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Fed Preparing To Bail Out World Again: WSJ Reports Dollar Swap Lines Likely To Be Reopened By The Fed
Thanks to Leo for pointing out that the WSJ's Jon Hilsenrath has reported that the Fed is considering reopening swap lines with central banks, likely in conjunction with the rumored rescue package. This is the news that shot the market up in the last 10 minutes of trading as the Fed would never allow the market to close at the days lows, as it was preparing to do. "Apparently New York Fed President Dudley and Vice Chair Don Kohn are in Basel this weekend for an already scheduled meeting with European central bankers. A Sunday announcement seems like a growing possibility." Lehman weekends are back baby. And with that, we are paging Alan Grayson, who personally had a thing or two to tell the Fed lunatic about bailing out the world ever again without getting prior approval first.
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ahhh fuck, those fucking assholes.
Subprime DIP Financing Subordinate to All Other Useless Debt Obligations.
The New Amerikan Capital Structure Bailout Model
"Give us a minute. We're messing with some stuff. Slide."
Love it.
I got "Give us a minute. We're messing with some shit. Slide."
Classic OH
Well, that should generate the little rally next week that will set up the next shorting opportunity.
Its a terrible idea, but from where THEY sit, what choice do they have? God only knows what the Fed owns (for us, cough cough) over there.
Are there Red Roof Inns on the Continent?
I'm glad you have the correct perspective on the various actions being undertaken by the Fed. Denninger is incorrect - there was never any way to fix the problem back in 2008. We were dead then, and we are dead now. What does it matter if the system ultimately blows up? It's not really extend & pretend, it's just extend.
Some may still cling to the belief that public sector credit demand is only a temporary state of affairs until the private sector recovers. Problem is, the private sector is never going to recover for the very simple reason that government deficit spending destroys both incentive and (private) capital formation.
At this stage in the game, public sector spending is now a key component of overall GDP. Take it away, and the system crashes. Print Benjamins & take on $trillions more in sovereign debt and the system still crashes ... just further down the line.
The only true hope is some kind of miracle that would produce sufficient real wealth in excess of our compounding debt loads. A new energy source, advances in food production, etc, anything really would do the trick.
Cold fusion?
ECB to open 600 billion euro fund says they will take all bad paper and make banks and countries whole with fresh money. which means they will start the presses no bailout is to big,.Includes 1100 eorozone banks.they say just a rumor but it sounds like a plan ,Fresh money for everyone.
A new, cheaper energy source would destroy the economy unless ... it stimulates greater debt.
Telecom shows both side of this. Voice calls will eventually be free. I doubt that will stimulate the economy - it doesn't really change investment spending by the consumer or enterprise (beyond the fact that they save money).
In contrast, data connectivity is getting cheaper. That likely does change the investment spending by the consumer and enterprise - they can do things with cheap data that they weren't contemplating before.
I think cheap energy will have the same effect as cheap voice calling.
Edit: what's needed is something which will stimulate debt/investment. Until something realistic is identified, we're just postponing the obvious - deflation until bad debts are cleared out.
All you need is enough growth so that the ability to service debt (ie: surplus wealth creation) grows at a rate faster than or at least equal to the cost of servicing said debt. Cheap energy would directly influence all prices downwards, stimulating spending and allow much larger scale production. The end result is increasing material wealth and therefor the ability to take out more loans.
I don't agree that a massive energy breakthrough should be exploited as a means of perpetuating the ponzi but it would, as Mako and B9K9 like to say, feed the equation a bit longer.
Same thing I told Douchinger.
They will print to extend the game. Allowing real deflation is an all-stop event. Look at Japan. The yen rallied so hard yesterday it was incredible. It's not because Japan isn't in debt 10 feet above their eyeballs, it's a precursor to a sovereign default as their own debt service crushes them.
So they dumped in liquidity today.
The Fed has NO CHOICE but to provide liquidity; afterall, we DID infect the world with dollar debt, didn't we?
Douchinger claims we can "take our medicine" and let the banks fail; the problem is that this would create a deflationary implosion in the monetary base which could not be stopped. FDR did the only thing possible, devalue.
The problem now is what do you devalue against when all forms of paper are fiat? If someone stood up an asset-backed currency now, they would immediately be subject to such immense speculative attack that they'd lose all their assets just like the French attacked BW. Given the beggar-thy-neighbor policies of nations these days, also, everyone would devalue against YOU and destroy your export competitiveness.
This is why these types of competitive devaluations used to lead to war.
And war we shall have again.
Well.....
I've said several times that a limited jubilee on credit cards and housing debt paired with an end to the war on drugs (aka bringing a good portion of the black market into the light of monetization) would bring about real reflation.
I'm with you though, the only solution, is no solution. No miracles to behold, or coming, except of the Sodom and Gomorrah variety.
