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Chris Whalen: "Why The Fed Must Let Rates Rise"
From Chris Whalen, posted on Reuters
Why the Fed must let rates rise
This week all eyes are on the Federal Open Market Committee
(FOMC) and Federal Reserve Chairman Ben Bernanke. The FOMC must decide
whether to stop monetizing the federal debt issued by the Treasury,
which is what the U.S. central bank calls “quantitative easing.”
Americans continue to believe — and hope — that the Fed can save us
from our collective idiocy when it comes to debt, both public and
private. While there are growing signs that the Fed’s zero interest rate
policy, or “ZIRP,” is greatly damaging individuals and financial
institutions alike, we also need to question whether the Fed can let
rates rise without provoking another financial assets collapse.
In effect, the Fed and other global central banks are all caught in a “Catch-22″ situation, to borrow the phrase from the 1961 novel by Joseph Heller.
The Fed’s aggressive easing of interest rates and purchases of
trillions of dollars in Treasury debt and other assets has stabilized
and even raised the price of financial assets, but in other respects the
Fed’s policy of reflation has failed — especially compared with past
interest rate cycles.
In a comment published by IRA this week, Chief Monetary Economist of Cumberland Advisors Bob Eisenbeis notes:
“From the 50s through 70s, the main channel for monetary
policy was through housing: when interest rates exceeded the Reg Q
ceilings that banks and thrifts could pay for funds, the supply of
funding to housing was cut off. Then construction declined and the
effects rippled through the rest of the economy. Most of the economic
models have that structure and international isolation embedded within
them. Yet this is not the world that policy makers are now dealing with …
“
In an earlier comment in one of my pieces on Reuters.com,
I looked at the fact that “the Fed faces continued asset price
deflation at home even as the impact of its accommodative policies are
already boosting global inflation.” My friend and mentor Alan Boyce, who
ran the risk book at Countrywide, has been trying to educate people in
Washington about the lack of “trickle down” money in terms of the Fed
reliquifying the housing sector.
While the Fed’s QE and ZIRP have been a boon to the largest banks and
investors on Wall Street, Main Street has been left in the cold. The
continued decline in home prices in February as reported by Case-Shiller
— now down eight months in a row — has been ignored to a great peril by
the Obama administration. As I’ve noted previously in this blog, how
does President Obama expect to win reelection if the U.S. housing sector
and the banks that hold these assets are melting down come election day
2012?
Last summer, my firm earned condemnation from Wall Street for
suggesting that U.S. banks were not out of the woods and that net
interest margins were starting to fall. Dawn Kopecki at Bloomberg
reports: “At JPMorgan, almost half of the New York-based bank’s earnings
came from the release of reserves previously set aside to cover bad
loans. Net revenue at the second-largest U.S. bank dropped 8.9 percent
to $25.2 billion.”
The reason that revenue at many banks is falling is largely to the
Fed’s policy stance, but also reflects the still dismal economic
situation on Main Street. Most banks are seeing the revenue from
interest earnings fall as older assets run off and new assets with far
lower yields are put in their place. But the lack of demand for credit
from consumers and business is also a big factor behind the sharp drop
in bank assets.
The chart below is of the gross loan yield for Bank of America vs.
its large bank peers. It is taken from the IRA Bank Monitor using data
from the FDIC and shows the gross yield on the loan book for Bank of
America Corp’s subsidiary banks going back a decade. Notice that in the
2000 timeframe, just before Chairman Bernanke joined the Fed and his
predecessor Alan Greenspan stepped on the monetary gas pedal, bank’s
were earning yields on loans almost two times of today’s levels. Notice,
too, how competition in the 2005-2007 period drove bank loan yields
down, but from 2007 the Fed’s QE and ZIRP temporarily boosted lending
spreads.
Now,
however, the benefits of Fed easing and FDIC debt guarantees are
fading. Bank loan yields are starting to fall as lenders compete ever
more aggressively for the few borrowers in the market who want credit
and can actually qualify for a loan. The shrinking pool of earning
assets and the lack of yield on these assets is perhaps the greatest
danger to the banking system — and makes it next to impossible for
Chairman Bernanke to put off raising interest rates much longer.
As we told clients of The IRA Advisory Service last week during the Q1 2011 earnings reports from the banks:
Our predominant impression from top universal banks is
slack revenue to date and weak demand, and thus doubtful backlog going
forward. In Q1 2011 US banks are reflecting the true situation facing
their customers in the US economy. We were struck this past week by the
fact that several bank executives basically said during calls and
Q&A that the Fed needs to allow rates to rise so as to counter the
effects of the accelerating run-off of earning assets and subsidized
funding such as FDIC TLGP. Perhaps the appropriate policy formulation
for the Fed is to force the cost of funds up while continuing to support
overall volume of market liquidity via QE, reductions in bank reserves.
End of QE without liquidity support is a very dangerous path for this
fragile market in our view.
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Why does the fed care so little for the real economy and 99% of Americans. Gas and food up. Oh well it's all good because your houses are falling in value and you ain't getting raises if you have a job.
Fuck this shit.
