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Fed Responds To Allegations Of POMO-based Stock Market Manipulation
It is no secret that the Federal Reserve, and its now semi-daily interventions in market liquidity via ever increasing Permanent Open Market Operations (aka POMOs, next on deck - Wednesday and Friday for a total of about $7-8 billion), is rather hell bent on creating the impression that the economy is alive and well courtesy of a ramping stock market (when the causal relationship is always the other way around, but who cares). A reader got so disgusted by the POMO ramp game, he sent in an angry letter to Brian Sack's henchmen. Here is the Fed's response.
Dear Mr. (removed to maintain privacy):
Thank you for your recent correspondence in which you expressed your concerns about the Federal Reserve's influence on the stock market.
The Federal Reserve monitors all sectors of the economy, so that we can be prepared when crises arise. It is within this context that the Chairman is often called by Congress to offer his views on many issues that may or may not be directly related to monetary policy. I want to assure you that the Federal Reserve's monetary policy actions are not aimed at correcting or influencing any particular market. As you know, the goal of monetary policy is to foster conditions conducive to sustaining sound, noninflationary economic growth over time and policymakers must make decisions that provide the greatest benefit overall.
Again, thank you for writing.
Sincerely,JPD
Board Staff
So if "the Federal Reserve's monetary policy actions are not aimed at correcting or influencing any particular market" is it safe to assume that actions are aimed at "correcting and influencing" all markets in general? Well, the Fed is already rampaging in USTs, Agency securities and FX, would it be too naive to assume equities are for some reason excluded...
As for the whole premise of monetary policy boosting the economy, the picture below explains it best:
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LOL
That was where I laughed as well.
So they are openly admitting that the crises are alive and well. I thought that everyone thought yesterday that the recession ended last June???
The form letter is simply a public reiteration of the public myth for public consumption.
"Phillip Morris company has always worked to enhance and support the health and longevity of its customers by providing tobacco products with minimal pulmonary side effects while still ensuring the maximum smoking satisfaction."
Whatever.
Actually, THEY were all LOLing amongst themselves when they crafted their letter.
Very very probable.
But as a peasant of the system all I can do is take the declaration of the masters with humor.
I recognize your humor. This is a general statement that keys off your comment, not an attack of you personally.
As long as you call yourself and think of yourself as a peasant, they don't need to do much more that what they're currently doing, which is serving themselves. Your programming has been successful.
Once we begin to recognize that we have the power and that the entire dance of the control system is to convince us to willingly give up our power, the end is near for the powers that be.
What's going on may seem to be a financial and political crisis, but in reality what's happening is a titanic struggle to keep the wool pulled over our eyes. You're only a peasant because you believe you're a peasant.
Looks like the Staff forgot to add </sarc>.
It all starts with each of us declaring our own personal sovereignty. It progress rapidly from there. Of course, we seem to have a problem pulling away from their illusion machine. And I'm not just talking about the TV, movies, mainstream media etc. Those are all obvious even to the semi aware.
I'm talking about the ultimate illusion, the mighty buck, the nations currency, the ultimate manipulator of every one's psyche. Every time we accept currency, we are in effect accepting the control system that surrounds it. We have become slaves to the currency, thus we are enslaved mentally and emotionally to it's almighty pursuit, hoarding, spending, making, saving, debasement and adoration.
I pledge allegiance to the almighty buck, under which this nations crumbles, divided and isolated as we are in front of their electronic illusion machines.
CD et al,
FYI, I've decided to promote myself from peasant to central banker (as in, being my own central banker and buying PMs). Thus, closed out my IRA and transferred it to Wells Fargo so I can retrieve my FRNs (at less than 10k at a time so Uncle Sam doesn't get a heads up from the bank)--and yeah, that's a lot of daily trips since I haven't been a whore for plasma TVs and Hawaiian vacations like most of America for last 10 years. So I'm taking cash to coin shows as soon as I get my money belt filled (I'm doing coin shows versus Gainesville or CNI, as they only take wire transfers which leave a trail).
So--I go to get my first withdrawl from my local branch yesterday after work. I tell the teller I want to withdraw $9500. She excuses herself for a minute and comes back and says they don't have that much, and would I take $5000.
I feel an icy feeling going down my back and look around--this is a big branch at a decent sized city. I can't BELIEVE they don't have a pissant $9500, so I press her. She says I can come back today for more.
THEN as she's counting me out, she asks if I travel a lot. I look at her thinking "it's my fucking money, what the fuck business is it of yours what I want it for?" So I tell her "no" and she shuts up.
I don't necessarily feel I'm one of the bit actors in "It's a Wonderful Life", trying to get my cash from Jimmy Stewart's insolvent S&L, but it shocked me. Maybe I'm easily shocked.
interesting.
and i'm sure you were the *only* one that came in this week to take out $9999 (roughly)...
i've worked at places where everyone seems to like a co-worker until he/she is fired, then they all chime in with a collective 'finally, that bitch/dork is gone'...
i wonder if, similarly, many of the 'sheeple' may be more on to this game than anyone is letting on... acting like all is well, and yet quietly going to the water-hole at night to fill their canteens before it gets too muddy.
so, is gold gonna rise to 'all-time-highs' until december 31, then the 1099 health-care tracking begins... preceded by a massive dump, leaving it much tougher to anonymously 'buy on the dips'?
