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Excess Bank Reserves, Fed Balance Sheet Assets Skyrocket To Record High Levels
The saving grace of declining liquidty swaps and CPFF could only go on for so long. In the past week, the balance sheet of the Federal Reserve exploded, hitting an all time high of $2,174 billion. Furthermore, total reserves of banks with the Fed also hit an all time high of $1,047 billion. So much for the whole "banks lending newly printed money out" theory.
Total Federal Reserve balance sheet assets for the week of October 21 hit a record $2,174 billion ($68 billion higher compared to the prior week's $2,105 billion). Fed assets consisted of:
- Securities held outright: $1,678 billion (an increase of $99 billion MoM, resulting from $10 billion in new Treasury purchases, $77 billion increase in MBS and $11 billion in Agency Debt), or a massive $70 billion increase sequentially
- Net borrowings: decline of $23 billion to $265 billion. Total bank borrowings hit record, pass $1 trillion.
- Float, liquidity swaps, Maiden Lane and other assets: $230.2 billion, a $1.5 billion decrease based on a $1 billion reduction in CPFF and a $2 billion reduction in FX liquidity swaps, bringing these to a fresh 52 week low. At $41 billion in liquidity swaps, foreign banks are once again massively exposed to underfunding of dollar-based assets.
Foreign holdings increased by $28.5 billion to 2,893 billion.
Total bank reserves with the Fed hit an all time high, surpassing $1 trillion, as banks continue to hoard cash. The amount of extra lending that could have taken place but didn't was $65 billion week over week, or a $130 billion increase in just the past month. Keep in mind this is a very confusing datapoint especially in light of recent reports that the Fed's $100 billion reverse repo test was a failure, meaning despite the $1 trillion in cash presumably with the Fed, any liquidity slack in the system does not exist.
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When does the music stop
wait for a butterfly to flap its wings in some far away place and then we'll have an answer, but only after the fact...
When they are "forced" to rent the homes and CRE because the mortgages are junk. The latest program from HUD out this week confirms my long time suspicions. They will sell us our cars, rent us our homes, partner with us in the markets, hold our money in their banks, and we will be grateful for the implied safety.
The great experiment of personal freedom is winding down. Long live the King.
Well said. You cannot have total freedom and total safety at the same time.
You can't separate peace from freedom because no one can be at peace unless he has his freedom.
-Malcolm X
watch.the.UK.
This is quite confusing. So there ARE reserves within the banks, but they are, for discussion purposes "frozen" and cannot be used to lend out or pay back to the Fed?
*blink*
The banks are stuffing their reserves into the proverbial mattress (Fed) because they know they have large looming losses to contend with. It's probably some combination of (1) a realization that actual losses will be terrible on a big chunk of their under-reserved marked-to-fantasy assets, and (2) the threat that they'll have to bring many assets that are currently off balance sheet back on... and that reserves and realized losses tied to those assets will be quite large as well.
In other words, the $1 Trillion is [partially] filling a massive hole that the banks have yet to admit exists.
Funny thing is, you can't fake cash flow. So they know they'll need those reserves eventually. No point in writing more loans, even if they're prudent ones.
The TBTF banks are all technically insolvent. The real robbery here is that the bank are supposed to be using the profits generated from a stacked interest rate and government backed deck of cards to repair their balance sheets.
They are not doing so. They are taking some of the obscene profits for themselves in bonuses and the rest is being piled into the stacked deck on double or nothing.
Exactly what I see.
They act like the game might end any minute which it should but it won't and they know it. For that reason, their heads should be on pikes up and down Wall Street.
Don't forget higher capital requirements, which remain undefined. Cash has no capital charge. Also, why lend into an economy where you won't get paid back. Note the increase in securities holdings at big banks as a percentage of assets.
