity argument vis a vie the losses described in the OP, just because you hold a bond to maturity doesn't mean it's value didn't go down. In other words, by holding bonds that are decreasing in market value, they are effectively reducing the value of the dollar. They have explicitly stated that they are not devaluing the dollar, but this post clearly shows that they, in fact, very much are devaluing the dollar.
The question I tend to come back to, though, is what that means from a valuation standpoint on the forex market. Yes, they clearly are doing this, but it almost seems like a sort of Wal-Mart strat, ie., sell at a loss and force the weak hands to go out of business entirely, thus ramping your value. That seems to be what's happening here, ergo the refusal of the dollar to tank in spite of this value destruction.
Ah, controlling the money supply, there's the rub.
Once again, that view is a financial market perspective, not necessarily a politcal one.
To me, the idea that they control anything is mere smoke and mirrors, they can't and they damn sure know it. What they can do though, is one thing, and one thing only, which is to destroy the value of their liabilities (our currency) while ramping up their production to infinity. Will it work? Well, that all depends on what their true desires are, which I cannot believe for an instant are their stated ones of controlling money supply or the pipe-dream of "full employment".
Now, if their desire is to destroy (which makes sense, as that is what they do), then it is working perfectly.
Please explain to me why they would ever want to sell.
In short, what I'm trying to say comes from Mises' idea that there is no escape from a credit-fueled crack-up boom.
Bernanke cannot fix anything in the future by removing liquidity any more than he can fix it by adding liquidity today.
So, knowing this, why would he try? Wouldn't he instead carry the madness to its logical conclusion while transferring more wealth to the banksters as it progresses?
The idea that Bernanke is trying to save us all is nonsensical, when it is obvious he is consuming us.
> So, knowing this, why would he try?
Because he is from Princeton University - one of the top Ivy League Universities in our galaxy AND he is an intellectual, AND he has developed "equations" which will save us. /sarcasm
It also assumes that the issuer can make good on it's repayment obligation but for much of the shit that The Bernank has bought holding to maturity just means the stark realization that book value and actual value are two completely different things.
I want to see those CMBS mature! That will be fun to watch.
But...but...Moodys said they were AAA.
Dagong, on the other hand.
It's fascinating to hear all the whining about the crap on the fed's books. They don't seem to care what they put on their "books". That's probably for the very simple reason that when the time comes for them to get that crap off their books, they may just call up one of the (now much larger) banks that they have assisted and ask them to buy said "crap" at face value. Perhaps they will exchange some recently insolvent small banks or toss in a few politicians as a bonus. The combination of the fed and the other banks can make all sorts of interesting things occur.
The behind the scenes crowd is either very smart or insane. Either way, we are simply another asset to be harvested.
So what happens to these MBS's once house prices start collapsing again, and deadbeat borrowers start walking away from their mortgages again?
Oh, the mortgages are all insured, of course. Let's hope nothing happens to the insurers.
Truth is a three-edged sword...
OH sure the FED is holding till maturity, like a fine wine...the level of Zerohedge commenter has gone way the hell downhill. This is 'tip-top IN' material right here.
Ben Bernanke is very smart and a savvy money manager. I will invest my money with him.
-Lehman Quant
When it all comes down, the kids will exchange my fiat dollars for a bailout from the Monopoly bank.
Bloodbath? Anybody who thinks today was a bloodbath let me tell you you haven't seen nothing yet.
When was the last time bonds were limit down? When we have a series of multi-day limit downs on the 10y and 30y that's when the fun starts.
if that happens stocks will still go up.lulz
(d)
Anyone catch Hoenig talking up a gold standard today? Wow.
http://abcnews.go.com/Business/wireStory?id=12547488
Thanks for the info link!
"The gold standard is a very legitimate monetary system," Hoenig said, adding: "We're not going to have fewer crises necessarily. You will have a longer of period of price stability or price level stability, but I don't know that you'll have lower unemployment, I don't know that you'll have fewer bank failures."
Well... it depends on how much FRACTIONAL RESERVE GOLD they use, or if they go 1:1 like they SHOULD. Also, there is lot that he seems not to know. It's a bit like an adult finally discovering how to use a toilet for the first time. "Toilets are a very legitimate pooping system - but it still won't prevent me from pooping in my diapers." WTF!
