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Exclusive: The Fed's $600 Billion Stealth Bailout Of Foreign Banks Continues At The Expense Of The Domestic Economy, Or Explaining Where All The QE2 Money Went
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Courtesy of the recently declassified Fed discount window documents, we now know that the biggest beneficiaries of the Fed's generosity during the peak of the credit crisis were foreign banks, among which Belgium's Dexia was the most troubled, and thus most lent to, bank. Having been thus exposed, many speculated that going forward the US central bank would primarily focus its "rescue" efforts on US banks, not US-based (or local branches) of foreign (read European) banks: after all that's what the ECB is for, while the Fed's role is to stimulate US employment and to keep US inflation modest. And furthermore, should the ECB need to bail out its banks, it could simply do what the Fed does, and monetize debt, thus boosting its assets, while concurrently expanding its excess reserves thus generating fungible capital which would go to European banks. Wrong. Below we present that not only has the Fed's bailout of foreign banks not terminated with the drop in discount window borrowings or the unwind of the Primary Dealer Credit Facility, but that the only beneficiary of the reserves generated were US-based branches of foreign banks (which in turn turned around and funnelled the cash back to their domestic branches), a shocking finding which explains not only why US banks have been unwilling and, far more importantly, unable to lend out these reserves, but that anyone retaining hopes that with the end of QE2 the reserves that hypothetically had been accumulated at US banks would be flipped to purchase Treasurys, has been dead wrong, therefore making the case for QE3 a done deal. In summary, instead of doing everything in its power to stimulate reserve, and thus cash, accumulation at domestic (US) banks which would in turn encourage lending to US borrowers, the Fed has been conducting yet another stealthy foreign bank rescue operation, which rerouted $600 billion in capital from potential borrowers to insolvent foreign financial institutions in the past 7 months. QE2 was nothing more (or less) than another European bank rescue operation!
For those who can't wait for the punchline, here it is. Below we chart the total cash holdings of Foreign-related banks in the US using weekly H.8 data.
Note the $630 billion increase in foreign bank cash balances since November 3, which just so happens is the date when the Fed commenced QE2 operations in the form of adding excess reserves to the liability side of its balance sheet. Here is the change in Fed reserves during QE2 (from the Fed's H.4.1 statement, ending with the week of June 1).
Above, note that Fed reserves increased by $610 billion for the duration of QE2 through the week ending June 1 (and by another $70 billion in the week ending June 8, although since we only have bank cash data through June 1, we use the former number, although we are certain that the bulk of this incremental cash once again went to foreign financial institutions).
So how did cash held by US banks fare during QE2? Well, not good. The chart below demonstrates cash balances at small and large US domestic banks, as well as the cash at foreign banks, all of which is compared to total Fed reserves plotted on the same axis. It pretty much explains it all.
The chart above has tremendous implications for everything from US and European monetary policy, to exhange rate and trade policy, to the current account on both sides of the Atlantic, to US fiscal policy, to borrowing and lending activity in the US, and, lastly, to QE 3.
What is the first notable thing about the above chart is that while cash levels in US and US-based foreign-banks correlate almost perfectly with the Fed's reserve balances, as they should, there is a notable divergence beginning around May of 2010, or the first Greek bailout, when Europe was in a state of turmoil, and when cash assets of foreign banks jumped by $200 billion, independent of the Fed and of cash holdings by US banks. About 6 months later, this jump in foreign bank cash balances had plunged to the lowest in years, due to repatriated fungible cash being used to plug undercapitalized local operations, with total cash just $265 billion as of November 17, just as QE2 was commencing. Incidentally, the last time foreign banks had this little cash was April 2009... Just as QE1 was beginning. As to what happens next, the first chart above says it all: cash held by foreign banks jumps from $308 billion on November 3, or the official start of QE2, to $940 billion as of June 1: an almost dollar for dollar increase with the increase in Fed reserve balances. In other words, while the Fed did nothing to rescue foreign banks in the aftermath of the first Greek crisis, aside from opening up FX swap lines, one can argue that the whole point of QE2 was not so much to spike equity markets, or the proverbial "third mandate" of Ben Bernanke, but solely to rescue European banks!
What this observation also means, is that the bulk of risk asset purchasing by dealer desks (if any), has not been performed by US-based primary dealers, as has been widely speculated, but by foreign dealers, which have the designatin of "Primary" with the Federal Reserve. Below is the list of 20 Primary Dealers currently recognized by the New York Fed. The foreign ones, with US-based operations, are bolded:
- BNP Paribas Securities Corp.
- Barclays Capital Inc.
- Cantor Fitzgerald & Co.
- Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.- Goldman, Sachs & Co.
- HSBC Securities (USA) Inc.
- Jefferies & Company, Inc.
- J.P. Morgan Securities LLC
- MF Global Inc.
- Merrill Lynch, Pierce, Fenner & Smith Incorporated
Mizuho Securities USA Inc.- Morgan Stanley & Co. LLC
Nomura Securities International, Inc.
RBC Capital Markets, LLC
RBS Securities Inc.
SG Americas Securities, LLC
UBS Securities LLC.