In the language of the current admin, it all sounds "fishy" to me.
i really just don't believe their numbers...i think the money went in, and the blackhole sucking happened and voila, unimaginable massive, overwhelming debt for the future of America to pay off, all in the name of a bunch of robbers that run our country...and have you insisted on auditing the Fed yet? call, fax, write, email,your legislators and tell them if they want a chance for reelection, they better not support the idiotsCorker/Merkley legislation, and they better back S604.
The link below directs you to a site where you can look up contact info for your local elected officials. Just type in your zip code, then your elected officials’ contact info pop’s up and a personalized letter is there for you to copy and paste into a letter for you to either email, fax or mail to your representatives, and senators. I suggest you also take this link, and this info and email it to ALL your contacts—if WE THE PEOPLE don’t use our power to VOTE, we may lose our republic! Our future has been robbed and it is time for justice!
http://www.ronpaul.com/2009-07-21/ron-paul-ask-your-senators-to-support-audit-the-fed-bill-s-604/
Amen, we are losing the republic bit by bit.
I just watched this today. Fucking scary stuff.
http://www.youtube.com/watch?v=F8LPNRI_6T8
Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.
Thomas Jefferson
I was just sent this to watch yesterday (Wake Up Call):
http://www.youtube.com/watch?v=qX_qOaZmCFM
Wish I had seen that a long time ago. And now I already have another one to watch; thanks Ghost.
thank you for this ghostfaceinvestah!
I think the majority of people know in their gut the machine that is conveyed in this movie, but the only thing we all, as a people have as equipment to deconstruct the machine, is one vote per person--but without enough good people getting into politics, there can't be any hope for us--so i am trying to push the idea that young people who want to save our republic will displace the puppets for the juggernaut that is our government/financial complex which is led by whichever president that happens to be in office--right now it is Obama.
don't look now but i am afraid you were asleep
when it was taken....we do not have a republic
and have not had one since 11/22/1963....
the same evil rockefeller / rothschild cabal
which ordered the murder of jfk is the same
terrorist organization which planned the
destruction of our economy....
for those dense enough to deny a conspiracy
consder these two videos by john perkins and
aaron russo
confessions of an economic hitman - most won't
believe until you hear his story of his role
in economic terrorism....
http://www.youtube.com/watch?v=yTbdnNgqfs8
russo's is just as compelling including the
perfidy of the rockefellers:
http://www.youtube.com/watch?v=7nD7dbkkBIA
agrotera, every day in every way we will stand for our beloved republic. Take a moment and look back to when I first reminded you about the avalanche and compare that picture with our present view. The mass and momentum are becoming nearly irresistible as more and more learn for themselves & join up. Ghost posted another in a series from Chris Whalen below that is worth a moment.
Good to see that your zeal & humor are in no way diminished.
All The Best
Hi Miles Kendig!
Thank you for gfi's article, it is excellent! The tripartite "Alliance of Convenience" that is discussed is exactly the sound bite that needs to be expressed in some simplified form for more people to digest.
I think it is worth noting two things that are happening this week:
1)The same week as the Frontline piece about the stonewalling of CFTC's Brooksley Born was accomplished by henchmen Larry Summers and Robert Rubin on behalf of the privately held federal reserve/banking monopoly, we get the dog and pony folks in Washington passing Brooksley's Born's legislation for transparency--after the titanic sinking iceberg of damaged to our country's financial future has already been accomplished by the Washington/privately held Fed/banking cartel.
2) Bernake is pushing for b@#$sh@# legislation to enable our country to manage the TBTF--funny how Bernake and Paulson didnt take the ONE DAY to ask for authority last fall to unwind these monopolistic bankrupt monsters (GS, MS and C and MER instead we get a new "corrupt bargain pushed by paulson and bernake), but they spent THREE WEEKS to lobby for TARP so they could rob our country for their mobster bank bosses...