Naw, it's cool. Mitt Romney is gonna fix all this shit for you.
Plastic Man to the rescue!
Really? Was that a legitimate question?
The Fed is a private corporation created by the bankers to cause inflation, lower interest rates, and support fractional reserve banking. Every fiber of its being supports the skimming of the people for the banks.
IMHO, it is the Original Sin of our economy and monetary system.
I'll go with Jacques Rueff here, who says that "la peche monetaire de l'Occident" is inflation. But the original sinner is the Fed.
Just remember there are those of us who are Fed skeptics. Then there are Fedophiles. Dirty, stinkin Fedophiles. Which one are you?
That's right traderjoe, why do people listen to what the Fed says rather than watch what they do? They say "we believe in a strong dollar policy!" and their actions destroy the value of the dollar. They say, "we want to help the economy grow and reduce unemployment" but their policy simply transfers interest income from savers to the banks.
I would argue normalized short term rates would actually be stimulative, give the nations widows and savers some interest income they can spend.
that watch what they do not what they say is good universal advice. puts the obama administration, where the cog dis between the two is greater than most, in a telling perspective.
Yep. No question. The last 3 years should have been spent addressing this problem. And it hasn't been done. Hence why I regard those responsible as, at best, fools or, at worst, criminals. What's next? Wholesale global unrest I believe. A complete mess that didn't have to go this way. One way or another, it will continue to play out on the streets around our world.
Most of the US only cares about britney spears upskirts and american idol. all the while they ream up the market and tell you things are great. Time to wake up. 1400 On The S&P Coming? http://bit.ly/gOBvRc
If they wish to stimulate the economy, they could start by giving me a little more than 0.000...% on my T-backed money market account. I promise I will spend some of it, maybe even on campaign contributions.
Think about the absolutely enormous number of retirees who have saved a nest egg/retirement fund of $500k to $1m over the course of their lives. These are hard working, responsible Americans.
At a safe 5% return, those boomers could have lived on $25,000 to $50,000 per year.
Now they're looking at $5,000 to $10,000 per year. (ie: POVERTY).
Bernanke is basically exterminating the elderly. When these people need to pay for non-covered healthcare expenses -- guess what's going to happen to them? They're dead.
Alternatively, these poor elderly -- who have no ability to recoup losses should they occur -- are being forced into ULTRA HIGH RISK equity markets in search of regular income. This is *not* the way it's supposed to work.
This is what Bernanke is doing to Americans to save the banks.
Yes, that is a damning indictment of that clueless and sociopathic academic, isn't it? A crime, much less one of such magnitude, was never more apparent --- and yet is cheered on by millions of sheeple as "proper government economic policy".
Get out the brown shirts and prepare the concentration camps --- mindless America is ready for them.
You are absolutely right.
But it's not just retirees. Unemployed people like me were expecting to live off the interest on savings with minimal hit to principal. But now instead of my expected $75K of interest income, I get about $2-3K. I could earn marginally higher by using a term deposit instead of a demand deposit, but with the banks having been within hours of failing in 2008 (granted they were referring to money markets being that close, but it would have rippled through), I don't want my money locked up for a long period.
And of course, that $2-3K is nominal. In real terms, I am losing money by keeping it in the bank.
It is a transfer of wealth from savers to borrowers. And pinheads like Mark Zandi say "Yes, that is what government should be doing". Fascist.
LOL. Thanks for the chuckle. BB will say nothing tomorrow except "I hate the dollar". To which, gold and silver will go into orbit.
May I have a cocktail of fire and ice. And make the ice, hard clear ice that won't melt, and make the fire inferno hot which won't cool. I don't want to burn my tongue though, nor chill my teeth.
We'll call it the impossible catch-22 'cause it sends you to Heller. Actually we're already there--just the instant before everything implodes.
Agreed. May you live in interesting times, brother.
Off topic, but where are the BofA hard drive files Julian old son? It's almost May now, think we'd forget your promise?
Forget about that fucking faggot. Irrelevant sideshow like Dancing on Bullshit.
Who the fuck is Chris Whalen? Is he a good cop or a bad cop?
The dude is A+.
A++
If you don't know Chris Whalen, you're in the wrong classroom. Art history is the shabby building down the lane.
"My friend and mentor Alan Boyce, who ran the risk book at Countrywide,"
This caught my eye
OMFG, the BANKS aren't making enough money...CATASTROPHE
That's NOT even what this article talks about. There's 2 components to money. Borrowing cost and lending costs. The rate they want to raise is the savers playing bankers rate The homeowner rate is the counterfeiter rate.
When interest is 10 percent and someones grandma in florida is getting 5 percent from money market account there is a collective bankerism going on. In otherwords the bankers go beyond their borders. They have to increase interest they PAY for money to jumpstart the collective bankerism meme. Not what they charge for money. To get a larger mass of people intent on keeping things as they are to subdue those who want to change.
Right now counterfeiters - housing inventories home owners, commercial reit is so fucked up it's keeping the focus on the banks.
Right now retirees and savers are not getting paid to play bankster. Stock market dividends are in the toilet so investors aren't getting paid to play bankster.