That's right, out of 20 Primary Dealers, 12 are.... foreign. And incidentally, the reason why we added the (if any) above, is that since this cash is fungible between on and off-shore operations, what happened is that the $600 billion in cash was promptly repatriated and used by domestic branches of foreign banks to fill undercapitalization voids left by exposure to insolvent European PIIGS and for all other bankruptcy-related capital needs. And one wonders why suddenly German banks are so willing to take haircuts on Greek bonds: it is simply because courtesy of their US based branches which have been getting the bulk of the Fed's dollars in 1 and 0 format, they suddenly find themselves willing and ready to face the mark to market on Greek debt from par to 50 cents on the dollar. And not only Greek, but all other PIIGS, which will inevitably happen once Greece goes bankrupt, either volutnarily or otherwise. In fact, the $600 billion in cash that was repatriated to Europe will mean that European banks likely are fully covered to face the capitalization shortfall that will occur once Portugal, Ireland, Greece, Spain and possibly Italy are forced to face the inevitable Event of Default that will see their bonds marked down anywhere between 20% and 60%. Of course, this will also expose the ECB as an insolvent central bank, but that largely explains why Germany has been so willing to allow Mario Draghi to take the helm at an institution that will soon be left insolvent, and also explains the recent shocking animosity between Angela Merkel and Jean Claude Trichet: the German are preparing for the end of the ECB, and thanks to Ben Bernanke they are certainly capitalized well enough to handle the end of Europe's lender of first and last resort. But don't take our word for this: here is Stone McCarthy's explanation of what massive reserve sequestering by foreign banks means: "Foreign banks operating in the US often lend reserves to home offices or other banks operating outside the US. These loans do not change the volume of excess reserves in the system, but do support the funding of dollar denominated assets outside the US....Foreign banks operating in the US do not present a large source of C&I, Consumer, or Real Estate Loans. These banks represent about 16% of commercial bank assets, but only about 9% of bank credit. Thus, the concern that excess reserves will quickly fuel lending activities and money growth is probably diminished by the skewing of excess reserve balances towards foreign banks."
Which brings us to point #2: prepare for the Bernanke hearings and possible impeachment. For if it becomes popular knowledge that the Chairman of the Fed, despite explicit instructions to enforce the trickle down of "printed" dollars to US banks, was only concerned about rescuing foreign banks with the $600 billion in excess cash created out of QE2, then all political hell is about to break loose, and not even Democrats will be able to defend Bernanke's actions to a public furious with the complete inability to procure a loan. Any loan. Furthermore the data above proves beyond a reasonable doubt why there has been no excess lending by US banks to US borrowers: none of the cash ever even made it to US banks! This also resolves the mystery of the broken money multiplier and why the velocity of money has imploded.
Implication #3 explains why the US dollar has been as week as it has since the start of QE 2. Instead of repricing the EUR to a fair value, somewhere around parity with the USD, this stealthy fund flow from the US to Europe to the tune of $600 billion has likely resulted in an artificial boost in the european currency to the tune of 2000-3000 pips, keeping it far from its fair value of about 1.1 EURUSD. If this data does not send European (read German) exporters into a blind rage, after the realization that the Fed (most certainly with the complicity of the G7) was willing to sacrifice European economic output in order to plug European bank undercapitalization, then nothing will.
But implication #4 is by far the most important. Recall that Bill Gross has long been asking where the cash to purchase bonds come the end of QE 2 would come from. Well, the punditry, in its parroting groupthink stupidity (validated by precisely zero actual research), immediately set forth the thesis that there is no problem: after all banks would simply reverse the process of reserve expansion and use the $750 billion in Cash that will be accumulated by the end of QE 2 on June 30 to purchase US Treasurys.
Wrong.
The above data destroys this thesis completely: since the bulk of the reserve induced bank cash has long since departed US shores and is now being used to ratably fill European bank balance sheet voids, and since US banks have benefited precisely not at all from any of the reserves generated by QE 2, there is exactly zero dry powder for the US Primary Dealers to purchase Treasurys starting July 1.
This observation may well be the missing link that justifies the Gross argument, as it puts to rest any speculation that there is any buyer remaining for Treasurys. Alas: the digital cash generated by the Fed's computers has long since been spent... a few thousand miles east of the US.
Which leads us to implication #5. QE 3 is a certainty. The one thing people focus on during every episode of monetary easing is the change in Fed assets, which courtesy of LSAP means a jump in Treasurys, MBS, Agency paper, or (for the tin foil brigade) ES: the truth is all these are a distraction. The one thing people always forget is the change in Fed liabilities, all of them: currency in circulation, which has barely budged in the past 3 years, and far more importantly- excess reserves, which as this article demonstrates, is the electronic "cash" that goes to needy banks the world over in order to fund this need or that. In fact, it is the need to expand the Fed's liabilities that is and has always been a driver of monetary stimulus, not the need to boost Fed assets. The latter is, counterintuitively, merely a mathematical aftereffect of matching an asset-for-liability expansion. This means that as banks are about to face yet another risk flaring episode in the next several months, the Fed will need to release another $500-$1000 billion in excess reserves. As to what asset will be used to match this balance sheet expansion, why take your picK; the Fed could buy MBS, Muni bonds, Treasurys, or go Japanese, and purchase ETFs, REITs, or just go ahead and outright buy up every underwater mortgage in the US. This side of the ledger is largely irrelevant, and will serve only two functions: to send the S&P surging, and to send the precious metal complex surging2 as it becomes clear that the dollar is now entirely worthless.
That said, of all of the above, the one we are most looking forward to is the impeachment of Ben Bernanke: because if there is one definitive proof of the Fed abdicating any and all of its mandates, and merely playing the role of globofunder explicitly at the expense of US consumers and borrowers, not to mention lackey for the banking syndicate, this is it.
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Swap lines are supposedly for short term e.g. overnight funding only.
But who knows, when the endgame nears, the rules always seem to change.
How many days did it take for the former Wall Street Investment Banks to become BHC's in 2008?
So we have the Chinese buying our bonds and the Federal Reserve turns around and bails out European banks. European countries turn around and threaten to downgrade us for bailing them out and UBS and Barclays still suck.
Who hatched this plan?
Did I not hear that the Chinks are bailing out the Yuros also? Seems like one big circle jerk to me.
the only thing you need to know about the Chinks..
is the the Yaun, China's Currency.. has 1,200 times leverage (ish).. whereas the U.S. Dollar has 120 times leverage (ish)...
From the colored stack chart, it is quite likely Fed-minted digits from QE2 went to foreign banks, what is not clear is what assets they monetized (ie sold to the Fed) to accumulate 630b of cash. In QE1, we know these foreign banks held as much toxic MBs as domestic banks and they sold them to the Fed for 100% of face value. But in QE2, the Fed was supposed to have bought treasuries, did these US branches of foreign banks own $600b of treasuries at the start of QE2? Readers have been reading that the PDs have been flipping newly minted treasuries to the Fed's Sack team, so did Sack not buy freshly minted treasuries but instead bought some older ones held by these european banks? If the european banks held these much treasuries, then their balance sheet would be well capitalized, and lending the fungible capital to headquarters would not require selling any assets to the Fed. Unless of course they needed US dollars.