So, 10 years of damage later, now we see Brooksley Born's intentions getting addresses; 13 months after the biggest bank heist in the history of mankind, Bernake suggests that we "must" get legislation in place to unwind the TBTF even though he could ask for an unlimited lien on the future security of America to give away to failed entities, to let them continue their shell game, and gambling with taxpayer and depositor's money.
Very best to you always MK and thank you for your participation in spreading the good word...i just hope the college crowd get's a drift of all of this and decides to form a new party so we can, kickthemallout (see kickthemallout.com).
The true filth of it is that taxpayers are now indebted to pay for off balance sheet gambles that should have just gone away. The fact that they never should have existed at the level they did and do supports this argument.
But the "bankers" could not face going broke. We are "too big to fail". It would be "economic calamity". Isn't that special. Now we are forced to let them engineer a recovery. Why should these criminals be trusted to do that?
Yes. Notice that $1 Trillion is more than the entire amount of the TARP. So they took more liquidity out of the banks than they put in. And what allowed them to do this? First, redefining GS, JP Morgan, etc. as banks. Member banks are required to keep 3 to 6% of their capital on deposit with the FED. Second, twisting the arms of the AICPA and getting them to throw out the fair value accounting rules. Presto! Instant excess reserves at the banks when they reversed those fair value bad loan reserves. Then Ben "enticed" the banks to deposit those excess reserves at the FED, paying them relatively high interest rates to keep them pacified. Ths created instant liquidity for the FED to monetize large chunks of the Treasury auctions and bail out Freddie & Fannie by loading up on garbage MBS, and maybe buyout some of the Agency paper the foreign central banks were so very unhappy about. I wonder which one's he bailed out? In short, that taxpayer TARP money that America thought was going to be used to buy mad mortgages, was effectively rerouted through the banking system, through the FED and into the coffers of our deficit-spending government, unhappy foreign central banks (and maybe governments) and Fannie and Freddie, who then have more liquidity to artificially prop up the housing market by continuing to make more bad loans to people that cannot afford them. Instant Green Shoots!
Also, the continued cartel/monopoly practices of HFT, Flash trading, Rebate churning, co-locating, black pool front running, etc., are creating more capital and excess reserves at these newly redefined banks like GS, some of which I suspect are making their way into more deposits at the FED. So why would the Bernanke, Geithner or the Administration possibly want to implement any legislation that might turn off or slow down the outflow of money from current and future taxpayers and our retirement, savings and investment accounts into the FED and then the Treasury's coffers? How large can it get before the banks need those excess reserves back to cover more writedowns of mortages, REIT loans, credit card receivables and OREO? Maybe Ben will just give them all that MBS and Agency debt on the FED's balance sheet. Or maybe he has something else up his sleeve? Makes Madoff look like small time.
+1. Well said; the ponzi of all ponzis. The dam can't hold forever.
Well stated.
My question now is, does this result in a lingering death as the banks pay off bad loans over the next few years, or, or does the SHTF as interest rates rocket upwards to entice foreign buyers to take another spin on the roulette wheel.
Why would they indeed when sustainment of the structure is dependent upon the monetization and encumbrance of future income streams in the present since present activity can no longer sustain the structure?
I forgot to mention, the FED is not allowed to issue its own debt. So this is how they get around it, by "borrowing" the artificially created "excess reserves" from the banks. This way Bernanke can say he is not printing money because he didn't literally print $1 Trillion in Greenbacks. Is his motivation because he thinks he can somehow unwind this mess without having to turn on the presses and thus avoid hyper inflation? Or is it because he wants to inflate the bubble some more before it spectacularly bursts and the FED and its favorite bankers have all the money and the rest of us are screwed? Massive amounts of money are being moved around and increasingly ending up in the pockets of certain bankers and wealthy indstrialists, with a little making it to the poor in order to pacify them. Where is it coming from? The hard working middle classes.
The explanation is quite simple. These excess reserves are not the "traditional excess reserves", but the side product of the bulk purchase of garbage by the Fed.
