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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

Tyler Durden's picture


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.


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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Sun, 06/12/2011 - 09:27 | 1362816 americanspirit
americanspirit's picture

I wonder if Ron Paul could force the Fed and all its members to register as foreign agents? Seems reasonable.

Sun, 06/12/2011 - 09:37 | 1362823 falak pema
falak pema's picture

global "reasons of state" vs "nation state reasons"..good basis for a debate. 

I think that TPTB would argue..."we are in a state of global economic war"...which requires extraordinary uses of power with our allies to do "God's work" Juncker so aptly put it to Der Spiegel...

Sun, 06/12/2011 - 09:30 | 1362820 SirIssacNewton
SirIssacNewton's picture

QE3 or as I like to call it "QUBED" or really it should be called "QCREWED" will be all about getting OBummer re-elected so that the next phase of the facist state can be moved ever increasingly forward.  The Fed will allow a pause after QE2, as most of us have surmised, to create downward pressure on liquidity and equities to create yet another call for market intervention.  This Qubed program will now be about helping the banks get rid of the bad mortgage debt on their books through monetizing the private mortgage debt onto the public's back.

Specifically, I predict this Qubed program, in some type of form, will allow the banks to write down all the bad mortgage loans to current market value.  The difference will be the stated mortgage amount and current value will be transfered to the bank by the Fed making the bank whole on a digital currency basis.  The home owner or mortgagee will have a revised mortgage amount that makes them no longer underwater to the current market.  The banks get a huge injection of liquidity and get the risk of the writedown they would have to take, if they proceeded with foreclosure, removed from their balance sheets.  The underwater homeowners now have a greatly reduced mortgage.  Of course, the banks are happy and now have the liquidity to buy up U.S. Treasuries with this money, which will be the hidden part of the requirement for them to get this deal.  The homeowners are happy and will now re-elected OBummer as their savior.  The size of this program would be about $600 billion to $1 trillion and start some time in Sept 2011.  In order to protect current mortgage holders that are current with their payments from deciding to join the party, they will freeze participation to a certain date and Congress will create some type of legislation which will removed the MERS mess and, again, streamline the foreclosure process for any new defaults after said date.

For the record, I have hated every "QE" type program they have pushed upon us.  But I think its important to understand the form and the timing of such a new effort.  OBummer is afraid he won't get elected with unemployment on the rise.  He and his Corporate Bosses need something to sway public sentiment his way at the right time.  If OBummer could have the program start in September and run through May 2012 that could do a lot to help get the Sheeple to once again chant "Change you can believe in" or whatever new slogan crap they put out.  Qubed has to be more stealthy and, at least, fake the sheeple out enough for them to see it as a direct benefit.  Even if, its really just another bank bailout and another way to have the Treasure debt monetized by the Fed.


Sun, 06/12/2011 - 09:44 | 1362835 Tater Salad
Tater Salad's picture

SirIssac, I must respectfully disagree.  I don't think the banks will be getting QE3 although as they didn't even get QE2, at least domestically speaking.

QE3 will need to save the states.  I'm guessing they'll package it up nicely with say a MAPP, Municipal Asset Purchase Program.  This way Obummer can save supportive states, i.e. IL which is completely broken.  The states are broke and running on fumes, for this I think the QE will be thrown at the states, this will also be spun as increasing employment at the state level which the sheeple will give a golfer clap.

Regardless, QE3, 4, 5, don't care anymore, dollar on a road to the electric chair.

Sun, 06/12/2011 - 09:57 | 1362852 SirIssacNewton
SirIssacNewton's picture

Tater Salad with the way things are going....I actually could see both types of programs being done.  From a motivational point of view, OBummer needs to get some juice from this next run of liquidity to be re-elected.  Just doing more bailouts, even if its for the state governments won't get many sheeple thinking the Prez is all that great.  The only reason I care is to try to make it through what will be a truly horrendous sh@t storm when the ponzi collapses.  I'm trying to understand where the next round of funds will go to and, hopefully, eeke some small gain to put to other hard assets.

I agree....the dollar is on the road the electric chair.  I just don't want to be in the chair with it if its avoidable.

Sun, 06/12/2011 - 10:14 | 1362875 boiltherich
boiltherich's picture

They are already floating the idea of a (employer) payroll tax holiday, I would suspect that they will also whip up a new extension of unemployment benefits, and probably tack a point ortwo (or three) onto the COLA's that get formulated for 2012 and are announced in November or December, the social security crowd is really smoking pissed off at three years in a row without a raise.  I know I am.  There are a bunch of ways to monetize more debt, we will never run out of debts to monetize.  What they call it is irrelevant, they can front another trillion or so through the Federal Home Loan Bank system like they did in 2008-9 without it even getting into the newspapers.  How about a new homebuyer tax credit?  Maybe 10,000 bucks this time around?  And of course no matter what else they do there is quiet channeling of funds into equities so that your little IRA's and 401k's and kid's college funds and such do not fold up before the elections. 

Sun, 06/12/2011 - 09:44 | 1362837 ZeroPower
ZeroPower's picture

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. 

Is there a way to calculate fair value of the EURUSD? Perhaps IRP formula of the EUR with respect to USD?Curious as id like to know how to get to the sub 1.20 number.

Sun, 06/12/2011 - 09:57 | 1362857 Greeny
Greeny's picture

"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. "

Best Article I ever read 5+++

Thank you.

Sun, 06/12/2011 - 10:06 | 1362865 I am Jobe
I am Jobe's picture

The next economic perfect storm – should start in the end of June – From Asia to Europe to the U.S., all the important economic indicators are rolling ove–-shoul...


Sun, 06/12/2011 - 12:26 | 1363061 longorshort
longorshort's picture

You look like a bad Chiquita banana commercial. 

Sun, 06/12/2011 - 10:11 | 1362874 blindman
blindman's picture

thanks to the hedge !
. from max...
Modern Money Mechanics | June 12, 2011 at 3:37 pm |
Sorry – Missed a folder in the original post.
Listen to Damon Vrabel explain explain why this happened and how it’s just the beginning…
Debunking Money #4 – 20th Century – Where We’ve Been

Debunking Money #5 – 21st Century – Where We’re Headed

Sun, 06/12/2011 - 10:17 | 1362881 pauldia
pauldia's picture

Zerohedge focused on the trivial Take a look at what is really important and how efficiently Congress "invests" your tax dollars.It's O.K. because he's going to rehab and he has a "Hope and Change" bumber sticker.

Sun, 06/12/2011 - 13:18 | 1363155 JW n FL
JW n FL's picture

We dont care about the Democrats.

We dont care about Republicans.


The Dog and Pony Show that you find so very entertaining, speaks to your station and level of comprehension.





Sun, 06/12/2011 - 10:16 | 1362886 Coke and Hookers
Coke and Hookers's picture

There are two things going on here.

1) The Fed is NOT lending to small banks, thus starving the US economy of credit.

2) The Fed is lending to big Euro banks, which seems strange but isn't.

Let's look at what this might actually mean.

1) Small US banks and the Fed: How many small US banks have been closed since the crash? Anybody have that number? The answer is 405 according to the fdic failed bank list. How many big Wall Street banks have been closed? Well, Lehman maybe but it got absorbed by other banks. Let's ask ourselves a question: Were the small banks worse off than the big Wall Street banks? Probably not. I think the crisis was simply used as an opportunity for a massive consolidation program. Banks competing against the Wall Street/Fed cabal were simply slaughtered to remove competition. So why the hell would the Fed lend to what's left of non-Wall Street banks now? It makes no sense. Wall Street and the Fed WANT ALL OF THESE BANKS GONE and they are not going to to anything to help them out.