Second, these same foreign banks might now have lent the cash to their european headquarters, but that is solving a solvency problem with liquidity - Merkel should be able to understand that after taking a "xx% haircut" on PIIGS debt would still require massive recapitalization of German banks.
I second these questions!
Also Tyler, how did you come up with this data - simply looking around at balance sheets for the right match? So simple!
So, if I understand the post correctly, that Euro treasury investors liquidated and sold into Ben Bernanke $600 billions variegated treasuries,and booked profits and enlarged liquidity for doing so.
What's wrong about this? Those are Eruo investors' treaury holdings and they are certainly entitled to sell their assets at their own discretion. So one hebetude Ben bought, thinking he was helping /abetting/assuaging/.......shall be served with "impeachment"?????
Can someone corroborate this info with the change of foreign treasury holdings?
The bilderbeasties are not escaping the new real main stream media:
http://www.youtube.com/user/RussiaToday
600 billion USD in QE2 is not enough to recapitalize if the PIIGS go bust.
ECB has 444 bn in PIIGS exposure and the German banking system has 230 bn EUR in exposure to PIIGS. Sum: 230 + 444 = 674 bn eur. Add France, UK, etc. and you are looking at a near 1T eur figure.
At EURUSD 1.4 it would take at least 943 bn USD to cover the shortfall. So Europe needs at least say 300 bn more from the Fed to meet the pigs margin call. OINK OINK!!
Implication: QE3 should be preferably 1T USD for Angela Merkel + 2T USD for Obama. Add another 1T USD for Mr Wen Jia Bao to recapitalize the Chinese banking system after bailing out the local investment corporations that built the ghost cities and empty malls. Basically there's your 4T QE3 estimate.
Bravo... What an excellent hypothesis based on the facts...
Obama Bin Lyin'...
the problem is this.. if you are right, there has to be enough political will to sleuth this out. if there is such will, and bernanke gets in 'trouble', this will essentially handcuff the fed from moving forward with a qe3... so they are mutually exclusive outcomes...
Rock -- Paper -- Scissors
nice. still, bernanke going nowhere... i still think the default play will work itself out.. namely, ES drops precipitously over summer, leads up to panic and threats of chaos around the time of debt ceiling, and then shortly after, annoucement of 'cupcakes' (which was some commentators guess for qe3's new name)...
the story, as portrayed above, betrays the 'big lie' in far too dramatic a fashion... it is also pretty damn interesting in light of the earlier story of the EU douche saying that US debt is out of control..
anyway, it all makes 'eraserhead' seem normal..
So my initial loss of allegiance to the U.S.A. after the Congress passed the bailouts was well founded, and even more so now, eh?
I know, it's a bitter pill, a heartbreaker, but what am I going to do...vote Republicrat?...vote Demican? It would make no difference. We have been sold out and I have NO TRUST...so there can not be a relationship.
Those of you patriots left can get to putting the malfeasant in jail or hang them from lamposts; little else will save this rusted republic from collapse other than action, now.
Could this be were the persistent bid in the Euro was coming from, and in turn the early morning bids in the SP 500 coming from European players. Not sticking around to find out as the QE2 ends the bid will also end.
Could this be were the persistent bid in the Euro was coming from, and in turn the early morning bids in the SP 500 coming from?
No - of course not. That would mean the markets are manipulated. All of us watching from home know that could not be true. Could it???
Excellent work.
This is not too surprising, as the banksters and their syndicate are international and do all dealings accordingly (e.g. the Bernanke's masters are not American).
Since I've been harping on this topic for months I'm glad somebody else is finally paying attention. It is very important that practically all the excess reserves created by qe2 are on the balance sheets of US branches of foreign banks. Another way you can confirm this is by looking at the just released 1q11 flow of funds, which shows that as of march 31 nearly all the cash dollars held by US branches of foreign banks were in fed reserve accounts.
By running a large trade deficit the US is exporting dollars that foreigners MUST do something with. Before qe2 the exported dollars were mostly invested by foreign central banks in Treasuries. During qe2 there has been practically no net issuance of new Treasuries (after subtracting what the Fed buys) and foreign central banks evidently weren't attracted enough to treasuries to drive up their price by buying the existing stock from other holders, as the volumes of treasuries held in fed custody for FCBs has been flat. So it was inevitable those exported dollars would be used some other way.
One possibility and presumably the one Ben wanted was that foreigners would simply buy more US products and reduce the US trade deficit. In theory that's what a dollar devaluation, which is really what qe2 is, should do. But because the US imports so much oil and its oil demand is very inelastic, the opposite happened -- the rising price of oil in dollar terms caused the trade deficit to grow.
Another possibility was that foreigners could have invested the exported dollars into the private US economy. That's what happened the last time there was no net issuance of Treasuries and a large US trade deficit, back in the late 90s. No coincidence there was a big US equity bubble running at that time. For better or worse, during qe2 foreigners did not redeploy trade-exported dollars into private US investments.
So, foreigners merely kept the dollars as cash. And given that cash dollars can earn 0.25% interest if they're held in a fed reserve account of a US branch of a foreign bank, that's where they ended up.
The stats don't reveal which foreign banks are holding the reserves, but my guess is it's mostly European banks (which indeed use them to back up dollar lending in Europe). So there is probably another leg of the story, in which the trade-exported dollars get from the trade-surplus countries' central banks to European private banks. Are those CBs buying assets? Making cash deposits?
But I wouldn't assume that FCBs of trade surplus countries won't go back to buying treasuries once qe2 ends and there is again large net issuance. They don't need to use the reserves, they will have the same old constant supply of dollars exported by the US to support its trade deficit.
it makes no sense.. why keep the money as cash earning 0.25%.. unless they were mandated to do so for whatever reason..
it makes sense if they know they are gonna need the money in short order. shorter than 3 month bills.
thanks for posting this, Tom
.