Imagine you're a bank with a balance sheet full of garbage assets. You do not want to lend more but want to unload your trash somewhere. The Fed will buys your toxic assets and gives you in exchange the newly printed grabaje money (USD). Since you do not want to lend that money you deposit it as excess reserves in the FED. (The FED pays you an interest on those excess reserves)
These reserves do not represent real liquidity they are traped, frozen liquidity. You, as a bank, can't decide to spend it freely. If you, the bank, would, per example, like to participate in one of those ridiculous reverse repo should before recover these reserves but this forces you to buyback your junk assets in the FED balance sheet.
According to my fancy pants calculations the following scene should repeat in 2012 in a major metropolitan area near you.
'Shut Michigan', Time Magazine, Monday, March 27, 1933--er, 2012???
http://www.time.com/time/magazine/article/0,9171,745428,00.html
"Due to the many complaints registered against the plan for a new bank . . . have deemed it advisable ... to appoint conservators . . . until the confusion of thought can be eliminated. . . ."
If the scharade can even get to 2012 before collapsing.
The key question is really at what price did the fed transfer the Maiden Lane and Other (repo?) assets into the MBS bucket. This isn't necessarily bad by itself, we just need to understand economics.
That's like saying herpes isn't necessarily bad.
No, you don't need to understand economics to recognize fraud! It's painfully obvious to anyone who is paying attention our whole economic system is now merely a rotten pyramid scheme and the robber-barons have committed the greatest theft in the history of the world, right in broad daylight. Both the scope of the crime and the audacity of those responsible is breathtaking.
It will be painfully obvious through the lens of history. Perhaps in a few years things will be clearer, but I believe America just suffered a revolution.
Well, I'm sure they know what they're doing.
Now, back to ball-in-a-cup. The ball is on a string and attached to the cup, so theres no worry if you dont catch the ball in the cup.
LMAO. I spit coffee on my keyboard.
Of course they know what they are doing.
The best interests of the people is their main concern.
It will turn out fine.
"Umm, Umm, Umm, Barack Hussein Obama:" cocksucker
Is the information publicly available regarding the prices the Fed pays for its MBS portfolio? I would assume it is, but it might be interesting to see this information plus the counterparty to the purchase. Recall that a TIAA-CREF employee wrote on this site that CREF is carrying its own MBS portfolio at 96 cents on the dollar and above. I would hate to think that the Fed is paying this level on our behalf.
And so this means what, exactly? I understand it is probably not good but beyond that, how is this significant? A sign the Fed is monetizing more Treasury debt, pumping more money into the economy, buying more swaps to help out foreign banks or... buying Michelle and new gown?
Is advocating murder or assassination a crime? No doubt it is, which is why I am not doing that here. I remember, though, that former President Bush used to say about Saddam Hussein, "the world is a better place without Saddam Hussein in it."
Let me say, merely as an opinion, that the world would be a better place without Ben Bernanke and Tim Geithner and most of the partners of Goldman Sachs in it. And the United States of America would be a better country without them all.
I have forwarded this post to the FBI as a direct threat against the lives of ben, timmy, and the partners of GS.
108055, you are such a law abiding citizen and an island of calm in this chaos.
Your Fatwa has been reported to DHS.
On a side note... may 72 virgins await your arrival.
The monetary base axis is on the right, asset level on the left with a different scale. To the extent that the monetary base is below the asset level, is that a measure of the net delta to par the Fed has paid for these securities? If so, I infer the Fed took on the Maiden Lane and other assets at a discount to par when the Fed balance sheet really skyrocketed one year ago -- the time of the real quantitative easing.
Since then it looks like qualititative easing. The monetary base has grown a little bit, with the total assets remaining roughly constant. So in the process, the Fed has been on net "paying up" for the new assets it is now putting on its balance sheet. Presumably this is justified by the MBS/agencies/Treasuries being of higher quality than the Maiden Lane/other assets.