2) Euro banks and the Fed: How do the people who run the show in international finance see things? They don't see things from national perspective. All these people look at finance from a global perspective. They don't give a shit about anything else than saving the system. If Euro banks go down, Wall Street will go down too. From a global perspective, it makes perfect sense for the Fed to lend to Euro banks because they don't see any distinction between Wall Street banks and big Euro banks. The 'country' the Fed is out to protect is the international (mainly western) financial system, not the US or individual Euro countries. For the Fed it's 'us vs them' - 'us' being the western financial system and 'them' being the serfs having all their assets looted (that's us folks).

There is no US or Euro financial systems anymore. There's only one system now and the people with the easiest access to the digital printing presses (and the serfs' wallets) are tasked with the bailouts - and that happens to be the Fed. The ECB and the Eurozone central banks have done their part too. They are devaluing the Euro like there's no tomorrow - and the devaluation is for some magical reason enough to keep pace with the decline of the dollar. What do you think would have already happened to the dollar if they had shown fiscal responsibility?

This whole thing makes total sense if we look at the world from their perspective.

Sun, 06/12/2011 - 11:57 | 1363022 i-dog
i-dog's picture

Very well put. Also add Russia (sitting on a pile of resources) and China (sitting on a pile of FRNs) with their authoritarian control systems into the globalists' arsenal. (Remember, it was the globalists who financed both Lenin and Mao in the first place ... don't be fooled by their subsequent 'liberalisations').

IMO, the globalists are attempting to destoy the US (with a North American Union still on the agenda) while keeping the EU intact (and expanding it), which is proving to be quite a juggling act for them.

Sun, 06/12/2011 - 11:55 | 1363028 Yes_Questions
Yes_Questions's picture

This whole thing makes total sense if we look at the world from their perspective.

Brings this to mind:

Slightly O/T to your post, but I think there is a common denominator. 


Sun, 06/12/2011 - 13:31 | 1363177 JW n FL
JW n FL's picture

everyone needs to get up and scream! that will fix everything! maybe we can talk and hug it out with the FED after the screaming dies down..


We ALL should be Arming Ourselves to Defend the Constitution of the United States! We ALL should be finding the Treasonist Rats and Hanging them on the White House Lawn on ALL fo those 24 hour a day cable news channels! Not all at once, for years going forward.. we should hang them! and hang them high! 

Sun, 06/12/2011 - 12:10 | 1363053 Astrolabe
Astrolabe's picture

"There's only one system now..."

probably most who read ZH are aware of this. i think the significance of this fine work by Tyler is that it has the potential to be just the thing to wake americans up to this fact, and further, that it would shock them and be considered a betrayal of their interests.

the potential, mind you. i'm not expecting much.

Sun, 06/12/2011 - 12:32 | 1363083 KTV Escort
KTV Escort's picture

Best comment yet, thank you.

Sun, 06/12/2011 - 19:08 | 1363644 hardcleareye
hardcleareye's picture

I concur.  +++

Sun, 06/12/2011 - 10:23 | 1362889 Curtis LeMay
Curtis LeMay's picture

Excuse me, but who pays Mr. Bernanke's salary?

I thought it was a tall guy with a beard?

As it is, surely this is High Treason?

We owe no one anything, and to the contrary, they all (family members such as Great Britain notwithstanding) owe us...

bin Bernanke should have gotten his head out of his ass two + years ago, but this??

Guys, this cannot go on. Screw euroland and its tyranny. We have to watch our own backs here coz no one else will, it's clear...

Sun, 06/12/2011 - 10:59 | 1362944 Greeny
Greeny's picture

You not getting it. The Fiat system is world-wide leaving


It's either going to collapse entirely or you going to see

bankers cooperating on world-wide scale..

You know, it's like saying:

"screw the hard my liver is fine"

Sun, 06/12/2011 - 11:24 | 1362967 Curtis LeMay
Curtis LeMay's picture

Oh, but I am.

The USD, like Sterling, etc, are all fiat currencies since we went off of the gold/silver standard.

No intrinsic harm in that: "In God We Trust" is perfectly acceptable, and has been for a hell of a long time.

It's when we get to "in bin Bernanke we trust" or exponentially worse "in lying sack of shit Trichet/euro-'elite'-fraudsters-on-a-deluded-and-heinous-power-trip we trust" when the shit really hits the fan...

Enough is enough

Sun, 06/12/2011 - 13:49 | 1363211 Quixotic_Not
Quixotic_Not's picture

FWIW, in the former Democratic Republic of the USofA, it was Unconstitutional to issue debt based currency (Art. 1, Sect. 10), but that didn't stop the tyrannical likes of Abe Lincoln or FDR...

The solution is simple, but the sheeple are too stupid...

The state of nature has a law of nature to govern it, which obliges every one: and reason, which is that law, teaches all mankind, who will but consult it, that being all equal and independent, no one ought to harm another in his life, health, liberty, or possessions ~ John Locke 1690

Hell, even the so-called enlightened don't get it...

Whenever the legislators endeavor to take away and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any further obedience. ~ John Locke 1690

Que Sera...

Sun, 06/12/2011 - 10:21 | 1362891 ArkOmen1
ArkOmen1's picture

One of the best expose's ever written. Well done. Finally somewhere where we can clearly get the truth. Now this is truly an Omen! All aboard!

Sun, 06/12/2011 - 10:22 | 1362896 BlackholeDivestment
BlackholeDivestment's picture

 Tyler's report is too much for the quick echo-tainment cash spike whore, it's all dead Somali Q, the Weiner and Rosemary's Baby's economic 2012 re-election strategy. You know, bullshit.

Sun, 06/12/2011 - 10:38 | 1362914 blindman
blindman's picture

@"high treason?"
yes, high treason.
end the fed, arrest the traitors.
prosecute all of them.

Sun, 06/12/2011 - 13:31 | 1363181 JW n FL
JW n FL's picture

you are a brilliant man! and i love you!

Sun, 06/12/2011 - 19:34 | 1363696 blindman
blindman's picture

you are too kind !
but, thanks

Sun, 06/12/2011 - 10:47 | 1362924 tony bonn
tony bonn's picture

this is precisely what it means to be a citizen of the world....when obama touts his citizenship (which is primarily indonesian) he is really saying that he is a citizen of the world and will do anything to plunder america for his rockefeller-rothschild asshole overlords...

Sun, 06/12/2011 - 10:48 | 1362926 yabyum
yabyum's picture

All of the above 36.16$ fiat per ounce of AG seem like a sweet deal BTFD.

Sun, 06/12/2011 - 18:18 | 1363573 SilverDosed
SilverDosed's picture

Wait a day or two...

Sun, 06/12/2011 - 10:47 | 1362928 suz
suz's picture

Tits UP US!
See you on the other side.....

Sun, 06/12/2011 - 10:49 | 1362932 Arrowflinger
Arrowflinger's picture

What I don't get is how so many in the alternative finance/economics blogosphere, including much of the esteemed company here, doesn't understand that the Fed practices single entry bookkeeping as it's first action. It is all digital. It is unlimited. It requires no balancing entry. This gives rise to a wild party with unlimited booze, drugs, hookers, and ponzi finance. No adult supervision present, wanted, required, or even on the horizon.