Think of it as a core group of people the bankers having a face. When the economy "works" for more people they have a "mask" to wear of happy homeowner counterfeiters and happy savers playing part time bankster.
They have been running too long without the mask and they really really want to put it back on and let ignorant fucks take the heat and conform the masses to their will.
Raise the somewhat innocent through ignorance amateur sheild!!
Criminal Bernanke already has his rap ready to go. QE2 successful, interest rates stabilized, economy recovering, stocks booming, banks saved, inflation under control, gas prices up due to higher demand, yadda yadda yadda. We will halt QE unless the recovery falters (i.e. stocks crash).
"We will halt QE unless the recovery falters", based on what I've seen the last few weeks that won't take long at all, but I'm surprised they've been able to keep it inflated this well for the last 3 or 4 years.
Success to the fed is the stock market up.
Ben is a student of the great depression? I think he stopped reading when thy said the 29 crash caused it.
Meanwhile even charities like meals on wheels is cutting back, too little donations food and gas too much.
Maybe he'll pull a Donald Rumsfeld: "Building 7 ?? What building 7 ?? I have no idea what you're talking about."
"Inflation?I have no idea what you're talking about."
Actually the Fed is doing us all a favor...free gold
http://fofoa.blogspot.com/
Excellent blog. Worth visiting weekly.
It doesn't matter what he says just buy the fucking dip !
What dip? We haven't had a correction no matter what happened. USA debt downgraded, eurozone defaulting, oil high, food high, housing collapse getting worse.
I think they gave up on propping the housing market. Just hand the checks to the bankers.
All of the above just sound like reasons to me why the Fed should be eliminated.
This article is a useless as the rest.
Each and EVERY article should be How to dismantle the FED.
And how "The FED" is NOT ..FED at all,but private.for profit.
Until you's americans tear down the fed building brick for brick/block for block,you's get what you's deserve.
Each and every day of your enslaved lives should be exposing this maddness,and putting an end to it.
And until each and eveyone of you's call it the Non Federal Fed,then the deception is just passed on to future generations of Non Federal Reserve slaves.
WAKE THE FUCK UP...!!!! ...Docile sheeple
The Problem is the Sheeple, (majority), don't even get it. They think the FED is part of our government. Like another branch. Most Americans get their news from the Fraud News Fox. They are Told how to Think and Listen well.
We are Japan now and will remain so for many years. The elitist banking Cartel owns the sheep.
America is doomed. After what I've seen over the past 10 years I think we are the communist nation and Russia is Free nation. Their people get new Freedoms every day as ours diminish.
"Most Americans get their news from the Fraud News Fox. They are Told how to Think and Listen well."
You wake up. Do you think ABC/CBS/CNBS/NBC/CNN/MSNBC educates better than Fox ?
Don't be stupid. The corporate media are all shills TPTB, and you are simply helping them with their dirty work by buying into the Fox Bad meme. They're all bad.
Vladimir Putin nailed it when the press started complaining about Russian TV bias. His take? "TV is for the masses. Intelligent people get their information from the internet." It's a global truth. It's no better here in the US. It seems more open, but the reality of ratings checks mandates that only stories shallow or exciting enough to hold the eyeballs will be run.
I have friend who is an engineer from Italy who works for Fiat. He actually has lived here for a while, as he attended both college and grad school here.
Anyways, as he rightfully points out, the United States, with every single network, cable and radio station all owned by just 6 corporations, has the worst media, by far, of any nation he has traveled to - and he travels all over Asia and Europe for work reasons.
I also had a college professor who talked about regardless as to whether you're conservative, liberal, libertarian - whatever - you have to seek out a completely independent source of media to get any solid information on world events and accurate and unbiased (or least biased) reporting.
The media in the United States really is a sick joke. I literally can't tolerate watching any network or cable news anymore, because of the disconnect between reality and what is reported, the trivial bullshit that is reported - especially given the very significant events of our time, and the sappy idiots who report the news and inteview politicians and other notables and fail to ask intelligent questions or any intelligent follow up questions, even when their is low hanging fruit right in front of them.
Meet the Press and 60 Minutes are great examples of this. It doesn't matter what answer Rumsfeld or Bernanke give; the 'journalist' asking the questions asks no tough questions and never seriously presses the person or calls them out on an even obvious fabrication/lie.
It's sickening,
Doesn't everyone (at the point of a gun)?
@ skipjack Agreed, they are all bad. No problem with that. But Fox still wins the We Brain Wash the Most Award.
This is how they earned by disrespect. They have a Asshole who said, "You got to shoot them in the Head".
And guess what. Some mentally stupid did exactly what the Fox Professor told them to do. So, They are the Worst.
And worse yet, why is he not in Jail where he belongs. Last time I checked, YOU can't do that or your in jail.
Oh, I know, Fox is above the law because it is entertainment, not news. Fox claims to corrupt more minds then anyone.
This article is a useless as the rest.
And your comment is equally useless.
Fed isn't going to be stopped / shut down / eliminated.
If I see another "they should ..." comment, I think I'll scream.