Please poke holes in this analysis.
Any guesses as to who now holds the Maiden Lane/other assets?
"meaning despite the $1 trillion in cash presumably with the Fed, any liquidity slack in the system does not exist."
If my understanding of the Fed's balance sheet is correct, there isn't any slack. I am very open to the fact that I am wrong on this, and hope someone can explain to me why I am wrong if I am (I truly want to understand this stuff).
According to the Fed's own site and its explanation of the central bank liquidity swaps, the following is true:
"The dollar funds deposited in the accounts that foreign central banks maintain at the Federal Reserve Bank of New York are a Federal Reserve liability. In principle, draws would initially appear in tables 1, 9, and 10 in the line 'foreign and official' deposits. However, the foreign central banks generally lend the dollars shortly after drawing on the swap line. At that point, the funds shift to the line 'deposits of depository institutions'."
I think a lot of people are assuming that the line "deposits of depository institutions" are excess reserves that the bank would normally lend out in a positive credit cycle, but aren't right now because of their impaired balance sheets and the bad credit risks out there. If I'm understanding the Fed's explanation of central bank liquidity swaps correctly, then I think the conventional wisdom on excess reserves is only partially true. This is because the dollars from the swaps given to central banks, thereafter given by the central banks to domestic/local banks in need of dollar funding, are finding their way onto the line of the Fed's balance sheet called, "deposits of depository institutions." Therefore, some of the funds that people call excess reserves (perhaps the total initial amount of the central bank liquidity swaps) are actually acting as a source of dollar funding for foreign banks to buy U.S. assets. In other words, those funds can't be lent out or used for any other purpose (including the reverse repos) without causing a sell-off in risky assets. Therefore, there isn't enough liquidity slack to conduct the reverse repos without causing a sell-off in equities, commodities, or whatever other assets the foreign banks have been buying.
The next question is, why wouldn't the amount of dollars obtained by domestic banks from central banks as a result of the swaps be drawn down/paid off as central banks have closed out the swaps? The central banks must have found other sources for obtaining the dollars necessary to close out the swaps without pulling them back from the banks. Perhaps some of those dollar bond auctions that foreign countries have conducted was one way?
What's fascinating about all of this is that some of the massive expansion in the Fed's balance sheet as a result of the line "deposits of depository institutions" is simply telling us what we already know...that bank are releveraging themselves through borrowing dollars. It's all quite circular. Although the funds are listed as a liability, if I'm reading this correctly, the funds from the foreign banks that have been deposited under "deposits of depository institutions" actually came from the Fed originally, were given to foreign central banks, and then put back at the Fed by foreign banks.
Am I reading some/all of this correctly?
Here's the link of the definitions:
http://www.federalreserve.gov/monetarypolicy/bst_liquidityswaps.htm
you seem to have the gist of it - can't say what you say reads wrong
"Although there has been a lot of doomsaying about the falling dollar, that decline is actually both natural and desirable. America needs a weaker dollar to help reduce its trade deficit, and it’s getting that weaker dollar as nervous investors, who flocked into the presumed safety of U.S. debt at the peak of the crisis, have started putting their money to work elsewhere." Krugman tonight, so don't worry, kids. It's all good, especially that $82/barrel oil, despite massive overstock and falling demand. It's just what we needed, and what better way to weaken the dollar than by buying our own debt?
i am with chapman and willie on the rise of deposits - they are a war chest to take over a mass of failing banks which will begin in earnest after the disasterous 4th quarter retail sales reports start rolling in during jan 2010....
do not use any debt of holidays....unless you plan to default and fuck the money center vampire squids....
I think much of the increase in excess reserves is the maturation of the special purpose bills which you wrote about here awhile ago.
And what does it mean that the reverse repo test was a failure?
this is a good read, from Chris Whalen
http://us1.institutionalriskanalytics.com/pub/IRAstory.asp?tag=389
Chris Whalen has had some particularly good reads as this soup sandwich construction has gone on .
