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Federal Reserve Balance Sheet Update: Week Of October 14
Total Federal Reserve balance sheet assets for the week of October 14 of $2,128 billion ($9
billion higher compared to the prior week's $2,119 billion). Fed assets consisted of:
- Securities held outright: $1,608 billion
(an increase of $75.3 billion MoM, resulting from $13 billion in new
Treasury purchases, $52 billion increase in MBS and $11 billion in Agency Debt), or $13 billion increase sequentially - Net borrowings: unchanged at $289 billion, as no update in the current week.
- Float, liquidity swaps, Maiden Lane and other assets: $231.8
billion,
a $4 billion decrease based on a $252 million reduction in CPFF and a $6.2 billion reduction in FX liquidity swaps, bringing these to a fresh 52 week low. At $43 billion in liquidity swaps, there is little room left for the Fed to force foreign CB to keep pressing on the dollar. Keep an eye out on this datapoint as it is probably one of the better leading indicators of when foreign CBs start covering their dollar shorts (and are in need of dollar funding by the Fed).
Foreign holdings increased by $4.1 billion to 2,865 billion.
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I feel a disturbance in the force.
Off topic, job-loss graphic
http://tipstrategies.com/archive/geography-of-jobs/
How big was C4C? $4B?
4X that was printed last week to buy MBS.
And some people on this site still miss the big picture.
http://www.ny.frb.org/markets/mbs/
Net purchases from October 8 through October 14: $16,100 million
Oh, I should point out, almost no Ginnies purchased last week.
Anyone getting the picture yet?
and add to that Obi 'One' Kenobi's plan to try and buy the Social Secuirty Set off for a mere $12.5B (50 million folks X $250.00 per) - not a bad investment if it can garner enough support to back the $500B reduction in medicare
i'm being dense here (part on purpose and part from being dense) but can't this chart just be explained as the fed essentially transferring the maiden lane llc assets onto its books through the market? you've really been vocal about the MBS purchases recently and i still don't think i get exactly what you're trying to tell me. (i get the relative $ amounts vs Tsy QE, but i think there is something more) this is all my own lack of knowledge in this area but i'd appreciate any shortcuts in learning what i need to grok. thanks.
Pink,
Trying to build on your denseness with my own...
Looking at the chart, quantitative easing really happened when the Fed's balance sheet exploded in the immediate wake of Lehman. The MBS/Treasury purchase program could then be viewed as qualitative easing (as I've heard that term used by Buiter and others).
That makes the prospects of QE 2.0 all the more intriguing. If it happens, it would represent the first real expansion in the Fed balance sheet since Oct 08. That makes QE 2.0 a bigger deal and less likely I think.
It makes the qualitative easing look like a double rotation; i.e. holders of MBS/agencies (foreign FCBs, PIMCO, etc) rotating into Treasuries, and the Fed rotating out of swaps/lines/other assets into MBS/agencies.
The Treasury purchases of quantitative/qualitative easing have just brought the Fed's Treasury assets to where they were pre-Lehman. Add the $1.45T of MBS/agencies to get a balance sheet just a bit north of $2.2T. Not far from where the balance sheet is now. Voila!
One way to look at the whole issue of the asset side of the balance sheet - The Fed provided a certain level of reserves to banks starting sep 08 when the crisis hit. The banks NEEDED a certain amount of liquidity and the Fed provided it - traditionally through the window but now through the TAF. The amount ballooned really fast and just has stayed there for a year plus. That leads me to believe that the banking system NEEDED a certain level of liquidity that the Fed provided through the TAF. The Fed security buying has NOT increased the balance sheet much. They have merely rotated out of TAF funding into long term securities - essentially making the temporary reserves into permanent ones. or longer term reserves. Even if one believe the Fed that they paid the correct price for the bonds they bought, there is no way they are going to pull these reserves OUT of the system fast. And the Fed does not determine the size, the banks do - the TAF auctions were not over subscribed - so the size is more reflective of demand not supply. The Fed is playing with fire, in fact, igniting them all over the place. Now they want to buy more MBS securities. since the mortgage rates are really LOW, this smacks of something sinister - are banks just dumping their toxic assets on to the Fed because the bs PPIP type programs are not working?