Their problem is that those in custody of the finite, physical, and required for life assets now understand this and day by day even the rabble is understanding it.

Their advantage is that almost NOBODY in the common folkdome can conceptualize the enormity of the above.

Thanks to ZH and others I can.




Sun, 06/12/2011 - 10:51 | 1362935 Imminent Collapse
Imminent Collapse's picture

ZHers, I have a question.  I have no debt, have an organic farm, 400 acres, silver PM, cash, money on deposit, guns and ammo, and 1 year's supply of food.  I have two lakes and seven spring fed streams.

I like diversity, but I wonder about keeping more than 70% of my liquid assets in FRNs.  If we have deflation, then that would be a good thing.  If we have hyperinflation, then obviously not.  I don't want too many eggs in one basket, but I am confused by the differing opinions on deflation or inflation or biflation.  Anyone care to give my your thoughts on this?

Sun, 06/12/2011 - 11:02 | 1362951 Arrowflinger
Arrowflinger's picture

Well, given the stats cited,  we should be asking you for advice.

50% FRNs and 50% PM's would seem prudent at this juncture. The latter might go on sale, but don't count on it.

My allocation is similar but I look to move it in the above direction.



Sun, 06/12/2011 - 11:10 | 1362962 falak pema
falak pema's picture

diversify geographically your asset spread, but get good advice locally for each market.

Sun, 06/12/2011 - 11:10 | 1362961 Caviar Emptor
Caviar Emptor's picture

Biflation will crush your FRNs buying power while your PMs will keep up with the change and also hedge political/structural turmoil ahead. Remember this too: as something weakens, a premium gets charged against it when you try to sell convert it to something else (To exchange FRNs for gold, other currency or important resources, seller will demand more). When something is strengthening, a premium gets charged to obtain it by the owner. Price over spot has been rising. 

Sun, 06/12/2011 - 12:37 | 1363094 ThoughtCriminal
ThoughtCriminal's picture

buy a rice farm in China

Sun, 06/12/2011 - 12:43 | 1363098 longorshort
longorshort's picture

Not sure if you own your farm outright , but I think there is a farmland and PM bubble.  Its not sane for farmland to double in 10 years along with subsidized ag prices.  You should read about some of the manipulations going on with firms in commodities where the investment vehicles are scewed to the longside.  It bothers me that I see high end jewelry stores with well buy your silver and gold in big cheesey signs on their businesses.  This exhudes a bubble as well, but everyone will bash me for saying it.  Over 50% of farmland in the US is rented.  In the event of a correction its probably good for renters, bad for owners and really bad for newbie farmers or strained ones.   If you buy land at current prices in allot of areas it would take a 25-30 year loan to pay it off at these current prices.  Throw in some bad crop years, prices, or changes in government subsidy programs this is a long damn time to forcast for and damn near impossible.  PM have had a great run and all, it could go higher, but is it right in the head.  Most things in the world are priced in USD still.  Until we see significant changes in this I am not sure we will see a depression.   Its never bad to have extra food on hand,  I flood or tornado can cause need to have some items on hand to eat because everything is just in time delivery systems nowadays to save on taxes and inventory wastes for these big companies.   Just my two cents.  I am not an investment advisor and you shoudl seek a licensed one in your state.  This is for entertainment purposes only.  Best of luck to you.

Sun, 06/12/2011 - 14:45 | 1363287 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Brokers buying gold and silver is not a sign of a bubble in my opinion.  We have two forces at work here.  We have those who can afford it trading federal reserve notes for metals and those whose personal economics forces them to trade their metals for federal reserve notes.  What you perceive as evidence of a bubble is actually having the opposite effect, as the sales of gold and silver have a negative impact on overall metals prices in the demand/supply continuum.  Other than that I am in complete agreement with your comments and I am sure as hell not a licensed advisor which probably increases my credibility:)


Tuco Benedicto Pacifico Juan Maria Ramirez

Sun, 06/12/2011 - 13:46 | 1363207 Bolweevil
Bolweevil's picture

Take your recipe and multiply in two other countries and don't sweat the details. One burns down no biggie.

Sun, 06/12/2011 - 14:36 | 1363276 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Hold green cash in case of deflation and gold and silver in case of hyperinflation.  Even in a deflation precious metals should hold their purchasing power although they too may tank in nominal terms.  You sound like a smart cookie!


Tuco Benedicto Pacifico Juan Maria Ramirez

Sun, 06/12/2011 - 10:52 | 1362939 Seasmoke
Seasmoke's picture


Sun, 06/12/2011 - 10:54 | 1362941 PulauHantu29
PulauHantu29's picture


I hope Joe the Plumber is reading this.

Sun, 06/12/2011 - 11:08 | 1362957 alwaystoolate
alwaystoolate's picture

Do not forget that by dispersing that much USD globally - practically intoxicating all central banks with US fiat -  the FED created an unprecedented worldwide inter-dependency. Buying time for the USD and: in the end they all will fall together.

Sun, 06/12/2011 - 11:25 | 1362963 falak pema
falak pema's picture

THAT IS THE TRUMP CARD OF FED + US PDs. Obama has one other : the biggest arms arsenal in the world...

Coincidental point : If as this post indicates ALL of the 600 B amount fled to Eurozone, and none fed the local US PDs, THEN WHAT ALLOWED THE WS ASSET RUN TO CONTINUE FROM NOVEMBER 2010 TO APRIL 2011? THE MARKET KEPT CLIMBING BUT ON WHAT INJECTION IF IT WASN'T QE-2 AS SUSPECTED??? 


Sun, 06/12/2011 - 14:33 | 1363273 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Dr. Webster Tarpley says, "if the dollar dies there is no alternative to the up to $3 trillion + per day U. S. Treasury Bond Market.  What is in the wings to fill this gap?!  If nothing, we are totally and completely screwed. 

 Also, I hear all this ranting about China holding a trillion or two of U. S. debt.  In a world consisting of $1,500,000,000,000.00 in derivatives, big freakin deal!


Tuco Benedicto Pacifico Juan Maria Ramirez

Mon, 06/13/2011 - 20:48 | 1366404 baby_BLYTHE
baby_BLYTHE's picture

Tarpley is the man

Sun, 06/12/2011 - 20:18 | 1363763 Kayman
Kayman's picture

It is stocks (not the corporate share kind) and flows. Tyler is citing balance sheet numbers.

Sun, 06/12/2011 - 11:30 | 1362992 YHC-FTSE
YHC-FTSE's picture



Thank You! After sifting through jingoistic, halfwitted crap about how Europeans control the US, and how we should all burn history books. Somebody actually gets it.


It's a global scale dependency on USD. Just as the US flew in hundreds of millions in cash to Iraq by the container load after the invasion so that there would be no question of selling their natural resources in anything else. Saddam wanted Euro for oil - he got hung. Gadaffi wanted gold for oil - he got bombed. In an economy based on debt, the only thing the USD has going for it is dependency, because nobody believes in the fairytale of trust in the recovery of the US economy. It is its supremacy and dependency in the IMF (SDR), WB, and COMEX that has thus far avoided a wholesale run away from the dollar. Without demand, it is deader than dead. 

Sun, 06/12/2011 - 16:52 | 1363474 eureka
eureka's picture

YHC-FTSE is a learned man! Spot On! Are you listening y'all?

No more red-neck, provincialist anti-Europe rhetoric on zerohedge, please. It is below the intellectual level of the insightful posts here.

The enemy is globalist, leveraged, tax-evading, bailout receiving ponzi schemes and their subservient institutions and individuals.