Long live the forest, let it burn.
Images of helicopter gun ships rolling in Apocalypse Now style, ride of the valkyries and all... letting the fiat guns rip on some fucked up foreign land in all their worthlessness.... Go get em' Ben!
http://www.youtube.com/watch?v=Gz3Cc7wlfkI
+1
:-O
These people are playing with the biggest ball of fire ever but it is us who are going to suffer the consequences. What a flaming bunch of assholes.
Well, the good news is there will be plenty of unemployed folks who will gladly join the firing squads.
As a p.s., the best we can hope for is like every poor gambler, at some point in time, these idiots are going to overplay their hand - if they haven't done so already. Then we will start seeing it in the yields and in the CDS spreads. Oh, where are the bond vigilantes when you REALLY need them?
If anyone knows how to get access to this cheap money without using tools that involve ray guns or ED-209, please let me know. Thanks!
"Swap lines" sounds so innocuous. They want to buy the cratering euro, just like they bought cratering mortgages, cratering insurance companies, cratering corporate bonds. All hail the almighty Fed.
500B at the current exchange rate will not cut the mustard this time. It has to be north of 1 trillion EUR to accomplish EUR appreciation and $ depreciation. If the policy behind the swaps is to get the EUR back to its 1.45-1.52 exchange rate it can only be done so for two things; kill the EUR/Gold surge and infuse new money which part of will end up propping up the US equities market. London equity desks will make sure this happens if the FED and the ECB come to an understanding concerning the swaps. But i dont see it happening given that the current weak EUR is in favor of GER export oriented economy which does NOT rely on equities markets nearly as much as the USA economy does.
Yes, but Germany doesn't have a choice.
The proliferation of USD debt has made their own devaluation impossible. The world cannot tolerate a strong dollar because their own corporations and banks are infected with dollar debts. In a deflationary dollar climate, they will implode and take much of their national economies with them. This is the price they now pay for accepting the dollar; WE get the benefits.
They need dollars and we control the supply. The converse with respect to Euros is not true. The ECB will have to live with a strong euro for as long as we want it to take. A run on the euro, or its collapse, will cause dollar strength that will be *catastrophic* on both sides of the pond.
Neither we nor Japan can tolerate *that* either. Buying the euro up is in our interests as well.
Buying the euro up is in our interests as well.
Who's our ? Not me. Bring on the collapse. Let's start over.
they are not buying anything; its a swap, meaning it has a duration period and a fixed rate of exchange [given that FRB still gives a shit about whether it loses money or not and that ECB is strong enough to be given such a swap terms]. If they agree upon a swap and set a floating exchange rate both sides could easily get fucked [im still 50-50 in that one given that short term EUR will gain and the buck will lose precisely because of the swap agreement, but on the longterm EMU has Spain, Portugal, UK and presumably all other monetary members which will devalue the EUR to USD parity once they need their bailout]. But to keep a long story short; if the swap exchange rate is fixed its a legitimate swap agreement [i know, many will not like this interpretation, but it is a legitimate binary swap agreement with no long term downside because in the end the swap is reversed], but if the swap exchange rate is a floating one then the swap agreement will be nothing but the biggest currency trade ever and yet another facilitated gambling mechanism.
I'm sure these guys will come up with the same failed solution as they always do......print more money, try and keep the decay from being seen....try and get authority to hide everything from the public and lie you asses off.
They might have missed the boat on this one. The more they do this, the more transparent it is that the Fed is really the Wizard of Oz.
CONGRATULATIONS! If you are a US citizen, you are now a proud owner of the Red Roof Inn Hotel Chain:
http://www.youtube.com/watch?v=pE3oiKuU8UI
Alan Grayson's latest on the FED - stand up comedy (and reality) on the floor in congress - a must watch.
The compound interest equation should have been zeroed in 71 or 80 but this is way beyond funny now.
People had to live through the inflation of the 70s the capital destruction of the 80s and 90s and the sheer insanity of the noughties.
The Bankers and others will stop at nothing including world destruction to get a yield on their investments.
I have been too conservative in my observations - Gecko and the others are right - free gold now and end this fucking madness
Freegold will come. The people are voting. Yesterday was a confirmation for me. It was a battle royale below 1200 in itself, but with a tanking stockmarket it was uber awesome. The yellow lady is standing on her own two feet now..... and looking darn lovely if you ask me.
Blood and destruction shall be so in use
And dreadful objects so familiar
That mothers shall but smile when they behold
Their infants quarter'd with the hands of war;
All pity choked with custom of fell deeds:
And Caesar's spirit, ranging for revenge,
With Ate by his side come hot from hell,
Shall in these confines with a monarch's voice
Cry 'Havoc,' and let slip the dogs of war;
That this foul deed shall smell above the earth
With carrion men, groaning for burial.