January 5, 2011
KWN BLOG INTERVIEWS
The feed contains large files.
Download times may increase.
Downloading RSS feed… Today, 10:30 AM John Embry - Gold Over $2,000, Silver Above $50 in 2011
Today, 7:45 AM Strong 2011 Expected for Gold Shares Despite Initial Weakness
Yesterday, 4:40 AM KWN - World’s Richest Man Entering Silver Gaining Momentum
January 3, 4:30 PM Exclusive - Weekly Poll of Bank Positions in Currencies
January 3, 3:10 AM Is the World’s Richest Man Getting Into Silver?
12/29/10, 8:20 AM James Turk - Gold & Silver Shorts are Losing Control
12/28/10, 5:15 PM 2011: China and Other Asian Central Banks Light The Way
12/27/10, 2:30 PM Richard Russell - We Will Have an Upside Explosion in Gold
12/27/10, 2:00 PM Exclusive - Weekly Poll of Bank Positions in Currencies
12/23/10, 2:05 PM Rick Rule - Physical Supply Shortages in Silver to Continue
12/22/10, 3:35 PM John Williams - The US Government is Insolvent
12/21/10, 3:15 AM James Turk - Writing on the Wall, Hyperinflation is Very Near
With a sharp two day correction in gold and silver taking place, King World News today interviewed John Embry, Chief Investment Strategist at Sprott Asset Management. When asked about the quick decline Embry stated, “This may be the best opportunity you’re going to get at least from a price sense to buy gold and silver in the next few days. I think when this correction however long it will last is over, it will probably mark the lows for the year which will then be the liftoff to the eleventh consecutive year of higher gold prices.”
January 5, 2011
KWN BLOG INTERVIEWS
The feed contains large files.
Download times may increase.
Downloading RSS feed… Today, 10:30 AM John Embry - Gold Over $2,000, Silver Above $50 in 2011
Today, 7:45 AM Strong 2011 Expected for Gold Shares Despite Initial Weakness
Yesterday, 4:40 AM KWN - World’s Richest Man Entering Silver Gaining Momentum
January 3, 4:30 PM Exclusive - Weekly Poll of Bank Positions in Currencies
January 3, 3:10 AM Is the World’s Richest Man Getting Into Silver?
12/29/10, 8:20 AM James Turk - Gold & Silver Shorts are Losing Control
12/28/10, 5:15 PM 2011: China and Other Asian Central Banks Light The Way
12/27/10, 2:30 PM Richard Russell - We Will Have an Upside Explosion in Gold
12/27/10, 2:00 PM Exclusive - Weekly Poll of Bank Positions in Currencies
12/23/10, 2:05 PM Rick Rule - Physical Supply Shortages in Silver to Continue
12/22/10, 3:35 PM John Williams - The US Government is Insolvent
12/21/10, 3:15 AM James Turk - Writing on the Wall, Hyperinflation is Very Near
“The returns over the last 10 years, gold returned over 18% and silver close to 24% annually. These are spectacular returns and we haven’t seen anything yet, we’re not even close to the third leg which is the blowoff.
As you know we started the Sprott Phyiscal Silver Trust about about 3 months ago. We still haven’t got all of our silver in yet, we’re close, we’ve almost got every last bar. But it’s taken the better part of 2 1/2 months to get it in, so the suggestion that this physical market is tight probably isn’t a strong enough suggestion, it’s really tight!
You and I were buying this morning John personally, you probably bought for the fund as well, but I know we were personally buying. You have to have conviction in order to buy during these dips, and you have to know the companies...You had one company that was dipping 10%, you stepped in and were a buyer, it’s already recovered I think.
“Some of these things are very volatile. This is a very thin company...But an order hit the market, and I sometimes wonder is it stupidity or is it actually being engineered? But it doesn’t make any difference, the price goes down like a rock and those people that know what they are doing, they just step in and buy. This very same company believe it or not at the bottom of the market in 2008 basically sold for as low as 40 cents and it earned 30 cents in the next year. I mean the market can be absurd.”
When asked once again about tightness in the silver market Embry remarked, “There is infinitely more demand for physical silver than there is supply. I mean all of this stuff coming out of the ground is long since spoken for by traditional industrial and medical uses and what have you. And now with investor interest picking up, I just saw that on the 3rd of January there was 1.7 million silver coins sold in the United States which was equal to the amount that was sold in all of the month of December. So, investment demand for silver is going off the chart, this could only mean dramatically higher prices.”