Sun, 06/12/2011 - 11:20 | 1362972 rsnoble
rsnoble's picture

Our leaders are hell bent on ruling the rest of the world.  Only problem is home base is being sucked dry and there's not much left.  Solution: Pretend there are no problems, march forward.  Operation Global Gobble continues.

Sun, 06/12/2011 - 11:29 | 1362975 PAUL LEO FASO
PAUL LEO FASO's picture

Great, just great...can we now get on with the show?


Sun, 06/12/2011 - 11:21 | 1362985 Everybodys All ...
Everybodys All American's picture

I smell a revolution building ...

Sun, 06/12/2011 - 11:24 | 1362987 XRAYD
XRAYD's picture

Great job ZH!  Congratulations.

Sun, 06/12/2011 - 11:28 | 1362998 razorthin
razorthin's picture

ERX, NUGT and AGQ bichez!

Sun, 06/12/2011 - 11:39 | 1363011 MsCreant
MsCreant's picture

Funny, I get the effect, but I have questions. The Fed has put the US taxpayer on the hook for this thing. If we continue to swallow:

1. Are we going to be the "Bad country/treasury" that absorbs all the debt and is cut loose to go down the shitter?

2. Has the Fed crowned the US the king of the "Zombie" countries, a walking dead entity that feeds on everyone but does not create anything productive itself? The longer this strategy is up and running, the more energy we sap from everyone else.

3. Is this the way that The Fed ends up ruling/owning the world?

Sun, 06/12/2011 - 16:14 | 1363424 topcallingtroll
topcallingtroll's picture


( assuming the europeans and chinese continue to make mistakes demonstrating to the world that they are unable to run a world currency)

Sun, 06/12/2011 - 16:16 | 1363427 falak pema
falak pema's picture

this is priceless it should be framed for posterity...

Sun, 06/12/2011 - 16:30 | 1363446 samsara
samsara's picture

3. Is this the way that The Fed ends up ruling/owning the world?

Instead of the normal Warfare, (Backing each side), that got too messy. So Financial War was created to get the deeds of all the properties on Boardwalk(game). 

A World at Financial War

No, The Owners of the FED end up ruling/owning the world.


The Federal Reserve Cartel:  The House of Rothschild


Sun, 06/12/2011 - 20:27 | 1363772 Kayman
Kayman's picture


 Is this the way that The Fed ends up ruling/owning the world?

Uh... No.  The Fed can print so long as the "full faith and credit" of the USA remains unshaken. 

A country that has outsourced its productive capacity is a little weak on the full faith and credit thingy.

Mon, 06/13/2011 - 00:14 | 1364055 ThoughtCriminal
ThoughtCriminal's picture

"A country that has outsourced its productive capacity is a little weak on the full faith and credit thingy"


in that case, the warfare reverts back to old fashioned kind, with bullets, bombs, missiles, ICBMS, mass violence, etc., substituting for "full faith and credit" (now on display throughout Mid-East, North Africa)

Sun, 06/12/2011 - 11:40 | 1363017 rsnoble
rsnoble's picture

Well im gonna take a break from this craziness(the truth unfortunately), I got the boat hooked up and we're heading to the lake for the day.  Sisterinlaw is showing up, told her id take her tubing.  Of course little does she know we're really trolling for aligators.

Sun, 06/12/2011 - 12:07 | 1363038 TheJudge2012
TheJudge2012's picture

Beware the pizza man.

Fed Insider/Presidential Candidate Herman Cain Denounces Federal Reserve Audit:

Sun, 06/12/2011 - 18:25 | 1363589 SilverDosed
SilverDosed's picture

He's just too perfect of a fall guy.

Sun, 06/12/2011 - 12:16 | 1363050 Hannibal
Hannibal's picture

It is the World Bank in its optimistic projections about the "offline" to parts of the world. "One death is another man's bread" is the motto. Now it seems that this will happen vis a vis Europe and the U.S., maybe even Europe vs.. China.

The U.S. is bankrupt, ie it is the power over oil losing. It has 14 trillion debt and it is openly talked about 'temporary' bankruptcy, if that exists.

The cause lies in the evolution of what you can call the production economy to an economic transaction, particularly in the U.S.. Like the drone operators in Vegas Shooting Afghanistan households in the U.S. is a major sector of paper pushers that the production and financing activities around the world in their hands.

As the oil runs out and has moved production to Asia is becoming increasingly difficult to play this role. Some time it even worked by threatening with apoptosis, or financial suicide, but the world seems to be partly due to the urgency of the oil problem to adapt. Realpolitik is called.

The Eurozone is ready to cut lose the US. The country has itself undermined by the actions of individuals in positions of power who are not attracted to the country and its culture, as well as cancer cells grow and digest a body. The dollar next year will see 50% inflation according to Ron Paul, that's optimistic.

How does a country that has no purchasing power and that now claiming its own strategic oil reserves (38 days?) With a global vote of no confidence in the currency? Who wants to relinquish his property in exchange for toilet paper? 

Sun, 06/12/2011 - 12:10 | 1363051 DogSlime
DogSlime's picture

I don't get it.  I'm from the UK and I just don't get why the fed would bail out european banks.  They obviously are, but I don't understand why.

Weird stuff.  The US needs to stop the FED and quickly.

Who's driving this thing?

Sun, 06/12/2011 - 14:12 | 1363245 css1971
css1971's picture



Everyone is in debt to everyone else.


Course... It is kind of the whole point of the ECB & BOE.


Sun, 06/12/2011 - 19:17 | 1363654 JW n FL
JW n FL's picture

Contagion is Transitory!

Sun, 06/12/2011 - 14:24 | 1363264 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

Hey gang, Bernanke is a puppet of the "international" banking cartel.  Hence, they work "internationally"!  The privately owned federal reserve is just a subsection of the "international" crime syndicate.  Think worldwide corporate fascist state.  Ben Bernanke is not an "American". He is a "globalist"!


Tuco Benedicto Pacifico Juan Maria Ramirez

Mon, 06/13/2011 - 00:02 | 1364038 ThoughtCriminal
ThoughtCriminal's picture

same private parties with controlling interest in the FED hold controlling interest in major European banks, one of their headquarters being located in "The City of London" (which is not same as city of London)


think of the banksters in terms of nepotism, better yet, incestual relationships on global scale




Sun, 06/12/2011 - 12:10 | 1363054 davepowers
davepowers's picture

excellent research Tyler

but there is a fair amount of jumping involved with the conclusion that this was all an intentional scheme to bail out foreign banks.

from the data, we see only the gross amount of reserves in the system (roughly $1.6 t), but not A. which PD/banks first secured the typed printing of the reserves, or B. the course that reserves took as they were lent back and forth. There is a substantial Fed Funds market where lending/borrowing of reserves take place, primarily overnite lending. IF a bank is willing to pay the cost of such borrowing, the reserves show up on their balance sheet and they are entitled to the modicum of interest paid thereon by the FED. But the total reserves in the system still appear to be $1.6 t, as the Stone McCarthy quote shows.

So, what the data shows is that the reserves typed into existence by the FED to buy QE assets, repay SFP and cover treasury checks, ended up, so far, on the BS of foreign banks. Perhaps they borrowed them, say for their own balance sheet polishing purposes. That is, a bank balance sheet that has a zillion on deposit at the FED at the top of the asset list tends to be confidence inspiring. As Tyler says, almost everyone ignores the liability side, where the temporary borrowing/liability of the big reserve assets shows up.