They applied paint and wallpaper. The rot is structural.
Essentially, this is a big reason why it is so problematic about the stealthy reporting (or lack of) of the Federal Reserve and its minions throughout western civilization. So now we are propping up western society as a whole to prevent widespread unrest. It does make one wonder what else is being discussed in Bilderberg this week.
The global elite had better realize that people are waking up to this abuse. As long as the rich get richer and the poor get poorer, expect unrest and revolution in many places around the world. The USA is high on the list of wealth disparity between rich and poor, and what I fail to understand is why the rich have to keep pigging out at the trough at the poor man's expense. The anger level is rising in many places around the world as the extent of the injustice continues to unfold for everyone to see.
It makes sense if you view it as they could careless about money. They have enough. Now they want power. All of it.
Big Badda BOOM!
...coming real soon.
http://www.youtube.com/watch?v=mdwyVhNPzTg
Shocking? No.
If you claim to have the reserve currency of the world with the luxury of printing fresh money as much as you like, bailing out foreign banks is then one of the negative consequences when something goes wrong with those banks.
Excellent post
BTW, Tyler
So.. How exactly can a central bank be insolvent?
They can by definition create an infinite supply of money from nothing.
This is why some experts such as John Williams of shadowstats.com have been calling for a hyperinflationary depression for some time now. Williams forecasts they will attempt to print their way out of this as they have been doing, only to render the currency without value and relegating people to invest in gold to preserve some value in their wealth.
Uncle Sam covets retirement money in private accounts, to feed the beast called the US government. It's all a matter of what they can get away with politically. The question in many minds is whether or if the American people will erupt, as has been happening in the Middle East as we know.
the ECB by law cannot print euros without the agreement and participation of all members. the germans insisted on this at its inception. each member country must comit its pro-rated share to fund the ECB via the EU. the Fed and the BOJ can print whatever they like with only the tacit support of Treasury.
So if the PIIGS members do default/leave the euro and the core EU area gets their crap in order the euro will have more of a future than USD, JPY & GBP?
basically Germany is the only core EU member of any worth so somehow i doubt kicking the piigs out will do much long term. the French have the same lazy ass problem as the Greeks and Belgium (where the EU is based) is going to have civil war/default...
Yes, I was wondering about the euro currency unit itself though, if the unproductive memebrs are priced in but the unit can't be diluted?
well the comment about the ECB being insolvent if there is a significant default is true. it would therefore need re-capitalizing by the member states which in turn requires a 100% vote in favour. that is not going to happen easily. too many of the northern members have already been making NO noises. it remains then that the ECB cannot afford a default without itself needing a bailout and what is being discussed now is how to deal with the piig debt without triggering a default event.
thanks dave
bigwave - Stunning avatar! Are those real?
the ecb has no power to print, the germans are still terified of hyperinflation
Have you checked out Buiter's stuff?
The Chinese will not be happy to read this.
Maybe they're playing along? They did prop up the Treasuries market for a long time.
Maybe. And maybe they'll be the next recipients when it all goes tits up over there.
As a comment suggested, we moved well beyond hard money. QE3 is somewhat unnecessary for awhile given the Basel terms regarding sovereign holdings.
silver strangles, VIX calls. Looking for the $core of a lifetime then it's time to get the hell outta dodge. This place is getting downright scary. Either peaceful aliens are landing with gifts of higher consciousness and free energy within the next 2 years, or we are headed for the type of collapse that results in "estimates" of casualties years later. Not good, and not funny either.
http://www.youtube.com/watch?v=WudBfRa0ETw&feature=related
I reckon we all know that the Bernank is a putz. Jim Rogers and Marc Faber (among others, I'm sure) have, in so many words, said so, too. Will he be the fall guy? I mean, after all, he's getting his orders to do what he's currently doing from somewhere else.
In a way, I'm not sure whom I find more repulsive, the Bernank or Tiny Tim Geithner.
little Timmy g. is a career toady (protege) of former GoddamnSachs co-chairman bob rubin... whose #2 when he was Sec. Treasury during Clintion years was idiot obama's recent "economic policy top dog" larry summers. right out of grad school, little timmy g. was hired by henry kissinger associates... talk about "blood drenched economic hit men"!
(And to take it a step further, while it is Texan & Southern Republicans Phil Gramm, Jim Leach, & Thomas Bliley whose names are on the Gramm Leach Bliley Act (GLBA 1999), and Phil Gramm and fellow Texas econ PhD's Dick Armey & "Enron Ken Lay" were behind the similar Commodity Futures 'Modernization' Act (CFMA 2000) (search "Enron Loophole" - http://en.wikipedia.org/wiki/Enron_loophole ), it was actually - in both cases - WALL STREET, the big banks member/owners of the Fed (which is to say, the first in line for all the FREE MONEY the Fed prints up as DEBT for everyone else) who were REALLY the POWER behind the GLBA & CFMA acts... and the real organizers were RUBIN, SUMMERS and their minions (e.g. geithner, emanuel) in the Clinton so-called "liberal Democrat" White House or Treasury Dept.
obama's economic team was/is the DIAMETRIC OPPOSITE of "change" - the GoddamnSachs'ers who infest Obama co. are RADICAL RIGHT WING REPUBLICANS at heart, in GEITHNER & BERNANKE's case, not only Bush-II RETREADS, but both of 'em economy wreckers DECLARED Republicans!
(anyone who believes that obama is "liberal" much less "socialist" is completely daft - he is totally bought, owned, and in the pocket of the gs/jpm/fed/r's RADICAL RIGHT-WING money printing, pump-&-dump serial economy killing central banksters)
.
May 27, 2011 - "The Fed's Secret Giveaway to European Banks"
http://blogs.reuters.com/felix-salmon/2011/05/27/the-feds-secret-giveawa...
That is a completely different and well-beaten topic, having to do with overnight lending facilities be they Discount Window ot ST-OMO, discussed on Zero Hedge hundreds of times before.