If this was a checking account in a US bank then it is a considered a demand deposit account and the funds should be immediately available apon demand. You can try telling them that but I doubt it will do any good.
Otherwise you can ask them for a cashiers check. That should be no problem. Then turn around and tell them you want to cash the cashiers check they just wrote. They usually cannot place a hold on a cashiers check if the check is deposited in person into an account held by the payee. The only holds that can be placed are exception holds. These include holds for new accounts (really means new transaction account relationship), large deposits, repeat overdrafts, redeposited items, reasonable cause to doubt collectibility, and emergency conditions.
If they still refuse tell them that you your county Sheriff would be very interested to know they are writing bad checks. The criminal penalties for writing fraudualent checks in Texas are up to 2 years in county jail or up to $1,000 or both. 30 days to 2 years in jail and up to $1,000. Two to 10 years.
This should get them scrambling around to drum up enough FRNs for you ;)
Actually I am full of BS regarding the cashiers check. Straight dope from the Fed is here:
http://www.federalreserve.gov/boarddocs/CALETTERS/2004/0409/CA04-9Attach1.pdf
However I still cannot find anything in the regs that allows them to not pay on a demand deposit account when demanded. Anyone?
Geoff, splitting your withdrawals to under $10K is reportable. The aggregate of withdrawals will draw more attention to you than pulling out the whole amount. It is actually illegal to do that because it is assumed that you are circumventing the reporting requirements. Just tell them to get your money together -- all of it -- and you'll pick it up in X days. If you are ever asked by your bank, a government agent, or anyone else why you wanted your money in one lump sum just tell them that you don't trust your bank with your money. Your tale of their not having the first withdrawal is your example of your decision. Simple. They'll go away.
CD,
Are you suggesting that we attempt to somehow move away from a unit of measure for production? If it's not the dollar, it will be something else, e.g. seashells. I'm just curious as to how this transition would occur. (please do not link the venus project).
Psychologically speaking, could it be possible that zerohedge was created to pool together those individuals who were on the fence between action and inaction - and provide a "release" in a sense to steer us towards inaction. Reading this letter makes me want to "do" a lot of "things" - however reading all the comments, the like-minded individuals...this placates me, makes me feel like something will change it has to; and back to work I go....Seems we should be considering this potential --- with the secrecy and all...
Or make it easier for us to be rounded up.
I think some blogs out there ARE designed to attract and monitor the more ardent and possibly active people.
Take this one for instance...
http://theeconomiccollapseblog.com/
No authors, no dates, and a whois shows an address in Virginia. The owner's address in a bussiness park and he has over 200 other blogs. Oh and the blog above is loaded with tracker cookies that make military radar seem tame.
Or maybe I'm just paranoid...
Psyops is much more pervasive than many of us care to believe. It's much more comforting to think that the "person" you just responded to is someone like you rather than a paid disinformationist working for a private company that's doing the bidding of any entity, private or governmental, that's willing to pay the bill.
Then, of course, you have the black ops psyops programs run by various "intelligence agencies". But that's another story entirely.
Amerikans are now the most propagandized society on the planet...
Psyops, corporate whore "news" media, incompetent fabricating political class, flag waving jingoism, sloganeering and scapegoating are all tools in the social control, oligarchy looting tool box...
Don't ask; Don't tell... for the truth and the facts
The majority of our brethren prefer to be duped, CD...
No offense taken.
The point is that I dont really believe I am their servant, its just that they have the guns. I try to avoid doing all I can but the guns are the limit.
The way I see things is that people really believe we are quite free, so I try to use the servants-masters language to try to wake people up and realize that they really are servants. I use to believe all the propaganda about freedom and democracy. It took me a while to realize how things were. So I hope I can do the same for others.
appreciating both points, great response. pick your battles.
i'm sure there a great many folks with IQs over 150 in iran/venezuela/china/n-korea, etc. who quietly stack rocks on walls each day, knowing that any other course-of-action assures personal risk beyond any probable result.
our genes have survived (to date) due to this situational appreciation, and they will propagate accordingly.
when one goes about "knowing one's place", the context is all-important. eventually, one may realize that it's a dead-end anyway they go, and that's when the 'extreme' (and principled) behavior begins.
Too much LOLing results in double post!
Perhaps we can ask who is jamming the Euro higher every morning before the US markets open as well...
Dear Fan,
We only drop the FRNs from the helicopter, what happens then is beyond our control.
Signed,
The Management
Reminds me of those pictures you see of relief agencies dropping off tons of food in disaster areas where local warlords then forcefully take the food and then hoard it.
Don't the Fed POMOs actually supply the Treasury with the money to manipulate the markets with? So Geithner is the one running the market ramp operations, right?