Sun, 06/12/2011 - 13:36 | 1363184 BlackholeDivestment
BlackholeDivestment's picture

 Labor has been aborted by the contempt of debt, judgment is sealed upon Israel and the nations. We are unbecoming.

Sun, 06/12/2011 - 19:59 | 1363737 davepowers
davepowers's picture

great song, practically my favorite

thanks for posting

Sun, 06/12/2011 - 12:22 | 1363067 Hannibal
Hannibal's picture

741   Link   <   > It is the World Bank in its optimistic projections about the "offline" to parts of the world. "One death is another man's bread" is the motto. Now it seems that this will happen vis a vis Europe and the U.S., maybe even Europe vs.. China.

The U.S. is bankrupt, ie it is the power over oil losing. It has 14 trillion debt and it is openly talked about 'temporary' bankruptcy, if that exists.

The cause lies in the evolution of what you can call the production economy to an economic transaction, particularly in the U.S.. Like the drone operators in Vegas Shooting Afghanistan households in the U.S. is a major sector of paper pushers that the production and financing activities around the world in their hands.

As the oil runs out and has moved production to Asia is becoming increasingly difficult to play this role. Some time it may have worked by threatening  with apoptosis, or financial suicide, but the world seems to be partly due to the urgency of the oil problem to adapt. Realpolitik is called.

The Eurozone is the U.S. ready to cut. The country has itself undermined by the actions of individuals in positions of power who are not attracted to the country and its culture, as well as cancer cells grow and digest a body. The dollar next year will see 50% inflation says Ron Paul, and that's optimistic.

How does a country that has no purchasing power and that now claiming its own strategic oil reserves (38 days?) With a global vote of no confidence in the currency? 

Sun, 06/12/2011 - 12:20 | 1363068 Billyjoebob
Billyjoebob's picture

Amazing and shocking that the head of the most powerful branch of our "democratic government", Ben Bernanke, is so smart that he can successfully manage not just the U.S. economy, but apparently the entire world's economy.  Just like our next most powerful branch, the military-industrial complex, thinks it can spend trillions on foreign wars to "spread democracy" or "keep the world safe for democracy" or "fight terrorism" or whatever the current nonsense is. 

These morons don't understand we are no longer a superpower.  We are broke and cannot afford any of this nonsense, although they obviously are too stupid to see that.

Sun, 06/12/2011 - 12:40 | 1363099 cosmictrainwreck
cosmictrainwreck's picture

agreed. however, the flip-side is this: seems to me our "creditors" are the ones in the deep shit (you go, benny!).... holding bags of totally worthless IOU's. the real crunch will come of course when they try to cash in and buy the eastern 1/2 of USA. then we'll see what balls the .gov has, if they can say "fuck you". that will be the point when the (also agreed) BULLSHIT MILITARY should be yanked out of middle-east's ass in order to defend the real "interests" of USA. again, that should smoke out all the pussies in the Pentagram and hopefully at least a few still posess gonads. 

Sun, 06/12/2011 - 13:00 | 1363127 lizzy36
lizzy36's picture

Bernanke is an academic at heart.

To him this is just a thesis, and he is just trying to get the model to work.

The morons are the citizens of the USA. And the power of denial, is the biggest power of all.

Sun, 06/12/2011 - 12:29 | 1363074 slewie the pi-rat
slewie the pi-rat's picture

dammit, janet,  and abalone, above:   is this the "big news" of which we had been warned? 
i ratably think:  maybe.    how the hell do i know? 

unless this somehow sprang, minerva-like, for tyler, this seems like a lotta thoughtful work, so thanks 4 opus magnum 6X speed load.  i may need more time to get thru the implications of the implications, tho.  jeeeeeZ!

but a coupla things, so far, one being that i thought, maybe, the FED had put enuf XS liquidity into the banking system for a pretty good fractional credit joyride, and that it might have the good sense not to try to stimulate away the "fuk_u effect" slowdown, but let the ww.econom adjust and create demand just to get back to "normal-fuked-up".  stop pushing on the string;  see if it will tighten.

the other being that QEII went to the Primary Dealers (all foreign banksters, all the time?) b/c they had shelled out for the Treasury instruments at the T auction.  so, the FED "printed" the money to pay them back + the vig, and took the T's.  so,  timmah & the goobermint got mosta the POMO bil'$, so their checks wouldn't bounce. 

didn't they?

Sun, 06/12/2011 - 15:19 | 1363312 slewie the pi-rat
slewie the pi-rat's picture

i yam now at the point where IF fungibility = magic, THEN slewie begins to understand...

...also thinking about all those FED puts in light of what orly said (prev pg) abt euro bank stress tests:  are Ts being counterfeited (shorted) under cover of FED puts?

...possibly related:  are there more failed-to-clear T trades? 

Sun, 06/12/2011 - 23:55 | 1364039 Yen Cross
Yen Cross's picture

 SORRY for not saying hello Slewie.  Bset wishes Yen.


Mon, 06/13/2011 - 01:05 | 1364096 slewie the pi-rat
slewie the pi-rat's picture

hey, Y/C! 

all this banking is complex for me.  somebody funded the US goobermint during this time.  looking back, it may have been the easter buuny...

Mon, 06/13/2011 - 12:42 | 1365073 forexskin
forexskin's picture

always happy to hear from our slewie!

how about put options from the fed on its own debt? some money there, and the added bonus of keeping rates under their greasy little paws? mmmm, good.

Sun, 06/12/2011 - 12:25 | 1363079 oogs66
oogs66's picture

MF global - former GS in charge, and SocGen, big recipient of AIG bailout money, both because primary dealers just this year - guess the government wanted to give them even more money.

Sun, 06/12/2011 - 12:27 | 1363080 SwingForce
SwingForce's picture

Best work EVER Tyler!

Sun, 06/12/2011 - 12:37 | 1363090 jmc8888
jmc8888's picture

American Credit System (hamiltonian), a return's not a brand new experiement




Sun, 06/12/2011 - 12:41 | 1363095 gwar5
gwar5's picture

Excellent get. 

Paranoid banker conspiracy theories are now confirmed for the doubters. Hope this gets DRUDGED Monday morning.

Seems Kleptnanke really is on a one way trip to destroy the USA and the USD as the WRC. Getting any pesky alternatives to the NWO regime out of the way is clearly the way to go.  Freedom? Democracy? --That's all old fashioned nonsense, dontcha know.

Here's a twist. Does Germany/Europe have leverage over the Fed by threatening to repatriate their physical gold reserves held at FRBNY? 

Regardless, it was nice of Kleptnanke to have quietly given Europe $600 Billion USD under the table while the $$ was still worth a little something. Going forward post-QE3 -- not so much for us.

Besides CB greed and desperation, methinks the NWO must protect the ECB and EU experiment at all costs. A collapse of the EU would turn the entire planet against any world government scheme. 

"...and so, uhm, good luck with that!" -- SpongeBob Squarepants.



Sun, 06/12/2011 - 13:00 | 1363131 Reese Bobby
Reese Bobby's picture

Seems like a smoking gun to me.  I wonder if anyone will care.

Maybe Jamie Dimon will ask Bernanke about all this at the next Q&A.


Anyway, great article and great charts ZH.  Ground breaking for me.


Anybody want to make fun of Bill Gross today?



Sun, 06/12/2011 - 15:23 | 1363334 falak pema
falak pema's picture

As a certified troll, Bobby (Grease) Reese, I have a question to ask you, if I may.