But I believe to achieve a true understanding of the crisis, we must step back and take a political perspective.
I couldn't agree more. This is a political crisis much more than an economic one.
The internationalist tendency prefers instead to align themselves with the view of foreign nations whose governments are predominantly socialist in economic orientation and authoritarian politically.
Hmmmm....nationalsocialists?
Markets must be allowed to go from exuberance to terror in order to have a free market system and also a free and democratic society.
Yes, we call this capitulation, and I've long asserted that we never had one, for exactly this reason.
If you want to see where the US is headed by embracing concepts such as "systemic risk" and TBTF into public policy, then just look at the EU, where whole nations have lost their private banking sector, where there is no private capital formation to create new banks and the state-sector has largely monopolized many areas of personal and commercial finance.
The utility model of banking. While Goldman chuckles heartily, its ample belly shaking like Father Christmas, it had better be damned careful what it wishes for.
Lesson: politics trumps economics.
In order to boost the profitability of these TBTF dealer banks, the Fed and the Congress encouraged the creation of opaque, unregulated over-the-counter ("OTC") markets for derivatives and complex assets.
Whether it was to boost profitability or merely to continue the Welfare/Warfare Ponzi for a few more years is debatable. I suppose they could be considered equivalent.
Typo Warning: Tyler, I know it's late, but don't you mean Trillion, and not Billion. (or is it Gazillion?)
Just a thought...total reserves have grown from about $50B to $1000B, a twenty-fold increase. Reserve requirements are 10% for transaction accounts, 0% for time deposits. Is the Fed just effectively backstopping everyone's deposits by taking on these banks' toxic assets? Maybe because the FDIC is out of money and they don't want to ask for more? Comments would be welcomed...
"foreign banks are once again massively exposed to underfunding of dollar-based assets."
"Keep in mind this is a very confusing datapoint especially in light of recent reports that the Fed's $100 billion reverse repo test was a failure, meaning despite the $1 trillion in cash presumably with the Fed, any liquidity slack in the system does not exist."
Tyler -
Two points well taken . Reverse repo won't be a failure when its applied to the money markets . Just primary dealers are strapped right now . Isn't it they who failed. No liquidity
So, does the Fed get to make up accounting rules for itself? How are they determining their marks? Point is, who knows what the Fed balance sheet looks like. For example, Mish reports this http://globaleconomicanalysis.blogspot.com/2009/10/fed-owns-deserted-okl....
Now at what value is the Fed carrying this shopping mall they own?
that shopping mall absolutely says it all.
we.are.phucked.
And just one snaphot of the big vacation currently underway.
TD,
Time to bring back the N1H1 updates. Indications are that this will be the flu of the season this year, which is starting early, and its lethality thus far suggests people might avoid malls and restaurants ahead of the holiday season. It might amount to nothing, but one never knows.
The line item that surprised me most on the latest Fed Balance Sheet was this:
"iPhones, iPods and iMacs Bought or Held"
So that's how AAPL did it.
I'm surprised that they just dont delete that crap from their computers and start over, it is just cyber money anyway.
Relax, I am sure that once the banks pay out their bonus pools they'll get back to the business of lending.
Seems their more upset oversea than in the states:
Bring back the guillotine for Goldman Sachs & Co!
Here in America, the corporate class is now entirely out of control, lawless and beyond the sanction of prosecutor, juror or ballot box. If corporate lawbreakers felt that somewhere along the line the retribution of the guillotine might await them, it would concentrate their minds marvellously, and cow them into lawfulness.
Left and liberal commentators have talked yearningly about a new populist fever raging in the American body politic, prompted by the spectacle of bailouts for bankers but foreclosures and the dole for everyone else.
I can't say there's much sign of populism in any energetic form. Look at movies from the 1930s like Capra's Mr Deeds Goes to Town and there's a real edge to the anger of that time Capra felt it artistically important to convey. These days the anger is formulaic.