I mean, this makes it easy for the Fed to deny manipulating anything when they only supply the funds for the manipulation to the Treasury. The Treasury is selling 50% more bonds than the debt it has, and is handing this extra cash over to their favorite investment banks for PPT operations at 30% leverage.
I also doubt that this market pumping is done evenly across the board, but benefits favored companies more than others.
I think you're on to something there!
I AM NOT A CROOK!!
I DID NOT HAVE SEXUAL RELATIONS WITH THAT WOMAN!!
The Dems are so desperate right now that they've actually trotted Clinton out and put him on all the talking head shows. He was on GMA this morning and on some of those bogus agitprop Sunday morning political shows, too. What an asshole.
He was on GVS last night I do belive he was under the influence of somethin......
"I did not inhale"
"We're not going to monetize the debt," Mr. Bernanke declared flatly, stressing that Congress needs to start making plans to bring down the deficit to avoid such a dangerous dilemma for the Fed.
http://www.washingtontimes.com/news/2010/feb/25/bernanke-delivers-warning-on-us-debt/
"I would like to take this opportunity to state that there is no cannibalism in the Royal Navy! None whatsoever! And when I say none, I mean that there is a certain amount..." Monty Python
"The check is in your mouth..."
Sorry but my mouths full, stuffed even, so please mail my check to me. And no questions about what's filled me to the brim.
LOL, I forgot that a 12 year old wouldn't recognize a Bill Clinton quote.
his ego.
Even old Jimmy Carter was on the Nothin' But Crap evening news last night....talking schmack on Faux News. The Dems of today wear paper bags over their heads and then proceed to trot out all the dried up losers of yesteryear. Excellent plan ( not ).
The drug trafficker.
Remember Mena, AK.
aerojet,
Yes! I voted for him the first time because I thought he might be another Fulbright. But not the second time. Dole was at least a grown man.
MISSION ACCOMPLISHED!
"We have no control over what JPM does with it's cash...."
as for the converse, JPM said we have no comment.
"We have no control over what JPM does with your (taxpayer) cash..."
I can see Little Timmeh dressed like he is in that picture. "B-52" Ben, not so much.
Wait, they don't even flat out deny it? thats a pretty weak denial imo.
woof
form letter
LOVE it! The guy (or gal) sends a letter to the FED saying theyre obviously manipulating the markets.
Yale speak reply from the FED- 'As you know, we do nothing of the sort'.
Hellooooo Mr Orwell!!!
Can the Fed's POMO keep the market afloat for ever? October is often regarded as a bad month for the stock market. Will it crash this October since so many technical analyst like Prechter are all pointing this direction?
The existing power structure will remain in place as long as they can shield the population from the consequences of it's actions.
Combine this infallible truth with the sociopaths who make up the top tier of the current power structure and the answer is they will do ANYTHING and EVERYTHING they can to shield the population from the consequences of their actions. That most certainly includes stock market manipulation by any means necessary.
ANYTHING and EVERYTHING!
Too little, too late.
Doesn't matter.
In fact, if that's understood by the power structure, it will be all the more reason to go balls to the wall. What do they have to lose if the horse is already out of the barn? The Hail Mary pass is appealing to the sociopath, particularly since they have no sense of regret or social responsibility.
Your 4 word answer is perfect justification to do everything and anything to stop the inevitable.
Sadly, you've handicapped their quixotic fixations with great precision.
Cog, do I detect a slight uptick in your rhetoric? If you play out your (spot on) observations to their logical conclusions, wouldn't it be prudent to sell the (client) book, house, etc, and get the fuck out of Dodge? I mean, does anyone really want to discover firsthand, and very much to their chagrin, what the next level of desperate power retention entails?
On a slightly different tack, I gather most people would recall that Michael Lewis noted that aspirants viewed his first book not as a cautionary tale, but rather as career guidance. As to ZH's resident libertarians such as JR & SWRichmond, consider the emotional impact of the following snippet:
Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.
While you, I and most other 'normal' people react in predictable ways when reading TJ, consider the Lewis effect; that's right, some actually view this passage as a fucking GUIDELINE! I ask again, knowing what you know, and what they will do, do you really want to be around when they begin testing the limits of this "advice"?
Clearly you have not read my articles cover to cover if you think I'm hitting on new subjects or my rhetoric is escalating.
And I laugh when I hear advice that I must get out of Dodge, liquidate and hide from the boogie man, go underground and stay under the radar. You must really think your actions are hidden from view in order to convince yourself you can pull this off. Of course, that doesn't even broach the subject of where to "go".
Besides, where do you think I am now? How credible am I when I say I live "here" and how credible are you when you say you are moving your money to "there"? The entire concept of credible advice being given on an anonymous site makes me chuckle. :>)
CD,
Did you mean to say "Yea, though I walk through the valley of the shadow of death, I fear no evil, for I am the toughest SOB in the valley."?
I always thought that was cute.
Nice twist.