When asked about his themes for 2011 Embry stated, “Basically I think we are going to see more of the same. I mean I don’t see how you could possibly shut off the paper spigot without causing a depression, the likes of which would make the 30’s look like a picnic. If that’s the case then you’ve got to continue to focus on hard assets, and when you get these violent corrections...you’ve got to be in a position to buy them. The things that I would be avoiding like the plague are bonds, particularly long bonds.
...Things are sufficiently dire that I think we are going to have to recast the monetary system before this is over. And in such an undertaking I suspect that gold may be remonetized, and given the amount of paper there is in the world, I mean it will have to be remonetized at a price which would sort of stagger the doomsayers today on gold. There are still more people talking negative on gold today than there are positively believe it or not.”
When asked about price targets for 2011 Embry replied, “I’d be disappointed if it didn’t trade through $2,000 this year, in that event if gold were to make a run at that, silver is a layup for $50.”
Dear Abby:
I find myself fondling a few Gold Maple Leafs all the time, while treating FRN twenties like some sort of confetti. Is this normal?
signed:
Paranoid in MN
Perhaps more of a disaster for the USD dollar than the FED. Profit and loss is not concern, or a goal, of the FED. FED losses will have an eventual impact on the USD. But the USD is not their concern.
The primary objective of the FED is to increase bank profits, and promote policies which transfer wealth to the banks ( including during times of insolvency), either directly as fees or through asset purchases. The FED's policy is one of continual debasement of the USD.
The FED has never been efficient at tightening relative to the money supply. They play with rates while the currency suffers. The realization is the FED, overall, cannot tighten on a loss. It is essentually money created and given, in recent MBS history, for bad debt.
Mark Beck
Dear Ben,
I see that you have once again lost billions of federal reserve notes today, and so even your good buds over at the Treasury aren't returning your phone calls. Well, its been said that doing the same thing over and over, and expecting different results, is the true definition insanity. But, I'm sure that's just stress though.
Have you considered another line of work? Actually, that's why I'm writing. I hear the Sudoku desk at the Pacific Daily News has an immediate opening, and the climate on Guam is quite amenable. You'd fit right in! What do you say?
Best Regards - Bruce
Bruce, LOLOL
Of course, our Sudoku boards would be all wrong if they hired the twit.
This would matter if the Fed actually spent real earned money on these. As it is - this is money created by the Fed, not earned money.
If I print up $50 and use it to buy a chair, and turn around and sell it for $40 - have I lost $10? No, I've still made $40 in the deal.
Losing money on treasuries only matters if you actually use earned money (not printed) to pay for them.
...but now, there's an additional $10 in circulation. You've just lost everyone else money.
Well that's besides the point :) When you're the Fed who gives a rat's *** how much money everyone else is losing?
From a banksta's POV, that's a win-win. They managed to steal wealth legally.
It's good work if you can get it.
Rates gonna move up. Notice how when the bernank buys his crap, rates go down some, then the next day, they go up more each time. it is like he is running against the wind. He cannot catch up. And that, even with the cheering section from Lloyd and the boys.
10 Year over 4% and 30 year over 5%....Game, Set, Match, score... the bernank 0, tyler 40.
And I have been through many dumps the last 5 years with PMs, and while we never know day to day what is going on, this is a very mild pull-back so far. Usually, when the rout starts, it is viscious for days at a time with no break. Then a false start and another leg down. I am wrong more than right, but this does not feel like a 10-20% correction as in the past.
Just a thought for the board.
I have been at this for about thirteen years and I second your read as of now. The excessive bullishness on this relative newbie board was way over the top in the past few weeks. Even so, this one doesn't have the feel of a true rout that we have seen many times in the past.
I still say that the PMs are wildly overpriced on a purchasing power comparison.
A trip to some nice place in central America nowadays still can be had for two ounces of gold for two weeks. The silver price would be roughly $120-$150 if using the .900 fine silver coin of 1964 and earlier. A decent Nikon DSLR with two zoom ED lenses comes to USD$38.00 in 1964 coin. Is it reasonable to hope for even more price deflation relative to silver and gold coin?