ReturnFreeRisk
¨Anyone getting the picture yet?¨
Could it be that the FED is running an off-balance sheet ´special investment vehicle´?
I recall the FED announced an out-of-the-blue change in the definition of ´foreign purchaser´. When the Treasury was issuing record after record several months ago, ZH had trend lines, suggesting longer dating treasuries interest rates would rise. Instead they went much lower. With ALL governments borrowing record after record, who are these foreign buyers of US treasuries?
So instead of deciphering the FED´s balance sheet, could it be that the FED has copied the off-balance sheet trick of the banksters?
True, I had missed that the fed buys plain jane MBS. Somehow had thought they were just buying agencies and reasuries.
ONE THIRD of the balance sheet is now MBS. Are you serious???
The original TARP happened afterall. THe govenerment has purchased $700bill in "troubled assets".
The IQI is breaking down. point out by Karl at http://market-ticker.org/
I want to like, ya know, put a little boat on that chart and like call the boat the Titanic or something. I like, want to arrange the deck chairs until they are just perfect, and then ya know, like arrange them again. And the boat will be just fine, like that big iceberg, its like no big deal...as if! OMG my Titanic is the best boat around, the biggest, the stongest like ever made. It's my Titanic, it's like totally unsinkable because I say it is.
Ya know.
Hey man! You, like kinda sound like this cool cat daddy-o! Check out his get-up, its the most!
http://www.youtube.com/watch?v=1wq4rB_9QjM
A new bottom for YouTube. This is the absolute worst thing I have yet seen. If a pan of boiling aborted fetuses soaking in bloody fecal matter is a 10 in terms of disgusting, and a zero is a lovely glass of hot chocolate, I give this an 8.
lol, very nice... laughing like crazy
so what was the date again.... 12 12 12?
hey ghost could you elaborate a little bit more on the big picture for the laymen like me
Is it too late to give all the SS money to Wall Street?
You don't think that there is boatloads of public $$ propping up this new bubble?
And let them steal it instead of the government?
Wall Street and the Government are one and the same. No division here any more, if there ever really was one.
This needs an immediate attention and in depth analysis from TD. TG is taking another shot at the Chines. Questions:what is in store?preparation(threats)for a trade war?despite the collapse in usd and the huge reduction of trade balance?or is it may be because the Chinese are not buying TBs and the fed is stuck with more printing and risking a complete collapse in USD?I believe the triangle of the fed(TB-s&p-DXY)is getting close to unravelling(may be because of oil spiking today). And hence the treasury reaction. One would take it that the Chinese are not playing ball. So what exactly"risk unwinding some of the progress made in reducing imbalances,"means?is that like saying that the Hang Seng may suddenly drop 50%?or may be a tariff of 50% on anything Chinese?It would be interesting to have a thorough examination (including TG previous statement about the Chines currency).Here is the link
http://www.bloomberg.com/apps/news?pid=20601103&sid=aZz4nPnpFx1M
Who the hell hired Picasso to do our charts??
-Bernanke
At $43 billion in liquidity swaps, ... Keep an eye out on this datapoint ... when foreign CBs start covering their dollar shorts (and are in need of dollar funding by the Fed).
Why would they want to cover their shorts? Longer term, many say we'll need further stimulus to keep the party going. What's the real risk of the dollar getting strong? The best I can tell the only thing that has strengthened the dollar recently is market sell offs when $ goes from securities into money market (short term paper/treasuries) pushing their price up/yield down.
I'd like to understand Currency Swaps better. I get the concept, but apparently I'm a little shy on candle power (brains) to understand the implications of "in need of dollar funding by the Fed." It has been my understanding that currency swaps have been used to stabalize the dollar (keep if from collapsing) in the face of enormous Fed obligations. However, there would come a point at which the swaps expire and the dollar collapses. I can see MANY benefits of a weak dollar, but weak relative to what "Strong" national currency? Can anyone break down this topic Sesame Street style for my struggling noodle? Thanks, J in Denver
Go Fed! I need dow 12000!