CD, i'm quite certain that there is a category of the 'watched' called the 'invisibles'...
e.g. those that don't have *enough* activity to be considered 'normal'...
and i'm sure they are watched more closely than the average sheeple.
you might agree that it's prudent to keep a few credit-cards, use 'em on amazon/mcdonalds/gas, keep a bank account with a few grand. keep an IRA with a few grand (how else are you gonna participate in Social-Security V2)?, etc.
by looking too invisible, we likely become more visible than ever.
if you can't *really* get out, don't be an outlier...
"The marvel of all history is the patience with which men and women submit to
burdens unnecessarily laid upon them by their governments."
Don't know who wrote this.
B9K9, for my part I believe Thomas Jefferson, based on his early reactions to the French revolution, favored real revolution when tyrannical government became insufferable.
And does it not approach “insufferable” when a Constitutional scholar serving as our President recites portions of the preamble of the Declaration of Independence, omitting Mr. Jefferson’s important word, “Creator,” and mangles “unalienable” or "inalienable." Unalienable was the key to the entire Declaration of Independence—these are rights that cannot be denied, surrendered, sold, or transferred.
And I quote: "We hold these truths to be self evident, that all men are created equal..... endowed with certain unalienable/inalienable rights, life and liberty, and the pursuit of happiness." --U.S. President Barack Obama Friday evening (September 17, 2010) addressing the Congressional Hispanic Caucus Institute.
The word used in the Declaration of Independence is "unalienable" (unless I've misunderstood what you are saying). It also helps to read the word as "un-a-lien-able", as in "no one can place a lien on these rights". I read long ago that this is the actual meaning of the word as opposed to "un-alien-able".
"We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness"
http://en.wikisource.org/wiki/United_States_Declaration_of_Independence
http://www.ushistory.org/declaration/document/
Thank you for this bit of info.
Unalienable, of course, as you say TJ, and you make good points. But now I’m wondering if our Constitutional scholar doesn’t accept the concepts of the Declaration of Independence, one of our most important documents, but never approved by a vote of the people in that it was written before the formation of a Congress.
Is Obama, like his latest Supreme Court appointment Elena Kagan, declining to accept the basis for America’s founding under these unalienable rights? Kagan, in her hearing testimony, continuously refused to endorse natural rights as put forth in the Declaration of Independence proclamation, implying without it being named, that she would not support the Declaration as a legal document. Each time asked, she would, instead, come back to the Constitution.
The Harvard internationalism that Kagan represents needs to be stamped out.
Never approved by a DIRECT vote of the people, but approved through proxy (representatives) I would say. Even if he made that argument, it's a stretch to say that we would have the Constitution without the Declaration of Independence. By not following the blueprint laid down by the founding fathers, "we" have perverted the true essence of just what they were creating (hence the name TJ_is_annoyed). This is the usual path taken by those who never suffered during those times but certainly think they know better what was "meant" by those documents. Arguably two of the best documents ever created.
Is there a single ZeroHedge participant that would disagree with this? Highly doubtful.
An excellent article can be found here (15 minute read and well worth it): http://pages.prodigy.net/krtq73aa/sock.htm
Very good, TJ, very good. Is there a more needed time in history for a "TJ_is_annnoyed."
+++
not only did a willing majority vote for their reps to approve, but many fought and died for that same cause/clause.
i'd say the contract was therefore binding, and the notary sealed it with early american blood.
good. now we can put that question to rest and move forward... (now where were we?)
They only need to continue the charade until the United States, led by Israel, can officially enter World War III, at which point the American economy will begin doubling exports, aka tanks and bombs, worldwide.
Interesting Theory Willy-
Who's going to pay for it? You're not suggesting they raise taxes to Roosevelt levels (90% on the billionaires) to fix the economy are you? Under the guise of war it might actually work. We'd all be willing to make sacrifices, no? Probably not until we have a neocon president though. This one doesn't seem to be much of a warmonger. He hasn't started any new wars yet and it has already been 2 years.
Timmay will pay for it.
Just as soon as Ben gives him the money. Remember, issuance has been running double what the deficit requires to finance.
Nope. There will be no WWIII. There will be painful introspection and isolationism. Today your neighbor's house is owned by the government, tomorrow it will be yours. When the government collapses under the weight of the peter principle, machiavellian aptitude, and inherent beaurocratic inefficiency, its assets will be turned over to the masked men who have plagued your life from afar. This process has already begun in earnest.
These men will jockey for position. In doing so, families will be torn apart and traditional land boundaries of all types changed. Ultimately, there will continue to be an unspoken understanding between them that cooperation among them, albeit not direct, will be for the benefit of all. They will use this cooperation to whip our backs instead of/or in addition to clogging our minds. Some may be benevolent dictators, others may rule with a fickle and iron fist.
Eventually, we will get sick of their antics and begin collective bargaining. It will start small, but once set in motion, we will take enough for the concept of power to lose its shine for them. This will set off retaliatory measures and eventually, the nuclear option, controlled central banking. It is a universal drug we cannot refuse... and we will overdose just as our forefathers overdosed. And the cycle will begin again... after we are left destitute in the land our forefathers conquered.
General Petraeus will become President Petraeus in 2012, most likely on promises of withdrawing from Pafghanistan. As soon as he enters office in 2013, he will begin taking steps to lead America into WWIII.