Calculate what it costs for food in .900 silver coin. ZH had the Costco "one year" food supply for one, (it really is 200 days), for $800 delivered, or less than USD40 in 1964 coin.
The vocal silverbugs had better do some arithmetic before they spew on how they are going to buy the world with some silver slugs. It is as cheap now in silver as it will ever get.
Whatever Bernanke is doing I hope he keeps it up (LOL) My recent longs have been in love with him since August! The last 2 years have been the best 2 ever for me. Consider myself fortunate to be on the right side of the trade on QE1 & 2. I know it won't last forever but you gotta enjoy the ride while you can!!! In no way a permabull just trading the trend.
The Fed adds money to the system by purchasing bonds and securities and (in theory) can remove money from the system by selling them back. Suppose the Fed adds $1M to the money supply by buying a $1M Treasury and then later wants to pull that money back out of the system because inflation is starting to pick up. And suppose that the Treasury that it originally purchased for $1M is now only worth $800K because interest rates have risen. Then the Fed would not be able to pull out all of the money that it added by selling the bond. So a rise in interest rates would tend to hinder the Fed's attempts to undo the inflationary effects of QE.
I would have expected more from the ZH blog community. A year ago the 10yr UST yield was 27bps higher. The bond market is retracing gains from the QEII announcement. With real yields approaching 3-4%, long Treasuries will be the trade of 2011.
It's only one step removed from the Fed buying my 1980s cracked blue leather couch for $1 billion. They can claim to have assets to balance their liabilities, but do they really?
Obviously this charade is put on to inspire confidence. And even gold bug like me has to admit that backing the money with bonds (which are payed back with taxes people have no choice about paying) at least sounds sort of plausible.
So at what point do people decide that at least a significant part of the new money isn't really "backed" by anything other than an accounting trick?
"...but now, there's an additional $10 in circulation. You've just lost everyone else money."
Is'nt that the whole point of this?
So where can a guy get a good readable primer on how the Fed actually handles it's accounting anyway?
I always thought it was sort of a problem for them to say, "well we have $2 million paper dollars out in circulation backed by $1 million worth of stuff on our balance sheet".
Don't the two numbers have to be approximately equal to maintain confidence? If the amount of money in circulation is seen to be vastly exceeding the value of the assets used to create the money, isn't that a back-door helicopter drop? I thought the currency was supposed to go straight into hyperinflation in that case.
I think I heard somewhere that the Fed always values it's bonds as being worth what they paid for them (on the grounds that they "control" the interest rates that determine the bond's value anyway). But if they have to sell the bonds for less money than they recently created, how do they maintain the fiction that the things they buy are worth what they are paying for them? Isn't this at the heart of the con?
So where can a guy get a good readable primer on how the Fed actually handles it's accounting anyway?
You might try "The Creature from Jekyll Island". It is a 608 page paperback so I wouldn't exactly call it a "primer", but it is readable and does a good job of describing the history and operation of the Fed. (As you might guess from the title, the author is not a fan of the Fed.)
In the case of, say, a 30 year bond, the Fed would get back the full purchase price (and more from interest) if the bond doesn't default and is held for 30 years. But if the Fed was forced to sell the bond before then in order to combat inflation, it might have to sell the bond at a loss and some of the money it released when it bought the bond would not be pulled back in.
"And nobody cares."
And so ZH finally writes a line that is reasoned and accurate.
Just remember that no matter how you rant and rave Tyler, tomorrow, there will still be nobody who cares.
May I be one of the drops that starts the flood, because I care. From reading your posts, I find it safe to wager that 100,000 times more people care than care for you, No Mas.
Does anybody know what time Dancing with the stars is on Tonight -
Mr Sheeple
It is just mind boggling!
Even if rates don't move what about all that toxic sludge on the books? In the end the Fed's books will look like a dumping ground for bad assets, assets which allegedly back up our money supply. We are already past the point where he could sell to drain liquidity in case the banks start lending with the reserves. The assets are garbage and the banks will laugh when he asks for par. Another sweet point is imagine the pressure on the bond market with the Fed turned seller and the US Treasury dumping bonds into the market. The world only has so much money they want to put into US debt, and with a lot of the foreigners starting to look at exits pulling the sell trigger would panic them right out the door.