Go Fed! I need dow 12000!
The U.S. Securities and Exchange Commission hired Adam Storch, a 29-year-old former employee in Goldman Sachs Group Inc.’s business intelligence unit, as the enforcement division’s first chief operating officer, according to people familiar with the decision.
http://www.bloomberg.com/apps/news?pid=20601110&sid=a6ItnK32Cl6Y
Nothing to see here.
Ever generation has its Failure Caucus and the doom crowd here is no different. My god, what happened to the optimists who rolled up their sleeves and made positive progress? Why are these sites nothing but doom and hope of complete despair? What a despicable generation of whiners you've all become.
"What a despicable generation of whiners you've all become."
Yeah, get out of the way of our manifest destiny. With God on our side your despairs of doom are despicable.
And I don't want to hear your whining about the Indian problem ; they are savages and unfit for integration with civilized society.
Can't be said enough ; sick of your whining.
And as always, do your own damn dd.
just wanted to do the math problem
why did the dollar
cross the road ..
None of it was printed. The Fed is just another bank. They are swapping for debt. The debt still exists. The debt is deflating. You can't have bank paper without more debt. You can't inflate the money supply without more debt. The banks can't create more debt without capital, which means what the Fed is putting out there has no effect. The unemployment claims were 510K, not 310K. Last week was revised upward again, which after 10 straight weeks of upward revisions, you have to know the government is fudging the figures. 510K is 200K a week in excess of what will absorb the new workforce, so unemployed people are increasing near 1 million a month. 510K would be a recession high if this was December 1, 2008. Some recovery. When the worm turns, the CB's are going to rip the heads off the dollar shorts.
Hmmm. Will this be another "FDIC Is Broke Bank Failure Free Friday"? I shall call it a FIBBFFF. Predictions, anyone?
People have a tendency to think their shit is worth more than someone else's shit. We spend our whole entire lives promoting our shit as being worth more than someone else's shit. WE get this tendency from the constant watching of TV and media teaching us to constantly promote inflation. Take classic cars or precious art work you see them ooohing and aaahing over, it is to brainwash you into believing it is worth something more than it really is. We saw this with the housing disaster. Have we learned nothing from the Russians and the Chinese? The Chinese can make an exact copy of the Mona Lisa or any thing you can imagine and it will look and Smell and perform just as good as the original, for a hell of a lot less. The Russians can make diamonds and rubies that are better quality than the originals, for a hell of a lot less. We as a species are obsessed with thinking that our shit is better than somebody else's. Well let me tell you something, it's not.
The TV controllers constantly promote this shit at your expense. You get to pay higher prices for shit making your lives more miserable. Same with stocks same with bonds. You get to pay a higher prices for everything. This mindset as a cooperative species is harmful to our species. We should always be promoting lower prices so it would be easier on all our lives. But you continually allow yourselves to be programed by the ones who want to make it harder on the majority.
This is mass madness you maniacs, We are the real thing, TV is the illusion. The owners of it want you to think otherwise.
This was true, not so much anymore.
http://video.google.com/videoplay?docid=-2481042943414042535#docid=3545308944108169378
Marla, can you answer me something (that is, if you are awake ). What does it take to become a ZH contributor except a post worthily of ZH readership and ZH editorial standards ? Thank you in advance.
P.S. I also want to post pics of hawt chicks, hence my question ( no, just kidding, i would like to put up something for people to read )
CB just stay away from ,"How's Obama doing"
Send them a check worthy of a "cheeky bastard".
Just make sure that's it's not denominated in dollars. Noone takes that shit anymore.
btw, would you do Sara Palin? I do. Everytime she opens her mouth. Shit was so cash.
Cheeky, I am your father.
cheeky...send it in. it's all about content as you know.
post hot pics also, but sneak them into robo's column.
All you guys at ZeroHedge do is complain about HFT.