Over the weekend the left opinion makers at the New York Times - Bob Herbert and Frank Rich - chewed out Goldman Sachs. Growled Herbert: "Even as tens of millions of working Americans are struggling to hang onto their jobs and keep a roof over their families' heads, the wise guys on Wall Street are licking their fat-cat chops over yet another round of obscene multibillion-dollar bonuses - this time thanks to the bailout billions that were sent their way by Uncle Sam, with very little in the way of strings attached."
http://tinyurl.com/yjxfgfm
Exactly, the Street and those who own it, do not care. We the people, are expected to sit dociley on our couch and drink beer, tailgate or whatever else blows up our skirts, until the cows come home. I sense some rising anger in John Q. Public but it definitely isn't enough for the corporate greedheads to even raise an eyebrow in worry.
This particular moment in history is a watershed for corruption, power and greed. It storms ahead unabated. By the the time the populace is incensed enough to take to the streets by the millions, they will have secured their fortunes and private armies(which includes the U.S. Armed Forces), so that they may round us up and quell the dissent. Those who are left will be fed crumbs, while our children are groomed to provide more efficient and tranquil(all drugs supplied by Big Pharma) worker drones, to ensure that our corporate masters may continue to live a life of opulence. The greedheads and tyrannical bourgeoisie, believe thay know what is best for the Republic, which they equate to themselves, and wonder why we should be so ungrateful of their care for us.
""this time thanks to the bailout billions that were sent their way by Uncle Sam, with very little in the way of strings attached." "
Wrong!!! Track the campaign contributions for the next election cycle. It's win win for the bankers and the politicians.
totally useless information for traders. The macro view is irrelevant
My bank branch manager told me they are trying to get rid of money because they have too much--even with .5% rates being paid on savings accounts. Obviously demand for money is weak.
Bring in your toaster... and we'll close your checking account and give you $100 in cash???
Yeah...who wants to borrow money to start or expand a business in this economy? Kind of a feedback loop problem. Nobody borrows, because the economy's bad, so then the economy gets worse.
Don't forget, excessive bonuses to banksters are good for you. It means the system is working! xxoo Goldman Sachs
What is the relationship of total reserves to deposits held? Could all depositors get all their money if they wanted? Maybe this is ponzi insurance against runs on the fractional reserve banks?
When does quantitative easing end ? any dates ?
When the bullshit ends. So, never.
Here is a passage from the New Deal book by Garet Garett, "The People's Pottage: The Revolution Was" P.36
One effect (of Roosevelt's daily gold price manipulation)was that private borrowing and lending,
except from day to day, practically ceased. With the
value of the dollar being posted daily at the Treasury
like a lottery number, who would lend money for six
months or a year, with no way of even guessing what
a dollar would be worth when it came to be paid back?
"No man outside of a lunatic asylum," said Senator
Glass, "will loan his money today on a farm mortgage."
Todays' banksters don't know how far the US dollar with fall, so they will not lend.
My friends, The FED knows not. To effectively manage the private sector meddling across the breadth and depth of the instruments and exposure is far beyond the FED. But, is a soft landing a priority? Perhaps not.
The FED allowed and encouraged the derivative banking risk, and now they somehow have the ability to effectively administer interventions. It is a great experiment at tax payer expense. Many would say, it is futile to address deleveraging in this way. Prices will eventually correct. To attempt, and through monetary actions, dictate market price, is to ignore the system you are trying to fix.
TD, thanks for the charts and keeping some of us under the weather ahead of the curve. That chart on depository reserves dovetails nicely with persistent rumors of LOC's not being renewed by foreign vendors for American wholesalers and retailers. It sounds like the banks are gearing up for another Lehman style credit event and the foreigners are not extending any credit to any entity beyond the US Government.
I really gathered much from this.Thanks for sharing.
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