-Antony, Julius Caesar, Shakespeare
EU/China/Everyone Else: We know you have a printing press and we will tell everyone just what you are doing and collapse the economy.
Ben: No, don't, please...
EUCEEE: Well, if you were to, you know, start printing, maybe we could keep the show up and running for a while till we can think of something else...
Ben: Well why didn't you say so, welcome! There are some rules to the game I am going to have to teach you and you must never break them or the show will stop:
1st RULE: You do not talk about FIAT CLUB.2nd RULE: You DO NOT talk about FIAT CLUB.
3rd RULE: If someone says "stop" or financially recovers and engages in productive activity, the PRINTING is over for that country. We doubt this would happen, but we would need to make sure we started living off them for a while. Once they failed, the PRINTING would resume.
4th RULE: All countries in FIAT CLUB must make the $ their primary currency.
5th RULE: One bailout at a time. Keep the party orderly.
6th RULE: No nukes or we won't PRINT.
7th RULE: PRINTING will go on as long as it has to (this means forever).
8th RULE: If this is your first night at FIAT CLUB, you HAVE to redistribute the wealth in your country. Corporate socialists are the elite and get most of the wealth, the surfs need to get enough shitty assed jobs or welfare/unemployment so that they are not too pissed.
9th RULE: Everyone must have access to television in your country, or the printing stops.
+1,000 post of the day, possibly the week - kudos! LOL
megalulz
why can't the terrorists target the fed instead of times square
That would ruin their home.
Because they aren't real terrorist. They are actors who get "caught" and go through "interogation" and report they were inspired by "blah blah bullshit".
Obama's fault
MsCreant, that was great the Fiat Club. I wondered what could have made the market shoot back up from 1,000 down to -389 points.
The last time, when Volker jacked up rates and killed the party, he was able to do so because the North Slope and the North Sea just came on line and the price of crude plummetted.
Nothing like that on the horizon this time.
MsCreant - Great job, but I think this is actually rule #1,
9th RULE: Everyone must have access to television in your country, or the printing stops.
As a techie, I used to work on this problem until I fugured out what was going on - subliminally that is.
10 Borrow money
20 buy gold (or AAPL)
30 hold for a month
40 sell
50 goto 10
Well, there goes the weekend. Every Senator and every Rep gets an email. The Fed gets an email. The White House gets an email. Dylan and anyone who cares gets an email.
God damn Bernanke. At what point does even an academic get the point that all his efforts are in vain? The Depression happened not because of actions taken during it, but because of actions taken before it. Once the debt bubble burst, there was no way out except to accept the pain that resulted from the collective mistakes of society. Same thing now. But Noooooooooooooo...the phuckhead Bernanke thinks that what he does simply has to work, because, well, he has a PhD (in honor of which I've altered the spelling of my barnyard epithet).
Ben, give something else a try (I'd suggest a Beretta 9mm under the chin, but I don't think you'd do it, as I sense a little narcissism behind the well-coifed beard. Hey, even a short, bald nebbish has an occasional need to preen.). RAISE rates. Give savers some cash; they might spend some of it, and if they don't, well, at least you've cut back a little of the moral hazard. Make it unprofitable for banks to simply ride the yield curve, or use repo cash for ramping stocks. Force banks to make their spreads via sound credit assessment. Can't be any worse.
Oh, and open the friggin books so that the citizens of a supposedly democratic society---or at least their elected representatives---can see what we are responsible for.
On second thought, just use the Beretta and get the phuck off the planet.
Ph.D. = Phucked
Nice.
Plunk your Magic Twanger, Froggy
Everyone tries to rationalize the money printing by indicating the Federal Rerseve doesn't know what its doing. Has anyone stopped to think they know exactly what they are doing. It's just up to you and I to figure out what the end game is.
At the very least its a well oiled money transfer engine that will continue as long as we allow it to. You do realize the Federal Reserve is a banking cartel. Whose interest's do you think they have in mind? Certainly not yours and mine.
This was posted on May 1st - a week before the crash.
'11,250 / 300 is an area of significant resistance and if this level can’t be breached it should signal the end of the March 2009 bear market rally - the weekly DOW chart shows an expanding wedge indicating a significant move is probable - this remains an overbought bear market rally and the uptrend could falter at any time - the VIX index continues to give bullish warnings which is bearish for equities - long term charts of key equity indexes continue to give bearish warnings and the March 2009 lows will be breached in my opinion - USD Index bullish warnings since 2009 on the weekly and monthly chart have not changed and further USD strength and thus EURO weakness is still expected '
http://www.zerohedge.com/forum/latest-market-outlook-0
http://stockmarket618.wordpress.com
Keep an eye on the TED spread. If it blows out, the rollcoaster is going back down.
Define 'blows out'. Its up 65% since Monday.