As to the Fed letting is roll off, ok. That assumes that there is no recovery at all, because if there is then the money will be lent that is sitting in bank reserves and the money supply EXPLODES. So Zimbabwe Ben is faced with a choice, let the price of all climb like the a rocket or try to sell toxic assets to get the money back out. Even if the Fed wanted to drain liquidity it would not be able to because the asset prices would be lower then the book prices, we could see a situation with a huge money supply and NOTHING on the Fed's balance sheet for assets. Don't think that would inspire confidence.
We already past the point of no return. Just kick back and enjoy the free fall into 3rd world banana republic.
nothing is toxic when you have 1%'rs like Roubini saying housing is headed toward a double dip, yet in the mean time buys a $5.5M warehouse twink pad in nyc, financed nontheless ($3M ARM) - loincloths and poppers for everyone!
They going to the moon ! Glad I aint going.
Tyler, the reason people don't care is because they don't understand. Tyler, they can't understand. It is too complicated. I've been reading the more accessible posts on this blog for months and I still don't understand. To start, WTF is SOMA?
I looked at Investopedia, which says SOMA is:
An account that is managed by the Federal Reserve Bank, containing assets acquired through operations in the open market. The assets in the System Open Market Account (SOMA) serve as a management tool for the Federal Reserve's assets, a store of liquidity to be used in an emergency event where the need for liquidity arises, and as collateral for the liabilities on the Federal Reserve's balance sheet such as U.S. dollars in circulation.
Assets acquired through...operations in the open market -- does this mean the POMOS? So the SOMA is created by the POMO? ok, moving right along. Collateral...for the dollars? so the Fed has money in reserve which is supposed to be collateral for money? how can money be collateral for money?
Tyler, you are so hard on the "sheeple", but it is seriously confusing.
Everyone has a learning curve, but you have to stick with it. Learning just doesn't happen it's a process. At least you are trying.
It is complex though and it's a whole other language. I had a professor tell me multiple times that no one in class could understand me because I used the banker lingo. Which is in itself a bit of a trap, you learn it and start using it, but the masses don't know it. So people would be impressed by my big unusual words but had not idea about the ideas I was trying to convey.
Put simply, we are being robbed. But the robbery is complicated to keep people from understanding the robbery. Everyone is accustomed to prices moving up, but few ever ask why.
And as to collateral, the collateral is not dollars per se, because those are free and unlimited for the Fed. The collateral is the treasury debt, MBS debt and other assets on their books. Assets that at a given point the Fed can sell to accumulate dollars. However as those assets lose value the Fed loses the ability to sell those assets and soak up dollars in circulation. Say they have a debt that on the market is worth $10 but they bought it for $100. So on their books it's worth $100, but if they sell it it's worth $10 and they have to take the loss on their books. Now if they hold to maturity and it's "good" they get their $100 back and can balance the books. If the bet goes bad they take the loss on their books then. It's largely academic because the Fed can expand it's asset base out to infinity but as the assets get worse it loses the ability to contract the money supply should they wish to, which I don't think they will.
so the idea is that the fed holds things it thinks it can sell, in case there are too many dollars, and then if there are too many dollars, it sells the assets and keeps the dollars in reserve, out of circulation? i am trying to put the pieces of what i've read together here. if there's too much inflation, that's what it would do? but did they have those assets before they started printing money? because otherwise it is circular, isn't it? also, i read that they have bought MBSes -- how do they know anyone will want to buy them if they suddenly need to "correct" the money supply? i bet this was the reason why the attorneys general settled the fraudclosure suits. because otherwise those MBS would be a time bomb, not an "asset", don't you think? how do they know anyone will want the Treasury debt just at the exact time they want to sell? also, if they need to sell because there's inflation, won't the bond prices be bad for investors and it will be hard to sell them? what if nobody wants it? then what happens to the money supply?
Bottom line: The Western World is bankrupt
All the POMOs, SOMOs, CDS, MBS, TARPs, TAFs are just background noise and delaying tactics so the central planners and TPTB can figure out how they can come out on top.
They're toast, trying to land butter side up. We are still the floor getting stepped on.
Does it really matter any more? We're f*cked anyway, right? And the Bernank is going to keep going on & on with QE's until unemployment figures go down, that's what he said. Fricking idiot.