... hear that GW?
Understand your position. You must think they are doing God's Work. Godman Shafts runs the FED afterall.
Yes Bansters....you are so right. But don't expect an audience here. Like all blogs, these are the sheeple that continue to play the game...day after day. They contemplate for hours and days what the Fed will reveal on those special FOMC announcements. They don't want to change a goddamn thing except their bank accounts. That is who you are dealing with here and at other blogs.
This article doesn't provide anything but conjecture and speculation, like all the others. Many spend their time chasing ghosts, or I should say trying to second guess what their masters will do.
They all lie to you, and the ones that don't will never be right. That's the Catch-22. So many on these blogs that are so young and inexperienced. Live your life and get out of this hell hole. What kind of life is it to steal or profit from the misfortune of others.
Choices in life are simple. You're just thinking too hard.
The vast majority of ZH people 'get' the nature of the Fed.
But calling for its dissolution, thread after thread, is boring and pointless. It's like going to a frat party and suggesting having a good time every 5 minutes.
We all want the Fed destroyed. But even if one of us blew up the Fed, it would be pointless - until the majority of Americans understand the system, they'd just allow our politicians to re-institute it. So until that day, we're stuck with the Fed and trying to second guess its actions, in the hope we can front-run the bastards so we can carry on eating.
BAAAAAAAAAAAAAAAAHHHHHHHHHHHHHITCHES
idiot ... QE2 was designed to raise the rates! And it worked! Now when QE2 is over the rates will go down again.
Beg pardon, but did you pass basic math class?
Which must be what explains gold's fall from $1500 back down to the current $700.
+1500
Gold is in the early innings of a massive breakout if The Bernank doesn't convert himself into a hawk before tomorrow - which he will not do.
I suspect he will... at least, temporarily.
The Fed are coming under a lot of scrutiny now, and getting a lot of flack. If they stop QE, the markets will collapse, and then the Fed can claim 'see? without us, you're fucked!' People will cry out for more QE, and meanwhile, commodity prices will have collapsed.
So tightening now (for a month or two) would kill two birds with one stone, by reducing inflation, and getting political cover for more ZIRP.
nothing says depression like falling interest rates
if QE3 happens tomorrow, say hello to the NWO Bitchez! One world $$$
Rates rise= The bernake is looking after us....hahaha yeah right, thats not going to happen
His mentor ran the risk book at Countrywide? I think this must say something about the friends he keeps.
The contempt for the Fed and Bernanke will elevate to the level of outright rage......when social mood reverts back to the original bear market sentiment; aka Primary Wave 3 DOWN; the plunge and collapse will be swift, triggering all available circuit breakers.
And the Fed will be powerless as will Obama because neither is bigger than the market.
QE2 being initiated during a corrective uptrend of the market will show it's utter futility because it will not have eliminated the oncoming collapse in equities.
Gold and Silver have been near lock step with the equities and this should be very, very bothersome to everyone. The fact that metals did not surge on the day of Japanese tsunami and nuclear meltdown showed that it really behaved like equity rather than a save haven. If it truly was safe haven, metals should have rallied while leaving equities behind...instead, it went lock step with world indices....very scary.
Spot on. +1.618
I wonder sometimes (daydream, actually) how that rage will manifest. Then I snap out of it w/a shudder and a cold sweat. Scary indeed...should've stayed at Princeton.
I stopped reading when I saw, "Primary Wave 3 DOWN"...
'zooka,
You gotta get in tune with what goes on here. There's a reason why the interesting posts make reference to 1913, Nixon, .com bubble and so on. Your over-hyped technical analysis has a shelf life of anywhere between 15 minutes and 3 months. That's nothing but noise in the bigger picture.
Gold behaving like equities and what should or shouldn't be bothersome is stuff I can read on the sticky side of a bubble gum wrapper.
What's important is that the U.S. cannot possibly repay its accumulated debt, particularly so when it cannot get out from under the structural deficit that would yield ~$300B in annual shortfall even if so-called "non-military discretionary spending" was wiped out.
This game started decades ago - long before you started polishing your stinger in your sister's closet.
The game is ending as the real estate is running out. If the FED drops QE for any stretch of time, yields will rise in search of buyers. That will blow up the deficit, cause a pullback in equities and push the teetering housing market into freefall. That is Collapse Scenario A. Scenario B is that Benny and the bankster complex covertly finance the debt through economic repression or some other sleight-of-hand name. That means the dollar goes into accelerated free fall. Scenario C is default, which gets you the worst of both of the outcomes of A and B, but arguably a quicker reset/recovery.
The only thing holding the dam back is that the majority of people remain in the dark (read: YOU). But the light is beginning to shine through, and inevitably it is going to be an inhumane episode of survival instincts taking over. Money velocity is what I watch.
So while you're spanking your Wave 3 Down chimp, think about what you want to be holding when the dust clears.
"All of the above just sound like reasons to me why the Fed should be eliminated."
Exactly....!!!
They sure put a dog and pony show on for the sheeple.
And that old /Dem/Repub. thingy sure seems like the Non Federal Non Reserve Corporation's best friend.