And the transparency definition from the Atlanta Fed
http://macroblog.typepad.com/macroblog/2011/05/secret-loans-that-were-not-so-secret.html
Huh ?
I'm a little bit perplexed now.
There is only 1, I repeat, ONE, German bank among the 20 primary dealers and you put all the blame on German banks ?
Do you have a personal beef with German banks, Tyler, or what is it ?
Why do you constantly pick on German banks ?
I mean I know that bankers are criminals, at Deutsche bank just like with every other bank.
But why do you always emphasize this in the case of Germany, especially when the bulk of toxic Greek bonds is with a totally different bank, which is Hypo Real Estate (HRE), which had to be nationalized.
Why don't you talk about the criminal activities in the City of London ?
Barclays, HSBC, Standard Chartered, RBS, Northern Rock, ... ?
Why don't you pick on the 2 Swiss banks, the 3 British banks, the one French bank, the 3 Japanese banks among the primary dealers ?
What's the point of all this ?
I don't believe he is singling out German banks, it's just that the Greek is front and center. The German banks are the biggest holders of grek debt.
And because they are all the main participants in Euro Finance with the benefit of QE 2 being fungible to all of the Eurozone. In effect you can drop the nationality of the Euro banks because they are all in essence German banks given that Germany is the main driver of Euro finance. Walk into any Irish government office at cabinet level and you will hear decisions being made in German, I assume the same goes for Greece and now Portugal.
No wonder the ECB is now calling for inflation vigilance and a rate rise the very week QE 2 ends. I have always said that the Euro is nothing more than a new name for the Deutsche Mark.
Fairly certain the only bank named was Dexia. Last time we checked that was not in Germany. Yet.
That is, of course, assuming the Germans acknowledge that they failed to defend the Siegfried Line... :-)
After WWII, Belgium, home of Dexia, became the continental refuge of banker families.
And the most recent comments from Juncker were that the USA was screwed up. Now we know that was for show.
Thanks Tyler. You get another gold star.
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.Henry Ford I believe that banking institutions are more dangerous to our liberties than standing armies.
Thomas Jefferson
Belgium's Dexia? Has Belgium even got a Government together yet? More weirdo shit there like the Liybian Rebels stopping in the mist of a civil war to start a central bank, wtf is going on?
No, the king is still the titular head of the caretaker government. They seem to have decided they like this system better because it has been a full year since their elected government fell. Pretty fucked up when even the Turkish and Italians can produce a government and you can't.
The Italians can produce an government fairly easily because the people really don't give a fuck...
There is enough of an underground economy there (and always has been), that government is just a sideshow...
That's my new American dream (hoping for more of "Under the Tuscan Sun" than "Gladiator").
Wasn't the purpose of QE2 to finance a bankrupt US government?
Look,
all I want to know is if our 3400 t of gold are safe.
Is it safe, Tyler ?
Is it safe ?
if you have to ask then you know the answer
Its safe until it gets taken...but they won't tell you when or how...
Ask your Bundesbankpräsident..
Read this article Hitler. We already paid for your war crimes gold, and then some. Thanks for playing...
Whoops. This is meant for Frankie Stein.
Franken_Stein
"all I want to know is if our 3400 t of gold are safe."
Well of course your gold is safe. I just checked with Lloyd. He assures me your gold is safe.
p.s. he also asked me to tell you the check is in the mail, that he loves you, and he promises not to c--m- in your mouth.
Frankenweiner,
There are three stores of aurum in the US.
One is in Kentucky, one in Manhattan, and the other is in West Point.
The Manhattan gold is all foreign owned. That in Kentucky has been appropriated by the military for action.
That in Wes Point has been consigned to Germany.
http://www.gata.org/node/4223/print
This is all falling on deaf ears. The American people will not lift a finger unless the system crahses. I talk to people all day long, even news watchers I am always amazed at how few understand what is hpapening
Im just sitting here waiting for a pre Jeremiah Johnson Robert Redford aka Mr death to come a knocking on my door. He made death look so easy in The Twilight Zone
At the risk of looking like a foolish devil's advocate I have to ask why would they? There is a whole lot on the line under conditions they have little knowledge of and no control over. Just like us they are enjoying the good times while times are good, and when the crash does come they will deal with that, till then they are paying out rope for the masters of the universe to hang themselves with. I mean that in such brittle financial and economic conditions paralysis is usually how any individual or society collectively will move forward, it is like quicksand, the more you struggle the faster you sink. I repeat my optimism that when the crash comes that we at ZH all are aware must come the public will not go Mad Max and there will not really be a world war, those things are possible but only remotely, in fact the sun will rise in the east, values will reset to zero, life will go on. The sheep will be sheered but they will get a bright shiny new hamster wheel to run on.
I'd pretty much say that I agree with this "game day" wrap up... SADLY (in some respects)... GLADLY (in others)...
@ belogical
unfortunately, when the crash comes, there will be pointed fingers - pointing in all the wrong directions.
you think it sucks now trying to get people to care about what is happening? just wait until they do care, and you try to tell them what happened!
they won't hear you, it will not compute. clarity will not occur. all will not be revealed. the left/right dem/rep socialist/capitalist blame-game finger-pointing distraction dynamic will remain, unscathed, post-collapse.
this is the thing i am going to really hate.
But they can all tell you the latest pictures released of AIPAC Weiner's abs, can't they? Or who won American Idol?
I too am totally confused by the emphasis on the nationality of banks. These are now global entities whose only country and moral obligation is Greed. the banks don't give a flying fuck about about nationality wether it be US,UK or German.
The banks are incestuous, the ero banks are up their necks in munibonds and the USA is the third most involved in Greek debt.
Ponzi writ large.
"These are now global entities whose only country and moral obligation is Greed."
Well said Sir.
Shocking figures, but I don't agree with all your conclusions:
1. The money sits with the Fed, so it is not repatriated. Indeed, while the US maintains a current account deficit, foreigners cannot repatriate US assets. The fact that Fed assets are more attractive than US Treasuries should reduce downward pressure on the USD.