"General Petraeus" sounds like a character from "Planet of the Apes".
And then General Petraus will raise taxes to pay off the debt? Will he tax the businesses that compose the MIC? or just the wealthy?
Sweet! LOL
What a great piece of satire that picture is of the whole situation.
JPD
Board Staff
correction: Banking Cartel Employee
Yes, substitute "for-profit banking cartel" for "Federal Reserve" in the letter and the whole idea of the letter is laughable and ridiculous.
I want to assure you that the Federal Reserve's monetary policy actions are not aimed at correcting or influencing any particular market.
You got that sheeple? We're not influencing ANY PARTICULAR market. We're influencing ALL markets. Got that? Now what's you gonna do about it?
Heh, heh....nothing PARTICULAR
here...the PD's can take the free money
and leverage up anywhere they want
to.
This letter sounds like an admission that they are pumping the stock market.
Technically, they're not. They just
give the PD's the money to pump it.
(Wink, wink, nod, nod, say no more)
Tyler, please add a "Thumbs Up" button or something similar. We can Junk comments, but no way to show agreement/approval without posting a comment.
+1
I agree a thumbs up indicator is sorely needed around here.
As is filter by rating (ex - +2 or higher)
Absolutely not. Some of the most insightful comments are at one point 'junk' but turn out to be taken as doctrinesoon after. You'd be allowing most people to only see consensus opinion, and that stifles debate.
I agree.
i have wanted the thumbs-up for a long time, but you guys make a good point.
are the average ZH participants above group-think enough to manage such a mechanism?
i like a well-stated dissenting POV, and when it gets junked - even if i disagree - i'd like to 'plus-em' back up for articulating a valid alternative view.
Can someone help me understand exactly how the conclusion is drawn that these POMO operations directly lead to stock market pumping?
So the Fed is openly asking for bids on a specified number/type of treasuries that are being purchased. PDs line up to submit their bids. The bids get filled as newly printed dollars are effectively exchanged for legacy treasuries. ZH is speculating that the newly printed dollars are being used by the PDs and its clients (HFs) to purchase ES Minis, "risk assets" or other long equity securities.
First question/request is to correct me if I'm wrong with any part of that process.
Second question is, why are the PDs and its clients waiting for POMOs to pump the market. Don't they have enough excess reserves which they could use to effectively do this on any given day? Why wait for these (relatively) minuscule purchases to occur?
i don't really understand the process either. your question actually helped me.
You take the 'free' money and invest it in a manipulated market at low risk and pay it back with the tiny amount of interest, and keep the rest for yourself.
Imagine what you could do if you had access to free money.
And as you said, a rigged game.
If Goldman front-runs the Fed's POMO with ZIRP bucks (how many zeroes would you like) and uses the proceeds to prop up their prop desk (zero losing trading days)?
If you'd seen their mark-to-market valuations, you'd hold onto those reserves too, Basel III or no.
Why were you junked??? Seriously legitimate question here. Proof would be nice. Indirect proof would be fine as well. Until then, it's a bit "Conspiracy Theory" type of stuff.
Anyway, would the primary dealers have enough cash, long enough to actually buy any stocks?
According to wikipedia...
"Under a repurchase agreement ("RP" or "repo"), the Federal Reserve (Fed) buys U.S. Treasury securities, U.S. agency securities, or mortgage-backed securities from a primary dealer who agrees to buy them back, typically within one to seven days; a reverse repo is the opposite."
I'm curious...if this is true, the money doesn't even stay available for PD use at all, since the bonds are sold back to the Fed some short time later...
Confused...
These are POMO (permanent open market operations), not TOMO (temporary open market operations). TOMO includes repos. POMO never has to be paid back.
Oh, thanks...so the Fed is offering something above the face vaue of the bond to get the PDs to sell it?
I think the primary dealers purchase treasuries at auction knowing Ben will buy them from the banks shortly after, and there is definitely a little profit in it for the PDs in this scheme. This program of monetizing the debt is to ensure that treasury auctions don't fail.
The reason they wait for the "(relatively) miniscule purchases" offered by the POMO days is because they really DO NOT HAVE EXCESS RESERVES.
All of their "excess reserves" are a big circle jerk. And this is explained pretty well in another ZH post.......I don't recall the article or the author, but I saved part of the body, which is posted below. If anyone spots this article, please post the link.
Bottom line is, there are no excess reserves, so that is why they can only pump on POMO days when they are given money to do so.
Please note, what follows is someone else's work. It is not my intent to plagarize.