Silly rabbits,Trix are for kidz,but the USA has a plenty so the gig goes on.
Gas and food has not gone up... if you bought food and gas etf...
Hey Bazzooka....Joe....!
Ya ever hear of Precious metals suppression/manipulation.???
Good kid/a little slow.
Loss provisioning gimmicks have replaced the securitization gimmicks in the bankster trick bag. Beats the hell out of nickel and diming around for churn fees.
Begin with the desired result and work backwards.
All liquidity injections have not yet been able to eliminate the deflationary collapse of housing prices, decrease in earnings (hell i haven't had a raise in two years!).
IF we were in hyperinflation, prices should be increasing universally! But, housing and wages continue to collapse. Since these two components have not joined the "inflation" rally, one shouldn't be confused between a temporary reflationary period within a larger Deflationary spiral down.
I believe hyperinflation will eventually come, but we first must cross the valley of deflation. Which means, the USD will have a multi month to multi year bull run (currently 97% bears on USD.....not a bull to be found).
Disclosure: Long FAZ incrementally adding, Long UUP, Long VXX, S&P 500 puts.
Dude, don't hold faz or vxx. It's just shit.
Get some SH calls and XLF puts or join the bears in metals.
Shorts have been corn holed way too much.
I'm with dude. Should be 18 month down cycle, I got some sds and keep adding. From here to June I will move in slowly, we don't know when but once it starts it will go fast, maybe a quick drop a jaw bone backup then the tank os on.
When thing like zsl have such huge volume, someone is buying and if it's deep pockets they have taken silver to the masses, soon they will take it to their asses. Same with stock, these driven down bear etf's are being bought and when we get a tank that doesn't bounce, it's a VW squeeze.
You're adding to a double-short ETF (which will bleed value the longer you hold it), with a clear bull trend intact? Seems insane to step in front of this market. Why not wait till the trend line breaks?
Hope everybody's using stops... Just cause a market should go down doesn't mean it will.
+1
I went into FAZ in the beginning of the month, then ZSL last week. I do think silver will eventually hit >100, though I think everything will slide in the next few months. Would like to turn the ZSL into AGQ sometime soon.
WRONG.
In hyperinflation, currency confidence erodes and there is a run on banks to convert fiat into things with near-term value: food, fuel, water, addictions (cigarettes, alcohol), etc. The price of these things goes to the moon. But it doesn't happen in an hour. There is a build up - just check your history with Wiemar and Zimbabwe.
In this scenario, servicing long-lived assets becomes subordinate to immediate needs, so things like real estate FALL in price.
So once again class: pre-bought liquidity and safety are your top priorities; investment opportunities will come later. If you don't pre-buy necessities, you're going to miss the opportunities.
As I've posted elsewhere, my liquid portfolio includes generous amounts of food, water, ammo, fuel storage, PMs, and barter currencies. I will be happy to sell you any of these for the right number of ounces. :p
For the first time in my life, I'm seeing a true loss of confidence in the USD by AVERAGE AMERICANS.
When silver eagles are scooped up en masse by Joe & MaryJane Six Pack at $57 a pop, it tells me there is little doubt that there is solid and deep currency confidence crisis afoot.
Add that on top of the pile of the troubles and crises The Bernank faces (assuming that he cares or has the interest of Americans in his plans and machinations).
I TOTALLY lost all confidence in this wildly fucked-up country after the so-called Patriot Act, the outrageously unjustified invasion of Iraq (and the lapdog media's total lack of opposition to it), and the re-election of the Shrub. Everything that has happened since has just been the arsenic frosting on the shit cake.
+1
Any Patriot would realize what a crime against constitutional RIGHTS the UnPatriotic Act was - and Bush II & Obama are both culpable.
The small banks are being strangled.
That's the plan. The FED is owned by the big banks. Fewer small banks means less competition for the owners of the FED.
Why do the TBTF banks need any loan loss provisions or capital for that matter? Those are for 'little' banks the FDIC can seize if they can't keep up with the big boys and run on fumes.
Perhaps the appropriate policy formulation for the Fed is to force the cost of funds up while continuing to support overall volume of market liquidity via QE, reductions in bank reserves. End of QE without liquidity support is a very dangerous path for this fragile market in our view.
I like Whalen but wouldn't the effect of this suggestion be to push the QE that has already happened off Fed's balance sheet and into the economy? I think it used to be called "inflation."
I may be missing the delivery mechanism discussed here but it's either round-trip window dressing to make the banks look better or it's inflationary. Whalen's using fancy banker talk for more QE, just probably named differently.
No, I dont think you're missing something. It doesnt make sense the way it's written. Either Fed allows rates to rise (which is contractionary), or it supplies liquidity. The way it typcially supplies liquidity is by goosing bank reserves (essentially the banks' cash accounts w/the Fed). If rates rise, reserves tend to run down. Decreased reserves in other words is incompatible with increased liqudity support. The 2 are mutually exclusive unless the Bernank has found the magic wand of monetary policy that allows him to be at once both tight and loose....kind of like a virgin whore.