2. It is not surprising that foreign banks have difficulty relending the money to other US entities. Building up a lending operation takes time.
3. The end of QE2 doesn't mean that the Fed will sell existing Treasuries (forcing foreigners back into the market). It only means that the Fed will not buy newly issued debt.
A quote from this amazing article, which you might want to read more carefully:
"...here is Stone McCarthy's explanation of what massive reserve sequestering by foreign banks means: "Foreign banks operating in the US often lend reserves to home offices or other banks operating outside the US"
This as been a two way street that the PDs have taken since the euro dollar days of the 70s when this market emerged post BW repeal in 71. Citi, Chemical and Chase started the roll back then into Euro dollar market in London with Warburg assistance.
Seems kind on one-way lately, but thanks for your perspective.
You be tripping up there, methinks...remember circulatory plays? So eloquently said elsewhere by yourself! One big happy family, two sides of the pond since the 70s; now global at the push of a computer button marked "buy" or "sell" and relayed HFT style!
I wouldn't be surprised if this "circulatory" in-outs at the stroke of a click increase more and more if QE-3 starts up. Wow, what a merry go round that will be! We ain't seen nothing yet!
JWO
I junked you, but, if you can offer a nation that is not drunk, as I am naked, let the mark of temptation be upon me ...with mercy, as with the laborer of the harvest in Israel offered your portion of grace.
...if not, perfect the hole http://bible.cc/revelation/11-8.htm
http://bible.cc/revelation/18-3.htm
...ah, only two marks above my own contempt so far, and without mercy the coward remains clothed in their silence ...and stupid.
you sit on your ass quoting the words of men as it suits you, to feel yet more empowered by what you consider to be God's Will. How do the words of men translate for you to the Will of God? beucase those specific words suit your ego? your want to believe in what you feel is right is NOT God inspired, you fool.
eternal hell fire from the couch the potato spewed! all hail his interpretation of God's Gift of Free Will to ALL Men!
JW, I must be punch drunk, but how would I know? Did you hit anyone other than yourself? http://www.youtube.com/watch?v=6dxPO_Z57xg&feature=related
P.S. JW, ''Free Will''? What in the wide world of sport is that? Is The Truth a choice?
...is ''nothing'' compelling us?
everyone knows right from wrong in the pits of their stomachs!
God Gave Everyone "Free Will!" and either you choose right or you choose wrong but deep down inside you know.. whether your ego lets you make a conscience decision or not is not my fault, now is it?
My friend, we are compelled, there is no choice.
''the pits'', as you have described ''everyone knows'' ...well, your offer is in agreement, as you were compelled to offer the revelation.
''God Gave Everyone'' ...is not a choice either. Life, our lives, ''We'' ...have no ''free will'' offer. Agreement is not a choice, ''every knee shall bow'', that is ''The Truth'' ...and it is written in scripture. http://bible.cc/romans/14-11.htm
My friend, ''The Revelation'' is upon you, not because you are free from it. The Light does not escape The Light. Darkness does not escape ''the pits''.
...The Truth never changes, revelation is not a choice. Mercy is the sustaining offer of life, you can not escape the revelation. ''Free Will'' is a claim of dominion and it is the black hole. You shall be sealed my friend, you shall not escape the revelation of the fulfillment of the law. When you are sealed, you shall not have a doubt, the mark upon us is not a choice, be it of contempt or love, we are compelled unto The Master's voice proclaiming His will or we shall hear the word's ''depart from me'' ''I never knew you''. You can imagine all you want and claim that your ''image'' is the revelation of ''free will'' but, you did not choose to be born. You are the image of our Father in Christ, not the other way around, that is not a choice, which is The Revelation that there is no choice, there is only our Father in Christ, The Whole Body dwelling perfectly in agreement, as always and forever, without end.
Love is dwelling. Claims, to be above love, are fallen. There is no doubt ''who'll stop the rain?'' http://www.youtube.com/watch?v=U1TMulrUYME
Is not the time at hand ''the measure of a man''? ...our timeless Father in Christ? ...or is our claim separated from The Father in Christ possible? Is our claim ''Revelation is a choice'' the end of time, as it is measured by our own claim to be born as our Father in Christ is risen? The revelation of Mercy, Love and the sustaining will is compelling because ...it's a choice? http://bible.cc/revelation/20-15.htm
http://www.youtube.com/watch?v=BVvHEjJ62T0
I believe the greatest sins may be assuming you know the Will or Grace of God.
Also, try not sounding like one of the retards, (hangover pronunciation) who spew venom at dead soldiers' funerals.
''may be''? http://bible.cc/revelation/3-16.htm
http://bible.cc/matthew/8-22.htm
You can read!
Is this what John Taylor was alluding to when he said something was going to happen in a weeks time which would be bullish for the USD. Wouldn't these dollars have to be repaid? Hence, causing a demand for the USD. Could this effectively end the USD carry trade?
Yes.
how about the correlation between the S&P and QE2? Did the money go to the market or to Europe?
All the more reason to not raise the debt limit and if we have to default on some of our obligations. Republicans need to keep this administration under control or they will simply melt the dollar away. Bernanke is satan.
Bernanke is a Bush Republican
A Bush REP? Y'mean just like all the other short fingered barbarians at GS?
Bernanke was a Bush appointee ... that does not make him a Republican. More like a rino and hence the imurgance of the tea party. Anyone with a fraction of a brain wave would throw this idiot Bernanke out on his head. Yet Obama dithers. Because he is beholden if not as much even more so to these fools at the Fed.
the twisting-pretzel desperate-ness of your excuse is a wonder to behold!
yes, keep telling yourself that Bush would have realized his idiotic mistake and fired his appointee, because he did exaclty what he didn't want him to.
seriously, drop the ideology/party hackery. you're emotionally attached to it. it has to go for clarity to occur.
i know, i WAS you!
and your solution would be more of the same with Obama?