Let me explain in simple terms step by step. 1) All the global banks were up to their eye-balls in toxic assets. All the AAA mortgage-backed securities etc. were in fact JUNK. But in the balance sheets of the banks and their special purpose vehicles (SPVs), they were stated to be worth US$ TRILLIONS. 2) The collapse of Lehman Bros and AIG exposed this ugly truth. All the global banks had liabilities in the US$ Trillions. They were all INSOLVENT. The central banks the world over conspired and agreed not to reveal the total liabilities of the global banks as that would cause a run on these banks, as happened in the case of Northern Rock in the U.K. 3) A devious scheme was devised by the FED, led by Bernanke to assist the global banks to unload systematically and in tranches the toxic assets so as to allow the banks to comply with RESERVE REQUIREMENTS under the fractional reserve banking system, and to continue their banking business. This is the essence of the bailout of the global banks by central bankers. 4) This devious scheme was effected by the FED’s quantitative easing (QE) – the purchase of toxic assets from the banks. The FED created “money out of thin air” and used that “money” to buy the toxic assets at face or book value from the banks, notwithstanding they were all junks and at the most, worth maybe ten cents to the dollar. Now, the FED is “loaded” with toxic assets once owned by the global banks. But these banks cannot declare and or admit to this state of affairs. Hence, this financial charade. 5) If we are to follow simple logic, the exercise would result in the global banks flushed with cash to enable them to lend to desperate consumers and cash-starved businesses. But the money did not go out as loans. Where did the money go? 6) It went back to the FED as reserves, and since the FED bought US$ trillions worth of toxic wastes, the “money” (it was merely book entries in the Fed’s books) that these global banks had were treated as “Excess Reserves”. This is a misnomer because it gave the ILLUSION that the banks are cash-rich and under the fractional reserve system would be able to lend out trillions worth of loans. But they did not. Why? 7) Because the global banks still have US$ trillions worth of toxic wastes in their balance sheets. They are still insolvent under the fractional reserve banking laws. The public must not be aware of this as otherwise, it would trigger a massive run on all the global banks! 8) Bernanke, the US Treasury and the global central bankers were all praying and hoping that given time (their estimation was 12 to 18 months) the housing market would recover and asset prices would resume to the levels before the crisis. . Let me explain: A House was sold for say US$500,000. Borrower has a mortgage of US$450,000 or more. The house is now worth US$200,000 or less. Multiply this by the millions of houses sold between 2000 and 2008 and you will appreciate the extent of the financial black-hole. There is no way that any of the global banks can get out of this gigantic mess. And there is also no way that the FED and the global central bankers through QE can continue to buy such toxic wastes without showing their hands and exposing the lie that these banks are solvent. It is my estimation that they have to QE up to US$20 trillion at the minimum. The FED and no central banker would dare “create such an amount of money out of thin air” without arousing the suspicions and or panic of sovereign creditors, investors and depositors. It is as good as declaring officially that all the banks are BANKRUPT. 9) But there is no other solution in the short and middle term except another bout of quantitative easing, QE II. Given the above caveat, QE II cannot exceed the amount of the previous QE without opening the proverbial Pandora Box. 10) But it is also a given that the FED will embark on QE II, as under the fractional reserve banking system, if the FED does not purchase additional toxic wastes, the global banks (faced with mounting foreclosures, etc.) will fall short of their reserve requirements. 11) You will also recall that the FED at the height of the crisis announced that interest will be paid on the so-called “excess reserves” of the global banks, thus enabling these banks to “earn” interest. So what we have is a merry-go-round of monies moving from the right pocket to the left pocket at the click of the computer mouse. The FED creates money, uses it to buy toxic assets, and the same money is then returned to the FED by the global banks to earn interest. By this fiction of QE, banks are flushed with cash which enable them to earn interest. Is it any wonder that these banks have declared record profits? 12) The global banks get rid of some of their toxic wastes at full value and at no costs, and get paid for unloading the toxic wastes via interest payments. Additionally, some of the “monies” are used by these banks to purchase US Treasuries (which also pay interests) which in turn allows the US Treasury to continue its deficit spending. THIS IS THE BAILOUT RIP OFF of the century.I think this is the article.
http://xkorpion.wordpress.com/2010/09/01/global-collapse-of-the-fiat-money-system-too-big-to-fail-global-banks-will-collapse-between-now-and-first-quarter-2011/
who junked well phrased questions?
Someone who doesn't like the Steelers? Or Troy Polamalu?
http://www.nfl.com/players/troypolamalu/profile?id=POL041872
Wow that was weak, but suck it up ZH readers, it is all for the best. Charlie Munger here.
"The Federal Reserve monitors all sectors of the economy, so that we can be prepared when crises arise."
so am i to assume the fed is experiencing a crisis on a semi-daily basis?
Definitely!
I too am fed up and totally disgusted with these bullshit POMO ramp jobs. I cannot for the life of me rationalize how this benfits the U.S economy. Other than driving the dollar lower and pushing gold and equities higher just what purpose does this debt monetization serve other than to gun the markets? How the hell can anyone invest in these markets with all the distortions the fed has created? It's sickening to know they are doing this and I hope to God this blows up in their faces.
There is no way to rationalize why the markets have risen the past 30 days on shit data, other than to conclude that the fed and POMO is the driving force.
Fuck Ben Bernake and fuck Brian Sack. I'm sick of this shit.
+1
It actually would be interesting to know what JPM does with this cash infusion. It may be something akin to giving your kid some money and asking him/her what they did with it. This would be a responsible thing for the Fed to know to assess effectiveness. Oh, and they might let us know too.
to short silver and gold maybe?