Oh shut up, it's because of US, that the U.S Market is liquid.
"...HFT.
Oh shut up, it's because of US, that the U.S Market is liquid."
Actually, I think it's cocaine.
BIG miss by BAC on both the Q3 top line and bottom line (how do you miss big on drastically reduced estimates?). GE misses Q3 top line average estimate by about 5% but beats the average bottom line estimate.
I don't understand why you think the FX liquidity swaps indicate when the foreign central banks will need dollars. Please explain in more detail. Thanks.
Fox guarding henhouse; they have moles everywhere:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a6ItnK32Cl6Y
If you wrote a script for a movie about this shit and submitted it, they would say it was unbelieveable and you could not get funding for it.
UNF@KING BELIEVEABLE.
We are letting it happen.
Why do we call it a "Balance" Sheet??......;>)
question...
Tyler says:
"At $43 billion in liquidity swaps, there is little room left for the Fed to force foreign CB to keep pressing on the dollar."
Assuming then that swaps were higher, how would or can the Fed force foreign CBs to keep pressing on the dollar?
thanks
jules from Aus
could you explain the last not about the liquidity swaps being down and its implications? do foreign CB's acutally short the dollar outright? thanks
They aren't shorting the dollar-they are taking their high faluttin' currencies back after the liquidity disaster in October. The US swapped all these dollars for Euros,Yen,drachma you name it. Now the CB's are repatriating their currencies. As they sell dollars into the FX markets it pummels the DX and everyone is scrambling to get other shit currencies to return. Classic case of buy high sell-sell low. Man, they will be pissed when the DX starts moving up
I think the FED made a killing on these swaps. Imagine desperate deleveraging in a meltdown, the US sells(on credit) very pricey US DX for dumping currencies. Everyone needed dollars to clear out their dying positions in gold,oil, equities,junk,derivatives,CDS etc.
After March, these CB's are forced or want their repatriated currencies back. The ensuing sales of US dollars pounds the DXY lower as they flood the market. Sell high BUY low for US. BUY high, sell low EUROPE et al.
Now that these swaps are getting lower, expect less dollar pressure and maybe a rebase back up. That reboots the deleveraging of the US carrytrade and everyone scrambles for the buck. If it's bad again, the DX gets back to high 80's and other currencies plummet. Rinse and repeat swap scam all over again.
The US FED is jacking the other CB's which is why they HATE OUR ASSES
Californiagirl,
I wonder who the FED bought all those Fannie/Freddie GSE seruritization and direct debt from?
Could it be the very banks who then deposited the proceeds as excess reserves where they draw interest?
In advocating the power to pay interest, BB once argued it would allow the FED to infinitely expand its balance sheet. If they buy the securities from the banks but instantly get the money back, they could, in theory, do that infinitely.
The up side of that for the banking system would make their own balance sheets 'look' better (rather than shaky, illiquid MBS on the asset side they have interest paying money 'safely' deposited at the FED. This would facilititate the effort to lure outside entities (sovereign wealth funds, pension funds, etc) to invest 'capital' into the banks, an effort the US Govt was encouraging.
Of course, at some limit the FED would not want to destroy the 'look' of its own balance sheet by, among other things, buying long and lending short (assuming they would ever really allow the withdrawal of deposited reserves. The FED's aspiration of self preservation, common to everyone, would trigger a reaction. This might explain BB's recent crankiness re hating bailouts.
On a side note, the FDIC's recent plan to have the banks prepay 3 years of deposit insurance would require money to come from somewhere - possibly withdrawal of reserves.
To the extant the head of the FDIC has been resisting expansion of FED powers (notwithstanding the FDIC's own weakness), such an advance pay sheme might also be a nifty way to hamstring the FED (assuming some kind of interbureaucratic war is ongoing.)
Hello Anonymous, thank you for responding.