LOL - you get the maximum distillation of meaning into minimum # of amusing words award today. That's funny s**t!
the bernank doesn't give a crap about the small banks, only the tbtf paymasters.
"End of QE without liquidity support is a very dangerous path for this fragile market in our view."
Isn't the whole point of QEx to provide liquidity support? The end of liquidity support without liquidity support is a very danerous path for this fragile market in our view?
Thanks Chris.
Further proof that the fed only cares about it taking care of itself i.e. the banking cartel. The house of mirrors and illusions is running out of mystique and so as fast as these institutions reaped financial gain and power, they will lose it only as fast if not faster.
Only the Obama administration and Congress can now protect the American people from those banking liars and thieves. Let's see if either will intervene for the people!
El Arian said himself.. 'you can't solve an insovency problem with liquidity.. it just piles more debt ontop of old debt'! That is what QE has done.. and why they are loading up with T's. We have a financial system in worse shape than 2008, not better.. the bad debt is still there.
that is right.
the inflation machine (fed) has broken down. they can't get the credit pie to expand on its own so they are force-feeding with money from "the future".
but no new cash is being created - and therefore, there is not sufficient cash being created to feed all the rents.
so the debts are trying to collapse - but they can't - because public money is being used - still - to buy up all these "assets" faster than the assets can deflate in nominal terms.
i was a firm believer in deflation until i realized - very recently - that without continued money supply growth - the financial industry and its regulators would have to go out and explain to whole life insurance policy holders - "sorry folks, you got tricked fair and square. it was all a scam all along"
that's not going to happen. deflation would wipe out the insurance industry.
try having a financial services industry without faith in the utility and viability of insurance.
Perhaps PM prices are already signaling that there will indeed be QE3.
Please don't bitch when PM's correct! Buy the next DEEP dip.
@ Bazooka
Have you ever seen the Gold/DJI or Silver/DJI ratio charts? Silver especially shows that they have not acted in tandem over the past year.
I guess the Fed could raise rates a very small amount and at the same time extend a scaled down QE printing operation. That way they can claim there is not a significant increase in rates or printing operations, and hopefully everyone will go back to watching sport and drinking beer.
The Fed may be seeking to pay interest on bank reserves, instead of raising interest rates. This way, it starts to take the steam out of commodities... However looking at commodity gains, they better plan on paying double digit interest to attract money.
Wait a minute. According to the chart, gross loan yield for the banks is still above 2004? So what's the big problem for Bernanke that he "must" raise rates?
What would happen to the value of the dollar if the went from 0% to 3%. Maybe all those cash stockpiles will go out to door for preductive activity instead of gaming the system.
i'm adamant about my beliefs...until i see something that actually works. especially something that works "for no apparent reason, logic or numbering system." then my "real ideology" comes shining through. if equities keep rallying, oil prices suddenly moderate and growth and jobs suddenly return en masse then Beranke could be bailing out Bezerkistan for all I care. Still--I do reserve my right to still call you funny things and make people laugh about you. And I still reserve that right for all my friends here who are going to kill you as well. Go ahead...mess with my friends. At least i think they're my friends. Although if you arrest me I might say something different.
Guess I forgot how to use my secret decoder ring.
Let's just give BB and all the other useless assholes plenty of rope & watch what happens.
Score update:
Silver +0.940
Gold +6.4
DXY @ 73.61
I'm declaring the margin raid cleared. Let's see what land mines are tossed out in front of Benny's soliloquy tomorrow...
Place your bets: no meaningful change in the FOMC position, other than perhaps a nod to inflation as something they need to keep an eye on. In a good way, right, FOMC? (Wink wink!)
DOW 13000 hats please, Gold to 1750, oil at 125.
I think a lot of us are going to have some WTF moments after the Fed statement and Bernanke press conference.
I'm thinking no major changes in policy as well, except that QE2 will be replaced with an effort to maintain the bloated-assed balance sheet.
Bernanke seems convinced that no matter how much the central bank gooses liquidity, the inflation effects are transitory at worst. The reason? Beranake and his easy poliy minions see plenty of productive slack.
What may be closer to reality is that inflation continues to become more widespread-- without any improvements in overall income levels.
Of course, Bernanke will keep the blinders on for as long as possible, at least until (a) there's massive protesting in the streets; and/or (b) enough political pressure is placed on The Bernank so that a reversal in policy is needed to keep those who want to get re-elected to stay in the game.
If there's an about face in monetary policy sooner than later, however-- rest assured that the TBTF's are already making their bets.
Last week a Chase bank in Seattle was vandalized because of all of the fascist fraud and corruption that has defrauded billions from the American people . In responce JP morgan Chase has been running PR spots on the local media outlet telling how great JP morgan is for the area . Those dirt bags at JP morgan are so low they are using cancer victims to try to gain symphty and divert attention from their corruption. JP morgan buying add from the fascist controlled media so they won't do any reporting about the fraud and theft of the American people : Mortage fraud , MBS fraud , Securities fraud , POMO is a theft from savers. The lowest part is using cancer victims . Go on You Tube at( Chase bank vandalized) and tell them what you think of them I don't know who broke out their windows but they would get a free pass from me .