+1
oh please, intervention has been as obvious as the horns on geithner's head
and I don't believe POMOs are in any way required in order for it to be carried out, though I do believe that the PDs use the flow to force the markets higher for their own purposes
what's absurd about the Fed letter's statement is that the Fed has absolutely destroyed the US economy with it's policy decisions of the past decade+.
they suck. they suck shit.
What did you expect them to say? The Fed isn't there to tell the truth, it's there to inspire confidence, even if it means lying through their teeth.
'Inspire confidence', lol thanks for that one!
Sure, but when was the last time a pathological liar inspired confidence in anyone? Have you ever worked with or been around an alcoholic? Those people lie so much and so badly that even they don't believe their own bullshit after awhile.
Setting them on fire can be very inspirational.
Kumbayah!
Your questions still needs answering. Exactly how should they have responded to the letter? "We are all screwed and the ship is going down....".
Well, no. I suspect that one of these days a memo or internal document will be leaked (truly leaked, not strategically leaked) that will shed some light. The fact that this has not happened thus far might indicate how philosophically entrenched this policy is. They are all buying it and it's not going to change. Or not.
I used to think something unfortunate might leak, but don't anymore. I don't think anyone is admitted into their little circle, unless they are absolutely certain you're on their side.
Sort of like how it worked in the Soviet Union, really.
"Leaking" requires that it be "published", meaning widely disseminated, in order to be leaked effectively. That requires something other than a fawning corporate press that's willing to exercise the sacred duty of whistleblower for the whistleblower. Or "leaker" in this case.
There are two media channels these days. The mainstream media that is widely disseminated and, despite protestation to the contrary by the vast majority, avidly watched and followed by Mr and Mrs Average Joe. And the alternative media.
People still watch the mainstrem media for one important reason, other than being just plain lazy. I have had a few conversations that have gone like this.
"Do you believe what you see and hear on TV news?"
"No."
"Then where do you go for the real news, the correct listing of what's really happening?"
"The TV."
"But you just told me that you don't believe what you see or hear on TV."
"I can tell when I'm being bullshitted."
"So then you do believe some of what you see and hear on TV?"
"Yes, some."
As long as people can convince themselves that their bullshit detector is working, they will stay tuned to the bullshit.
chit. guilty-as-charged. (really)
in my (paltry) defense, i work hard to track alternatives (e.g. zh, etc.).
i wonder how that tempers the bs-O-meter...
I didn't kill him, nor did the gun, nor did the bullet. It was the massive exit wound out of the back of his head that obviously did him in.
(That pic is great!)
Truly Orwellian... true snafu!
Yeah, "greatest benefit", sure...TO THE BANKSTERS. The only appropriate response I can think of to this blather by the Fed...BWAHAHAHAHAHHHAHAHAHAHAHAHAHAHAHAHAHAHAHHHAAAHAAA!!!!TD,
can we get an update on the correclations of ES/AUDJPY/2's10's30's?
I just think about what that Money could do for the average people. How many Jobs would that Money support. How many Homes could be saved that are underwater. Instead they keep funneling the Money to the Banks and their Traders Bonuses.
It's not "money".
It's created-out-of-thin air "electronic currency" with no relationship what-so-ever to the tradionial notions of money as storage of your excess labor for future use.
Yeah, but... Those electrons in the right hands can get ya a yacht or a mansion. They can also get ya a pallet of gold bars.
Come on Rocky, you know we're talking about two different things. Of course currency can be swapped for "real" things. But the average Joe still thinks the paper in his or her wallet is "real" and represents "real" things.
Most importantly, that the paper has "value" and is valuable, that it is nearly static in holding that value. That inflation is "natural" and "normal" when all it really is is a paper debasement of that static value place holder in his or her wallet.
I'm not talking about you or me or more ZH'ers. I'm talking about average Joe, who is still seduced by the almighty buck. The illusion still holds.
Of course, you are right. I was referring to the middle range folks who have lots of "money" socked away such as hedge fund clients, etc. Millions of dollars as opposed to billions. Those folks can withdraw that and put it where they want. Those folks can convert the electrons to tangibles and chattels. You think all that disappearing money from savings vehicles is just the J6Ps getting money from 401k balances? What did I read recently about the ratio of insider selling? They are doing something with the "cash".
I'm sure the pod people at CNBC recite this patronizing "response" to themselves every morning.
I pledge allegiance to the Fed, and the Bank of America...
The FED can say what ever they like but I would like to see a chart of the Dow on the days of the FED Pomo. I think you would see a corelation with FED Pomo and a huge up day on the Dow.
The market is likely to do any appreciable trading up until 12pm, when the pre FOMC quiet will set in. The last meeting produced relatively tight trading at range highs after the announcement, followed the next day by the beginning of a 7% decline. Should be an interesting end of the day.
Today's chart for the DJIA looks a lot like "Mount Doom!"
POMO!!! ... bitchez!!!
The beating of the shorts will continue until moral improves.
I still await the grand exogenous shock that shows just how little 'power' this grandees actually have.