No one is without fault in this mess however I would wonder how many thought Bernanke would be this ineffective when he was appointed. Once the failure becomes obvious though you have to get rid of the problem. So far Obama has only allowed it to get much worse than anyone could have ever imagined. He along with Bernanke chiefly are running a deficit that is going to bankrupt all of us.
By the way my eyes are wide open when it comes to ideology.
but bernanke isn't a failure (from their perspective).
it isn't obama & bernanke per se. it is the monied interests. capital. TBTB. the banksters. whatever you want to call them.
and both obama and bush served / serve those interests.
not ours. not yours. not mine. theirs.
Listen to Damon Vrabel explain why this happend and how it's just the begining...
Debunking Money #4 - 20th Century - Where We've Been
http://pix.cs.olemiss.edu/econ/damonVrabel04.flv
Debunking Money #5 - 21st Century - Where We're Headed
http://pix.cs.olemiss.edu/econ/damonVrabel05.flv
Scotland Yard would be proud... impressive analysis. Unfortunately it is post-mortem.
Dave Harrison
www.tradewithdave.com
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Banksters
Bernanke get impeached? I will believe that when I see it and not one second before. Because if that happens, then so many other big boyz will go down with him.
So Congress will suddenly find the will to turn on their masters? How then, would they fund their campaigns? Furthermore, how many Congressmen will find their dirty laundry hanging on a line as a result?
The impeachment of Bernanke, IMO, isn't gonna happen.
Bernanke will not get impeached and there will be QE 3. Any news article or analysts blog stating otherwise is nothing but click bait ( Except for ZH )
be sure someone has a record of every keystroke
from every congress thingy and the scandals to
unfold, or threats of scandals to unfold, will be
voluminous. many news papers will be sold.
disclosure : long popcorn.
Pukes and Dumbos are in the same camp. Slaves to the bankesters and its over folks. Only way to get control is by hanging the bitchezzzz. It may sound somewhat ancient, however USA prides itself on nation of laws which are written to benefit the banks and politicians as they do not live under the same rules as the rest of the citizens of the USA. is this how you want to live and live in the USA?
Everything has its beginning and end. The question I have is when will the first begin and the second end.
The end is near and it is not looking pretty.
Kissinger: Obama Will Create A New World Order
https://www.youtube.com/watch?v=SISUIhprOa8
https://www.youtube.com/watch?v=RMVrxgvR_Xw&feature=related
Holy shitz. WTF, Get the geyser arrested and locked up . Enough of Kissinger. he just won't go away. Power hungry bastards.
you're killing me ;-P
http://geology.com/articles/geyser/geyser-california-old-faithful.jpg
USA killed by lawyers and the stupid laws which no one understands anymore.
The USA was killed by the corporate and their worship of money. It has undermined even the profession you list.
Make no mistake about it.
But for a very few years, since 1776, there hasn't been a, "UNITED States." We have never really been united as a people but instead have had Unitedness shoved down our throats. During wars is about the most we have ever been on the same page, and those were and are well-orchestrated dog and pony shows, playing on the sentiments of the people to sacrifice their sons and daughters at the altar of the Elite.
We have always been divided as a country, especially when our differences were far more important than our agreements, at the beginning and up until the Jacksonian and Lincoln admenstruations which succeeded in turning back secessions.
Our splitting apart that would have been anathema to the POWER mongers, the wealthy, the elite who have managed thru this forced integration, to make themselves into Royalty. It's not for nothing that incumbency is so critical.
Now we have nowhere on this part of the continent to assemble and overthrow the despots at the FED, Wall Street, and Treasury who themselves have been taken over by one Nationality, the Jews, as exemplified in the Greenspan dynasty, now the Bernank and Geithner one, Wall Street Investment Banks, (Blankfein, Steinberg, Fuld, etc) and all the worlds financial nexus points like the World Bank, IMF, (Strauss and Wolfensohn), Commodities exchange (Gensler) headed by jews, and whose employees are curiously from the same nationality.
There is plent of responsibility that this one group owns for causing a global financial devastation of historic proportions. And rewarding themselves for it by having the inside guy, TheBernank, put money in their checking accounts by the trillions, even now, for failure. If that isn't Tyranny then tyranny never existed.
More Wars Bitchezz brought to you by the FEDs and the banksters.
US foresees $46 billion in 2011 military sales
http://www.activistpost.com/2011/06/us-foresees-46-billion-in-2011-milit...
Infamous Quote from James Paul Warburg
"We shall have World Government, whether or not we like it.
The only question is whether World Government will be achieved
by conquest or consent.
In a nation-state this act could only be defined as treason. Obviously, America is not a nation-state in any meaningful sense of the term. Welcome to the New World Order.
End TBTF, and END THE FED!!!
Leave it to the Ivy league Educated fools and the other so called Prestigious U folks who have not done anything useful other than to destroy life's around the world.
This Is How the Dollar Dies
http://www.activistpost.com/2011/06/this-is-how-dollar-dies.html
Dominique Baettig calls on federal authorities to apprehend former US Secretary of Stat
http://www.worldtruthtoday.com/gracemj/2011/06/07/prominent-swiss-politi...
Profits privatized, Debt socialized, Welcome to the land of the 'free markets' (only when there is profits) America.
Thanks Helicopter Ben for bailing out foreign zombie banks.
I don't any member of Congress or in power understand the simple concept. Shows the divide between educated and over educated fools in DC understands the basics of balancing the check book.
You talk too much shutup and read more.
I propose a viral campaign on every stock, news and investment site that will allow a comment to be posted, to make this go viral! The American people need to know how badly their government and the federal reserve have been fucking them so they can get mad. Once they get mad, then maybe something can happen... but first, they have to stand up and scream, god dammit I am mad as hell, and I'm not going to take this shit any more! Let's do this! Operation ZH...
"They want freedom of speech? Let 'em have it. As long as they are yelling and screaming, they will not revolt".
Cheap Plutocrats' maintenance insurance.
So has all this got something to do with the eurodollar market?
European banks have been monetising a whole lot of US dollar denominated junk & been caught with their pants down?