If the QE-2 fled to Europe who allowed US PDs to levitate the WS Index and  the market from November 2010 to April 2011? Can you "pick or pluck that one out, with ya cotton picking fingers, out of your brain?"...Just asking like a stranger in Black Rock...? You know about a guy called Komako ....With Spencer Tracy...Sorry for the accent fella...Can you leave your reply at "Baghdad Cafè?" With Jack Palance...He will forward it to me...We have these ghost sessions around the turning table...I be Chumbawamba be himself.

That is my version of a Bill Gross parody...But am desperately looking for Susan to give me her reply...via Bobby two timer you. I hope I'll get the part in Spielberg's next movie...Its a race between Al P and I better not goof my red neck accent!

I love that line : "This is my town Mr Mccready like it or not."

Mc Cready: "The rule of Law is what a I want. You know what, the goons have taken over this town..."

"What are you be looking for in Doby Flat?"

"After that sneak attack on Pearl Harbour"...

Sun, 06/12/2011 - 16:04 | 1363408 Reese Bobby
Reese Bobby's picture

I will answer your question despite your extreme gayness.  This article answers most stupid questions so far.

Your question is, "...who allowed US PD's to levitate the WS Index..."?

Well, quoting this article, "That's right, out of 20 Primary Dealers, 12 are.... foreign."  So that makes a compelling case to me that most of the money went to shore up foreign bank reserves, the same banks that tend to be PD's.  However this fact does not mean there was not a circular stock market pump going on at the same time.  PD's in general can park UST's for a few days and then use the near-term QE purchase proceeds to manipulate the stock market.  It is a circular game, not a cumulative game.  But all this is my logic; I am not crying out for logical support from some strange network of assholes like you seem to find necessary.

You think ZH's smoking gun precludes PD led stock market pumping.  I'd ask you to defend that assumption, "if I may."


Sun, 06/12/2011 - 16:31 | 1363444 I_ate_the_crow
I_ate_the_crow's picture

"I will answer your question despite your extreme gayness"

Reese Bobby 1

Falak Pema 0

Sun, 06/12/2011 - 16:48 | 1363449 falak pema
falak pema's picture

you r fast on the the kid fast!

BTW I would have thought that 'because' was more appropriate than 'despite' to merit a reply; Just saying...

Sun, 06/12/2011 - 16:40 | 1363447 falak pema
falak pema's picture

If you remember we were under the assumption US PDs were busy cleaning their books using QE-2 to unload junk high risk assets and more expensive bonds transferred to FED with cheaper, shorter term new FED money. Then use these low interest loans to make leveraged plays at low cost either on commodity plays abroad or to pumping WS assets. If these US PDs did not win the Pomo bids which went to their Euro counterparts...then they had no access to cheap money to achieve their aims since november 2010...So if I hear you right they had already made enough margin to achieve the same in their previous operations in 2009/2010 (up to november) to prime subsequently the WS pump. Ie : they were already flush with money. Plausible...But then I don't know the state of their shadow banking books where all the gruesome stuff is parked and the cumulative level of those Hidden liabilities... Nor their leveraged positions on derivative plays which are very cash intensive.

You could be right...I don't see any other solution...Most of the HF cannot levitate the WS movement as they represent just 3% of WS transaction. These PDs sure are nimble footed operators...whether circular or non linear, they can bend every rule known and even those unknown.

Sun, 06/12/2011 - 17:45 | 1363541 Reese Bobby
Reese Bobby's picture

I was viewing the 20 PD's as all available to play the rotating flip-for-a-tip US Treasury game as a ever rotating, and probably expanding game.  I never viewed it as something that can work indefinitely.  PD's will play their role as long as they aren't losing money.  This was made abundantly clear recently when we had an intra-day POMO do-over when UST rates made a big move between the Fed accepting offers and executing the trades, (an event I would have missed w/o ZH).


The important point is we are all at the mercy of a Global Bank Cartel that controls our money supply and Government.


I have a lot to learn about the scam called the world monetary system.  But ZH has taught me more in one year than a BS, MBA, CFA and more years then I care to admit in the business world.  We country boys get learned up too...

Sun, 06/12/2011 - 18:20 | 1363576 topcallingtroll
topcallingtroll's picture

The foreign banks and pd's bought the treasurys on credit based on dubious collateral.

Then they repo'ed them to the fed for real cash.

This is how Ben saved the monetary system from the liquidity crunch.

However a different, long term approach is necessary for what is now.not a liquidity crises but a solvency crises that remains well hidden from most.

Sun, 06/12/2011 - 19:43 | 1363708 Reese Bobby
Reese Bobby's picture

Can you support your claim that the US Treasury has sold 100's of billions of Treasuries, "on credit"?



Sun, 06/12/2011 - 20:34 | 1363783 Kayman
Kayman's picture

Reese Bobby

Well said.

Sun, 06/12/2011 - 22:11 | 1363891 Reese Bobby
Reese Bobby's picture

Thanks.  Go Dallas!

Sun, 06/12/2011 - 15:22 | 1363352 lizzy36
lizzy36's picture

The point is not to get Bernanke or Jamie Dimon to care.

The point is to get everyone else to care.

Do you know when mass protests against the Vietnam war stopped? When the draft was abolished. Once "they" weren't going to be sent over there, they ceased caring so much about "over there". Did that mean "over there" ceased to be occurring?

In this case "over there" is EU, and each and every American is subsidizing it. And they will until the Fed is abolished.

Now one can lead a horse to water, but one can't make him drink. But it becoming a die or drink situation for Americans. If they only care about snooki, or whatever reality tv star is currently mocking "American exceptionalism", then they only have themselves to blame.

Sun, 06/12/2011 - 16:06 | 1363412 Reese Bobby
Reese Bobby's picture

I agree with everything you said.  Hey, it happens!

Sun, 06/12/2011 - 13:11 | 1363151 Weimar Ben Bernanke
Weimar Ben Bernanke's picture

I am speechless,shocked and enraged. You know what the saddest thing is? The average america would not give a damn. They would not understand,not care or not listen. Man this is not going to end well.

Sun, 06/12/2011 - 15:24 | 1363356 minsky4ever
minsky4ever's picture

The average American would have stopped reading after the third sentence.

Sun, 06/12/2011 - 13:18 | 1363163 Joebloinvestor
Joebloinvestor's picture

It is really, really bad when a fiat system is bailing out another fiat system.

Sounds like the real truth is that the EU printing press was broken.

Sun, 06/12/2011 - 15:52 | 1363384 falak pema
falak pema's picture

Well we europeans take pride in our Fiat cars...the Cinquecento ....that runs on no gas...and where your head touches your knees... its so cosy...As for fiat money we had twenty seven and now we have only one...what a cheap deal that is...

Sun, 06/12/2011 - 13:29 | 1363179 glock19
glock19's picture

I have never been more disgusted in my life after reading this article.  It is past time to be active against the FED.

Sun, 06/12/2011 - 13:37 | 1363186 PulauHantu29
PulauHantu29's picture

"The needs of the Bankers outweigh the needs of the People."

The New Star Trek Mantra

Sun, 06/12/2011 - 13:40 | 1363196 YesWeKahn
YesWeKahn's picture

I don't remember precisely. Either during a recent Bernanke's testimony with the congress or a FED conference call , someone asked Bernanke about his generosity towards the foreign banks.

Bernanke coldly anwsered that these banks have US operations, thus he can not treat them differently.