If the Feds actions are aimed to raise the entire market index then thier actions would result in significant losses for any investor or trader who took 'long" positions in inverse ETF's like DRV, BGZ, FAZ, SFK, etc. etc. so much so that these undisclosed actions would result in activity that should be disclosed to investors in these securities. Where is the SEC?
Also, how many people are privy to the Feds actions prior to them making the liquidity injections and then are able to confidently make investments (place bets) based upon this "insider" knowldge. Look at the Class 'A" director list - thats who and look at the 100 perfect days of trading...
Its all a fraud....
the Fed is a trapped animal now. They have no choice but to continue their policies and pray it all works. They will keep doubling down their bets, but for those of you who have enjoyed casinos know, that does not work. They will continue the propaganda as part of their policy of based 100% on hope.
I don't know, George. Every time I think the game is about ready to fall apart for them, they always seem to have YET ANOTHER bag of tricks up their colons. Gotta give them props for creativity.
+++
variations on a theme - this tune is getting old!
The policy is meant to keep those in control in control.
Gains or losses are inconsequential.
As you know, the goal of monetary policy is to foster conditions conducive to sustaining sound, noninflationary economic growth over time and policymakers must make decisions that provide the greatest benefit overall.--JPD
Below are excerpts from John Williams’ Shadow Government Statistics (SGS) September 17, 2010, subscription letter:
“ Presumptions of ongoing economic "recovery" are vanishing, and fears are increasing as to what the federal government and the Federal Reserve will have to do in order to maintain systemic stability. While actions taken may provide short-lived relative stability, the cost of same will be an extreme inflation problem.”
COMMENTARY NUMBER 325
CPI, PPI, Production, Household Income
Rising Income Dispersion Usually Foreshadows Economic and Financial Market Turmoil… Conditions surrounding extremes in income variance usually help to fuel financial-market bubbles, followed by financial panics and economic depressions. The sequence of those factors tends to redistribute income in a manner that usually lowers income variance. Other than for a brief dip following the 1987 stock-market crash, however, U.S. income variance since 1987 has been higher than has been estimated for the economy going into the 1929 stock-market crash and the Great Depression, and its current reading remains nearly double that of any other "advanced" economy…
The increase of income dispersion in 2009 (to a record high for the MLD), despite the ongoing economic and systemic liquidity crises, suggests that the greatest negative impact of the systemic turmoil, so far, has been on those in the middle-income area. It also is suggestive of even greater financial crises still ahead. ...
Alternative Consumer Inflation Measures… Adjusted to pre-Clinton (1990) methodology, annual CPI inflation was roughly 4.5% in August 2010, the same level as in July, while the SGS-Alternate Consumer Inflation Measure, which reverses gimmicked changes to official CPI reporting methodologies back to 1980, was about 8.5% (8.50% for those using the extra digit) in August, versus 8.6% in July.
The SGS-Alternate Consumer Inflation Measure adjusts on an additive basis for the cumulative impact on the annual inflation rate of various methodological changes made by the BLS (the series is not recalculated). Over the decades, the BLS has altered the meaning of the CPI from being a measure of the cost of living needed to maintain a constant standard of living, to something that no longer reflects the constant-standard-of-living concept. Roughly five percentage points of the additive SGS adjustment reflect the BLS’s formal estimate of the annual impact of methodological changes; roughly two percentage points reflect changes by the BLS, where SGS has estimated the impact not otherwise published by the BLS. ...
http://www.shadowstats.com/
As every trading day passes-by and as the Fed' chic(ken)anery continues,I'm growing more and more confident that i'm gonna puke all over my trading desk.Well,that is after eatin' that Bentucky Tried Tricken meal.
Now that you know how it works,
do your patriotic bit for the country, bid stocks higher, and
become a bagholder for the PDs.
Now that you know how it works,
do your patriotic bit for the country, bid stocks higher, and
become a bagholder for the PDs.
No wait!!! Suggest to your relatives that they become
bagholders for the PDs.
Maybe if you play the letter backwards there will be a secret message saying "Go to Hell you Filthy Peasants"
http://textmechanic.com/Reverse-Text-Generator.html
http://www.acapela-group.com/text-to-speech-interactive-demo.html
Not really.
Wow... crap - except for gold & silver.
Actually the POMO stuff started in 2005 (If you wondered how the market continued to rise into 2007, while the economy turned down, then now you know). I did a cumulative analysis on my blog over the weekend at http://www.apartofny.com/2010/09/pomo-auctions/
Our only hope is to undo the coup of 1913 by repealing the 16th and 17th amendments and the (not really) Federal (with no) Reserve Act. After an inventory of the nation's gold and exhaustive investigations of the central bank and its shareholders' activities, the speedy trials, incarcerations and executions can begin. After releasing 1,500,000 of the inmates housed in U.S. prisons for bull$#!+ stuff, there will be plenty of room for the 100,000 worst @$$#01e$ on Wall Street and Pennsylvania Avenue.
Hmmm, now what was the penalty established by the Coinage Act of 1792 for debasing the currency?
.