Thanks Tyler - very sharp and interesting points. However, I'm still struggling to see to what banks the bulk of the money was flowing to... funds don't seem to flow to DB or BNP as one may expect - correct me if I'm wrong...
More "fiat empire" and banksters stretch around the globe - more diluted will our savings be.
That goes for all people around the globe.
How many of you can link this to bilgenberg meetings, more and more frequent calls for centralized financial controls and final "NWO"?
This explains why that rhodent Rogers has been saying he intends to buy the buck because he expects a bounce. The suppression of the dollar vs. Euro was an artificial rate that should now end. But, do Gross and Rogers know something we have no access to? They are operating on the assumption that there will be no QE3 it seems.
So does this mean we bought Greece, Ireland, and Portugal? Because there is a fine little villa on the Costa Prata I would'nt mind getting my hands on.
DEXIA was a large MUNI player. Back door MUNI bailout..
“If Dexia went bankrupt, it could have been a catastrophe for municipal finance and money funds,”
http://www.bloomberg.com/news/2011-04-06/fed-s-biggest-foreign-bank-bail...
end the fed
Great post Tyler(s). I do have only one question though...
"to send the S&P surging, and to send the precious metal complex surging2 as it becomes clear that the dollar is now entirely worthless."
Yes, I think the metals go ape shit when QE3 is announced but I'm not sure about equities this time around. This time, I think the investor (retail and institutional alike) finally wake up to the fact that EVERYTHING is broken. Just my scotch induced opinion.
Equities will always go up when currencies are crashing - ape shit like metals when the end game is coming BUT there is a hudge inherent CUSTODY RISK... Not sure if you'll ever see your securities when some key players are defaulting, thus make sure that the securities are at least lying in your country. Assets / Fiat = 0 > unlimited
Going thru my Blackberry emails this morning. Found this gem that was forwarded to me earlier in the week.
James Wolfensohn at Stanford
The ending has a treasure trove of clues (14m). My question; Hillary can barely manage the US Department of State, why the World Bank President consideration?
Thanks for the post. Interesting facts to consider whilst USA sits and watches the unravelling of China and India take over the Gloabl markets.
Atomiser : You should post this on the Bruce Kasting page about African Real estate. The insight of this lecture and side-effect presentations, notably what China is doing in Nigeria is very revealing, as I unsuccessfully tried to point out on that thread...this provides good food for thought about INDIGENOUS African+ Asian effort to do JV developments, unlike the previous European post colonial rip-offs...
Sorry Falak, cannot do. Presently, my existence on the World Wide Web is .009%. I pay to be invisible. This is one of two sites that I post on. Tyler is deeply trusted, therefore my privacy is never a concern.
In fast forward time, you'll wish your presence on the Internet was .000%. It won't be ZH website to concern yourself with, rather than the others you joined. Heed the warning, winks.
This demonstration vividly shows that operation "save european PDs" has succeeded from their Oligarchic perspective for the reasons explained by TD's article. So the champagne must be flowing as the european faces are glowing at Suvretta this week end. If this analysis is as true as TD makes it out to be, there must be a counter party european commitment from the German/French PDs for having the US oligarchy come save their necks by the skin of US population's wealth. What is this counter party deal, that Merkel/Sarkozy/Juncker/Rompuy have offered FED/Obama over and beyond ECB's and Trichet's prudish namby-pamby reach? We don't know yet but we'll find out soon enough...I'm sure it has to do with MENA RMs bonanza...where USA needs EU support and a common front against China. So yes, now this number crunching display gives us the flavour of the G8 EU/USA hand shake at Deauville and formation of TEMPORARY monetary/financial alliance along military NATO lines. Now being celebrated at Suvretta.
If the big loser in this game of the alliance of the rich debtors nations is the BRIC bloc, there will be blood on the wall down the road, as the BRICs reorganise around China/Russia. They, who have the money and the primary growth, will NOT want to be left out of the debt gravy train that will now print away in QE-3+ at their expense through 2011/2012. I think this FED policy decision is now in concrete, the agreement between EU/USA for a round of QE at the expense of creditors; of which China is going to be the biggest sucker; as it will see its USD holdings melt and feel the inflation fed commodity fire that QE-3 will generate. China/Russia vs EU/USA seems like the run-up to the 2102 november elections!
What will the Sauds do? I don't think they have much choice; they'll string along with the USA... China will remember this sleight of hand for a long time...Japan of course is toast and has no choice but to tag along. We will see the pendulum swing once again post 2012, but until then the course seems to be set by this amazing deal and subsequent projected QE-3.
Thank you TD for this most revealing analysis. I'm sure ZH is pioneering this new analysis that will no doubt hit the MSM news soon.
not too sure about this, it rather looks to me that China is doing everything to keep EU alive...
China's game is more LT...It needs future markets post 2013. Look at the Wolfensohn presentation at Stanford posted above, to understand the paradigm shift after 2016...very revealing. In the current USD/Euro firestorm, the QE-2 deal to help Euro and the QE-3 deal to allow US economy to deflate USD further while protecting WS assets to the extent possible and also cater for state side financial "botux" operations up to Obama re-election is ALL that the US oligarchy currently wants. China will have to take tough shit during QE-3 and then recover the global ball afterwards; when the great US/Euro zone deflation will unwind in biflation/stagflation mode which the Oligarchy HOPE today will be containable. Meanwhile, middle class/working class USA/EU is toast. That is written in the winds of change as Wolfensohn explains for a LT perspective of paradigm shift.
Good presentation that Wolfensohn Youtube above!
if this happens China will just put the trigger and sell all treasuries as they have nothing to lose anymore... like it or not but China will have the upper hand because it is not a debt slave
Yes but it needs markets of DCs to grow. So it will selectively play the currency game. It can wait. Only it can prime the pump after the dollar hegemony collapses. Patience is an oriental word.
Spot on, Falak.
The only "wildcard" (if I can call that) is food supply. With flood and drought, it looks to be short...some how, they have to ensure sufficient food supplies even if they have to subsidize food imports heavily.
There in lies the "trade on".
So, if not the middle kingdom, then who?