Vandalism is kids play. Adults pull their savings out of chase or get a huge mortgage and declare bankruptcy.
I hope the cancer victim use Chase credit cards to buy big screen TVs for their children, and then default on the credit card shortly before they die.
Pray tell: how would you know the motivation of the bank vandals? Corporate vandalism was initiated by the WTC some years back. Broke windows of my company. You ain't one of 'em, are ya?
"But the lack of demand for credit from consumers and business is also a big factor behind the sharp drop in bank assets...."
this is an ignorant statement....there may be a shrinkage of credit worthy customers but the decline in loans is a result of fdic....as in a perfect cia conspiracy there is massive plausible deniability to either claim because there are two different treatments of banks....the tbtf banks are treated with laxity by fdic while smaller banks are feeling its heel....specifically smaller banks cannot loan because the fdic is requiring that they increase massively loss reserves on even the primest of loans....that eats up capital and lending capacity...i know this from 2d hand knowledge....
the complaint about a lack of qualified borrowers is another one of those media lies to shift attention from the power grab by the tbtf banksters and their collective insolvency....
.
Bring on the higher rates and higher gas prices.
The parasites living off the system will wake up.
Bring on the higher rates and higher gas prices.
The parasites living off the system will wake up.
Bring on the higher rates and higher gas prices.
The parasites living off the system will wake up.
Bring on the higher rates and higher gas prices.
The parasites living off the system will wake up.
Bring on the higher rates and higher gas prices.
The parasites living off the system will wake up.
The Bernank has no way out tomorrow, assuming he actually wanted to save Americans from either inflation or deflation.
There is no going back to the normal curve on prices and demand now absent a big and painful and long drawn out adjustment period after shock therapy is implemented, because The Bernank has fed so much cocaine to the monkey that habituation is a real problem now.
That monkey is going to have a very painful withdrawal period, assuming The Ben Bernank even takes away the liquid cocaine that it has been injecting for some time.
If The Bernank doesn't set into motion the taking away of the cocaine tomorrow, in anything less than firm and unambiguous tone (with a declaration of rate hikes soon to come), it's off to the races for anything that isn't the USD or other equally worthless fiat.
The Bernank is either a sociopath or the world's worst central banker of all time.
If he simply says QE2 will wind down as planned in June, and that further actions will be made on a wait-and-see basis, the economy is very screwed. Of he even hints at QE3, jus buy ammo.
- In fact, if he even hints at QE3, even via mere balance sheet income repurchases of treasuries, the economy will end up in a true depression as everyone bids the prices of everything up so much that it will literally crush the global economy.
He literally has to shock equity AND bond markets now, because he's waited so long and had his foot on the gas for so long, creating so many disequilibriums that are still now in play, if he hopes to save the economy.
Good luck with all of that. The mic is yours, Bernanke, you fucktard.
Sad, but all true.
Nice, if grim, summation of the situation.
Finally. Fuck up part 2.
This is going to suck. Bernanke has to raise interest rates to pretend dollar pays a dividend to drive people out of gold. During great depression they did this. Rose rates and then immediately dropped them. This drove everybody back into gold and silver and vapor locked the system. The rich could no longer direct the poor and so nothing happened. Well someting happened. People lived. But they weren't building and producing what the rich wanted built and produced.
Bernanke is going to do it differently. He is going to raise rates and attempt to hft SLV way way way down. Have his rich buddies swoop in on fake paper market. Get people to convert physical for the fake paper. THEN dump the interest rates while simultaneously HFTing SLV down. Or if they can grab enough real money leave interest rates up but drop them just a little to keep economy from "stalling".
There is just tooo much churn going on in SLV. Something is up.
What will actually happen. They won't get silver down to 26 to cover shorts. People will burn the fear trolls to death. They'll take silver from super tight to barely an ounce flowing. Gold will go to 1600 1650 as a "distractor" sleight of hand municipal and government budgets will start puking defaults and contract missed payments all over the place. America will end up broke with all it's roads torn to shit from shovel ready jobs. Stay Puft marshmallow men will explosively decompress all over ameria.
Just a guess.
The title of the article should be:
Why the Fed must throw in the towel...
... and dissolve itself.
They wouldn't do that.
Even if they pretended to wind up and close their doors, they'd either remain or re-appear in another form, with the same objectives.
In fact, I wouldn't dismiss the notion that The Fed is planning its own funeral, knowing full well that the IMF & World Bank will be strengthened in ensuing years, to carry on the same objectives, but from an even more global and diabolical perspective, to further the interests of the Lizardian Money Men.
As Jefferson or Andrew Jackson (or even President Garfield - check out what he had to say about the Federal Reserve - President James A. Garfield was inaugurated in 1881, he said "Whoever controls the volume of money in any country is absolute master of all industry and commerce". On July 2, 1881 Garfield was assassinated) knew, you have to literally cut the head off of the snake to kill it, and then you have to literally build a firewall to keep it from coming back after it regenerates.