Sun, 06/12/2011 - 13:56 | 1363199 Bob
Bob's picture

I've linked this ZH article several times previously, and I should apologize for being shrilly redundant that way, but while we debate the fire sale prices of the deck furniture on this great vessel, I think we could and should be talking on the level at which this article addresses the real issues:

This stuff is no secret.  At this point, I think it behooves us to develop a reasonably common language for addressing the fundamental problems.  It might save this iteration of the system, it might not.  It is the "if not" case that I find especially compelling . . . when the current system blows up, it will be vital for people to be decently informed about what actually happened as they watch--and possibly even influence--what follows.

Sun, 06/12/2011 - 14:08 | 1363237 BlackholeDivestment
BlackholeDivestment's picture

Bob, 6.66 billion people do not ''recover'' from ''this'' sudden destruction.

Sun, 06/12/2011 - 14:23 | 1363262 Bob
Bob's picture

No doubt.  But a new system will most surely be erected to take the place of the last.  Fewer people to see that increases the influence of those who will be there.  I don't expect the current system to last, fwiw.  But the bullshit will be monumental when the next one is erected.  We, the hopeful-to-be-survivors, really need to be able to appropriately weigh in at that time. 

Sun, 06/12/2011 - 14:17 | 1363248 Bolweevil
Bolweevil's picture

When your greatest problem is feeding your kids does it really matter who f'd up your ability to provide for them? What if you're one of the 50% who decided not to graduate from high school? The widening disparity between haves and nots might inspire action. Recent American action on a semi-grand scale says focus on who the perpetrators are isn't a forethought; stuff just gets burned. I guess someone should pay attention in the hopes that we can inspire change within the current system or rebuild after this one implodes?

Sun, 06/12/2011 - 14:21 | 1363255 CitizenPete
CitizenPete's picture


Have you watched  Money as Debt III  (The Evolution of Money) yet? 

Sun, 06/12/2011 - 14:40 | 1363266 Bob
Bob's picture

I would think so . . . but when I went to youtube to confirm, I got a bad swarm of search results that didn't include it.   More importantly, what's the lesson?

Sun, 06/12/2011 - 15:31 | 1363359 CitizenPete
CitizenPete's picture


MAD3 is not on Youtube and I hope it takes some time to get there.  MAD 3 offers a monetary paradigm and talking points based on a number of self issued credit theories, some libertarian in nature, all non-central in their governance.  The proposal is based on the digital coin concept where money and credit is spent into existence for use of everyone to buy/sell/invest/save etc...  Non of the money is issued from debt of fiat, but instead promise to pay in some real product or service.   The unit of value and quantity of of credit is determined by a free market, not some government or central/global banking institution or central committee.


IMHO MAD III offers one of the most significant talking points in money reform available today.  It addresses commodity based systems, fiat based debt credit, taxes from the commons and goes back to the philosophy of fundamental barter systems as the basis for an advanced electronic exchange which would world at a local, private, governmental, state, regional, and global scale, each one independent and unable to destroy the other.

Should be called Money as Freedom.


Sun, 06/12/2011 - 16:06 | 1363375 Bob
Bob's picture

(Psssssssst!  How do I see it for free?)  Now's the time for a quick promotional "free view" window, I would say . . . it would be a good investment at zero marginal cost.  This product needs to actively cultivate some market along its way to being the solution to its targeted problem.  Seed and feed some product interest here and now, then enjoy a much steeper growth curve . . .  maybe immediately.  This. Is. ZH. fer. chrissakes!

Sun, 06/12/2011 - 14:18 | 1363258 RockyRacoon
RockyRacoon's picture

Anyone who can use "behoove" in a sentence must be taken seriously.


Sun, 06/12/2011 - 15:40 | 1363263 Bob
Bob's picture

LOL.  Thanks for the vote, 'coon!  Note to Bob: Don't over do the "serious" thing.

But shit is getting real serious, man.  Whether you can make money off it or not.  (And I will make money.)

My disgust is becoming palpable. 

Sun, 06/12/2011 - 14:08 | 1363233 moonstears
moonstears's picture

Well, my thoery is evolving, as I do not(nor do you) have all of the info. 1st: Great work ZH.
2nd: I suspect on some level this may have been justified at the FED as a way of making sure the dollar didn't immediatly collapse(free meth at a party from the local dealer, junkie gets a taste for life, and knows where to get the fix.). 3rd: Taxpayer USA will never pay this off, it will be devalued away. 4th: It's FED money, not OUR money(Federal Reserve Notes). 5th: We don't need a "bloody" revolution and dissolve of Govt, it's OUR Govt, not the politico's(Glen Beck's crazy ass once touched on this "They want bloody revolt", said he, had to think about it, you should too), Americans live in a Democratic Republic(of the people for the people). Lets start small, we need awareness (nod again to ZH). Political class has three options on the economy, IMO, Get onboard with the people(including an OUR money plus JOBS solution), get out of the way voluntarily, or be forcibly removed from office (humanely) for your dereliction of duty (Timmy G will be a politico sacrifice at some point, comes to mind). There's much more but I'll comment later.

Sun, 06/12/2011 - 14:19 | 1363260 mess nonster
mess nonster's picture

Well put, but there will be no revolution. There WILL be lots of political sacrifices, and bigger ones than tiny Tim. All to pave the way for sociopaths that will make the sociopaths of the current administration look like muppet cheerleaders. The last time I checked, the velveteen was wearing off the glove in too may spots to make me comfortable.

We'll never have our money, (but the FRN will remain WRC, mark my words) or our jobs (does a slave have HIS job?), or our country back again. If you have a soul, consider yourself lucky, and go long on that asset.

Sun, 06/12/2011 - 16:52 | 1363473 Tuco Benedicto ...
Tuco Benedicto Pacifico Juan Maria Ramirez's picture

You are right.  "It's not our money".  It's our freaking debt.  Each $1 Federal Reserve Note created by the privately held Federal Reserve is a dollar in debt owed by the American taxpayer.  That's the scam started in 1913!

Sun, 06/12/2011 - 19:53 | 1363713 moonstears
moonstears's picture

Tuco, read my number 3, and repeat often under your breath "will not be rapaid, but devalued away", "will not be...". Sometimes when an elderly fellow is buying rounds at the bar, like he's got more money than he needs, well, he's got more money than he needs. Sometimes when a Govt spends like the money's going out of get my point, I hope.

Sun, 06/12/2011 - 14:33 | 1363272 Lord Koos
Lord Koos's picture

Why can't they print their own damn money?

Sun, 06/12/2011 - 14:51 | 1363304 Goldtoothchimp09
Goldtoothchimp09's picture

 i forwarded this article to drudge and breitbart

Sun, 06/12/2011 - 16:45 | 1363460 topcallingtroll
topcallingtroll's picture

Good job.

I tried to let tyler know that two senators are trying to kill the peer to peer digital currency bitcoin because " it might be used for drug purchases."

I wish tyler would do an article and help publicise this. It was a blurb on yahoo finance that deserved more reporting.

Sun, 06/12/2011 - 15:10 | 1363324 SwingForce
SwingForce's picture

This would seem to undermine Tepper's whole thesis, no?

Sun, 06/12/2011 - 15:14 | 1363330 ciao
ciao's picture

If they're not branch office operations and they're US regulated then they're US banks.  Schitzo and xenophobic like Denninger.

Sun, 06/12/2011 - 15:14 | 1363333 kito
kito's picture

oh, well, now that the european banks are well capitalized because the eu/imf/fed decided to bail out dumb instead of dumber, the game will go on for quite a bit longer................

Sun, 06/12/2011 - 15:22 | 1363347 RedMeansGo
RedMeansGo's picture

This would help explain the widening of the WTI / Brent spread over the last 6-8 months, right?

Sun, 06/12/2011 - 16:18 | 1363419 falak pema
falak pema's picture

No that is the full making of "drill baby drill" Sarah...They are still hoping and groping in Cushing while Brent is home and dry...Dry oil is like dry powder...explosively volatile...

What were those famous punch line words...What goes up must come down...Jane Fonda...China Syndrome or was it Electric Horseman...

Sun, 06/12/2011 - 15:22 | 1363353 SDRII
SDRII's picture

Is there way to peer through Eurodollar (FX forwards) to see impact from repatriation attempting to isolate other exogenous things like differentials, de, in,stagflationary positioning ($600B or so is meaningful even to the reputed size of Eurodollar)

Sun, 06/12/2011 - 16:29 | 1363357 TwitFilter
TwitFilter's picture

Yeah, so the foreign primary dealers took the bid and the US primary dealers didn't for whatever reason. That simple. The FED did not force it down any ones throat.

Maybe European banks wanted to liquidate dollars into commodities and other currencies. That would explain a few things.

As for Greek bonds. A hair cut is a haircut. I fail to see any relevance.

And as for "dry powder" (when the FED decides to tighten in the next Century), the FED will probably be forced to offer at rates higher than they target. This may be why Gross is or is talking about being short.

One thing is for sure: QE2 was a complete failure and probably did more harm to the US economy than good. It is for this reason that we think there is zero chance for QE3 unless there is a another complete meltdown of the financials where US banks either have to or are forced to accept FED stimulus.


Sun, 06/12/2011 - 15:41 | 1363367 moonstears
moonstears's picture

Interesting quote "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"...So when your local American broker says " Metals are a barbarous relic which you cannot LNKD on the other hand...", he still lives in that fucking neverland, he's not savvy and misleading, he's really a fucking dolt.

Sun, 06/12/2011 - 15:35 | 1363370 nicktd
nicktd's picture

Looks like the saving of insolvent banks is going opposite of economic power (ie west to east). Crisis started in US then went to europe. Next? Japan and China. (Maybe our russian comrades will see a crash to 2 in between)

Sun, 06/12/2011 - 15:36 | 1363373 Stu
Stu's picture
not sure if this is direct bailout of foreign banks

would Bernanke have plausible deniability in saying he has no control of bids in POMO auctions in that foreign PD's simply outbid domestic PD's to get hands on dollars ? does this mean Europe was buying a lot equities ? did Euro banks need dollars to plug dollar debt or dollars to buy Euros ?  my head spins

Sun, 06/12/2011 - 15:54 | 1363395 falak pema
falak pema's picture

Of course they did. They are flushed with money lent by China. Now they have the FED. Every body wants to lend to Europe. Soon it will be the Arabs. Then Zimbabwe...My God when will this stop...

Sun, 06/12/2011 - 16:02 | 1363406 topcallingtroll
topcallingtroll's picture

I think you are right.

My understanding of the true bailout of foreign banks were the repos or reverse repos. I get confused and forget which is which.

This is how no questions asked dollar liquidity was provided

Sun, 06/12/2011 - 15:50 | 1363381 topcallingtroll
topcallingtroll's picture

We are the world currency. We want to maintain our position.

We have to step and maintain confidence that the buck stops here with us, and that we are thoroughly reliable in currency and financial crises no matter who was to blame.

While everyone else dithered Ben did what was necessary to stabilize the world and a dollar based financial system.

This is why the entire world considers is more reliable than europe.

Sun, 06/12/2011 - 15:56 | 1363392 topcallingtroll
topcallingtroll's picture

After stabilization is where he made the mistake.

Subsequently all major world banks should have had stockholders zeroed out and banks turned over to senior bond holders as the new owners. Everything nasty should have been honestly valued and put in a national bad bank in each country. The only people who should have been made whole were bank account holders. We could have been thru with the crisis by now after a hard sharp depression. Most countries were out of the great depression in three years except the usa which followed policies that prolonged the misery and for which ben apologized on behalf of central banking in a speech he made.

Sun, 06/12/2011 - 15:50 | 1363382 razorthin
razorthin's picture

Quickly ensuing nostalgia for $5/gal gas in Amerika.

Sun, 06/12/2011 - 15:53 | 1363393 TK7936
TK7936's picture

Its not a bailout, its called out of court settlement.

Sun, 06/12/2011 - 16:17 | 1363415 Bob
Bob's picture

Exactly.  For the godbanksters by the godbanksters.  Keeping the peace between the families.  Protection payments from the ruled, errr, clients,  will just have to increase.

Sun, 06/12/2011 - 16:38 | 1363455 samsara
samsara's picture

Having read this article,  Then reading other posts which mention QE2 and it's effects or non effects now seem off.

It's like seeing how something really happened and then seeing everyone's false conclusions.


Sun, 06/12/2011 - 17:06 | 1363487 zenon
zenon's picture

I find the official numbers hard to swallow and reliance on these can lead to faulty conclusions. Takingh the offical figures from Tyler's piece show that foreign banks sold some $600B of Treasuries to the Fed in exchange for cash. US banks meanwhile did not participate in this operation. A few points:

First, I doubt foreign banks had that many Treasuries and even of they did, they are not "toxic" compared to other securities such as RMBS on their books. Swapping one good asset for another does not solve their solvency problem. Second if they used the cash from the sale of these to convert to Euros (thus boosting the Euro in the process) for use in their domiciles wouldn't their reserves at the Fed decline? The dollars would not disappear but they would end up in somebody else's reserve account. Third, we all know that throughout QE3, the Treasury would auction bonds to the primary dealers who would then sell them back to the Fed; sometimes even the same day. In other words the Fed monetized most of the issuance of Treasuries during the last 6 months.  But we are also told that the banks increased their reserves with the Fed by the full amount of QE3. This does not make sense and doesn't corroborate with the above practices.

My take from all of this is that the official data is bullshit aimed to show that all the Fed's purchases didn't add to money supply and was just an exchange of one asset for another within the banks. The reality is that the Fed bought the Treasuries with newly printed cash which also explains the similar magnitude increase in M2, when we all know that bank lending is dead. Why show that only the reserves of foreign banks increased? Probably because an analysis of the US money centre banks would show that their reserves are flat so somebody had to appear as the holder of these "phantom" reserves.

Sun, 06/12/2011 - 17:57 | 1363545 zenon
zenon's picture

Sorry, replace QE3 with QE2. I guess I was running a bit ahead of myself.

Sun, 06/12/2011 - 18:11 | 1363570 Tyler Durden
Tyler Durden's picture

Unlike the Household category in the Z.1 which is a plug, the H.8 actually requires weekly submission forms from constituent entities/banks.

Sun, 06/12/2011 - 23:59 | 1364044 Yen Cross
Yen Cross's picture

  That pretty much sums it up! Nice work.

Sun, 06/12/2011 - 20:44 | 1363797 Kayman
Kayman's picture


Unless this was all about buying back the slice and dice MBS shit that Goldman and the dirtbags foisted onto Europe. Perhaps with a dash of Greek, Irish and Portugese debt added in.

I fully agree that you cannot trust Fed numbers.  Any organization that is hell bent on withholding information cannot be trusted.

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