Even Woodrow Wilson knew it, and he enabled the passage of the Federal Reserve Act of 1913:
My guess is, the predators who own the FederalReserves intends to "dissolve" the Fed soon and pretend to "vanish", but actually just become the core of the "PlanetReserve", the central bank for the entire planet.
And, of course, they'll pretend their supposedly "new and improved" global fiat currency is the solution to the problems they created with the US dollar.
And that's what people need to stop... the formation of a new super-fed. Or failing that, all of us with at least half a brain need to steadfastly refuse to exchange our goods for anything but gold (or other real physical goods), and vice versa.
Hell, I'm already there. Over the past 3 years I've raised the percentage of goods I get by trading for my gold bullion from 27% to 96%. Today, a large percentage of individuals and companies will trade their products for gold... if you take propose it calmly and simply. I refuse to ever return to fiat, no matter what the rest of the humanoid morons on planet earth decide to do.
+1
The Siren song is reaching its crescendo. The shores of Sirenum Scopuli are near.
I do not know why there is such surprise or consternation here or elsewhere. For the record, I am with C. Whalen and deem his accounts true and accurate, if not slightly tempered by genteelness and to still secure gigs w/MSM. My guess is over three martinis, a more ripe summation would be found.
Dudes and Dudettes, the Fed for the last 100 years has run its course. It is now losing ground on all fronts. With other countries, with the law and with confidence of you and I.
Yes, yes, the 'sheeple' (hate that term) are unaware, I agree. These are people who weren't afforded or blessed or cursed with the ability or means to understand or see. They TRUSTED our leaders, our learned, our professionals to guide and serve in an equitable way - largely. Yeah, they know shenanigans go on and that Senators or EPA adminstrators have strange sex and take money...every man knows that. What they didn't know and I agree, are having to find out is that the FED is the enemy within. Our "leaders" failed them in that.
"Wisdom [is] the principal thing; [therefore] get wisdom: and with all thy getting get understanding." - Prov. 4:7
1913 Is coming home to roost. Silly me, I still believe that we might overcome that fact and do hope so. Yes, I would like to see T. Giethhh replaced with a woman or man, that would march over to the Fed and FIRE them, with a battalion of Marines surrounding the place and reclaim the Governments right to print and issue its OWN currency. Doubt that's likely, certainly with Barry "Quiet Storm" Obama in the house.
Be kind to people you meet.
I hate long posts.
Virgin Whore? Hmmmm, and just where can I find one of these "Virgin Whores?" not to get off the subject or anything.......
By the way - A friend of mine who is an engineer at Fiat and works with many Indian co-workers was told many shops and stores in India are not accepting USD.
I find it hard to believe, but he's never lied to me before (although he was hearing it from Indian co-workers).
The Bernank is looking into a bottomless pit in front of him, while a large boulder is rolling up behind him...
[quote]
The wheel is turning and you can't slow down
You can't let go and you can't hold on
You can't go back and you can't stand still
If the thunder don't get you then the lightning will
Won't you try just a little bit harder?
Couldn't you try just a little bit more?
Won't you try just a little bit harder?
Couldn't you try just a little bit more?
[/quote] -- Grateful Dead, "The Wheel"
"It means, hang on Dorothy, Kansas is goin' bye-bye" -- Cypher, "The Matrix"
+1
It seems signals of tightening in some form is coming today. If even banks want higher rates, they will get them. That will also solve silver shorts problem for JPM.
The FED has no choice. I see the yield curves.
European banks are struggling with Q1 profits. Need higher interest rates.
Well since my meager wealth is 99.99% in PM (there are a few piles of change around the house) I will have to sell a little bit in the morning just in case The Nackster does us in for a bit, his eyes have that naughty twinkle in them, and his beard wants blood, and my heart can't handle selling for less than $40.
To everyone complaining about the Fed and my bankster friends that run it, please don't hate us because we're better capitalists than you. Please accept your defeat graciously. We've played this game better than everyone else and would like to take this time to truly enjoy our chokehold on power at the world's expense. We're taking our profits as we see fit and would prefer not to hear any complaining from inferior capitalists. If you're not first...you're last. Deal with it. Love, Ben
Stop looking for deflation we already have it
Deflation in terms of gold and silver, gasoline already hit an all time low in silver terms surpassing the last low established during the Great Depression.
The value of fiat currency will never go up beyond a few short covering rallies from time to time.
Deflation is here for PM holders in all asset classes and consumables.
Ya-know, after reading so many articles, so many points of view, and so many blog posts over the last 12 mths - especially the last 3mths - I reckon nobody's got a clue...what I mean is that we're in a place where all of the factors we are currently looking at, have never been all put together at the same time, and therefore, there really is no clear way ahead, no enlightened one either.
Countries and Central Banks are using knowledge which may well be invalid...and therfore no better than any one of us in Blogland.
I reckon common sense may be as good as any chart or metric...certainly better than The Bernank's game of Spin the Bottle at the centre of the Fed/Treasury/TBTF Circle Jerk-a-thon.
Chris is too logical, where logic is an impediment to effectively running an out of control global Ponzi.
PS - ZH CAPCHA IS BULLSHIT!