Bernanke seems to be a magician of sorts. It will be interesting to see if he can hold those reserves indefinitely. I can certainly understand why he is cranky. If he doesn't help the Administration spend like money grows on trees, he will just be replaced by someone that will, maybe Summers. And the "end the FED" movement won't go away. I just think that if we ended the FED, who would be in charge of our fiscal policies and the dollar? Would it be Congress? Pelosi? That though scares the hell out of me. Or would it be the same FED bankers, just in another guise?
Also, you could certainly be right about a battle between Ben and Sheila. I had never thought of that. My guess is that Sheila will lose unless some other solution is arrived at.
Your statement: "If they buy the securities from the banks but instantly get the money back, they could, in theory, do that infinitely", reminds me that I read somewhere that he may have purchased them from foreign central banks to ease some of the anger toward our "irresponsible fiscal policy". I have no idea if this is true. I wonder if the foreign central banks list the CUSIPs of the Treasuries and Agencies they sell? I never looked. Your theory is certainly interesting - money just going around in a big circle.
Sorry if I am slow, but I still don't see how inflating the balance sheet indefinitely doesn't result in inflation and devaluation of America's savings and retirement accounts, particularly under the current scenario. To me, it looks like Bernanke actually "borrowed" the entire amount of the TARP (to be picked out of the taxpayers' pockets) from the banking system as well as the funds he had them raise from investors through secondary offerings, plus some. This enables him to get around the laws prohibiting the FED from issuing its own debt. I also thought that maybe some of the money Goldman has been extracting from our retirement accounts and investments with the aid of predatory algos, co-location, flash trading, SigmaX, SLP rebates, etc., was also ending up at the FED (as excess reserves on deposit) and being passed to the government by buying its debt. GS does not call out how much they have on deposit at the FED in their K's and Q's, unless I missed it somehow. The taxpayers are being put into astronomical debt by our government, which cannot continue indefinitely without serious consequences. It seems clear to me that Bernanke and Geithner are aiding and abetting the government in extracting as much money as it can from it citizenry so it can be redistributed in any manner they see fit, including sending large amounts of it out of the country to corrupt foreign governments through the U.N. and IMF.
Having been a CPA/auditor earlier in my career, and having slogged through countless legal contracts and complex transactions, I have a tendency to try to quickly cut through all the crap and machinations and get down to the crux of it (the substantive "economic reality"). I want to protect my retirement so my percentage of the pie does not shrink, but am having a hard time figuring out how to do that because of all the distortions, miss-information, manipulations, government interference, business-killing legislation, etc. Us Californians and our business get a double whammy from both governments, making it even harder.
The markets are very disconnected from the underlying values of the stocks, economy or business conditions. Common sense still worked in January 2008 when I moved all of my personal and business investments into CDs, and then again by buying back in during Spring when the stock market thought the world would end. So at least I didn't lose any money in the last 2 years and managed to make some. Everything is as clear as mud right now and yesterday I moved back to earning less than 1% interest. This is not going to prevent my percentage of the pie from shrinking.
The economic reality does not appear anywhere near as rosy as the press and Administration portrays. What little green shoots there might be, appear to be temporary, maybe brought about by all those happy animal spirits emanating from D.C. My small manufacturing business in Silicon Valley, and others around me and in my industry, are not seeing a significant recovery. The pop in business after Labor Day appears to be partially seasonal (getting products through the pipelines so they can line the retail shelves for the upcoming consumer holiday spending spree) and partially a recovery from businesses snapping out of the deer-in-the-headlights, frozen-stiff-with-fear mode that pervaded the Valley this past spring and summer.
So, being an uneducated idiot, I just don't see how consumer spending can improve over last year or come anywhere near Wall Street's expectations. In fact, my faulty common sense would indicate quite the opposite. As I drive around and speak to friends, associates, customers, vendors, etc., these are the "realities" that I observe, or maybe they are just mirages:
New "for lease" and "going-out-of-business sale" signs keep popping up and old ones are not being taken down. Landlord are negotiating rents downwards in attempts to retain their tenants.
Stores that never had sales in their existence seem to have permanent sales signs in their windows. Parking at malls is readily available close to the entrances. During the week, malls are morgues.
Unemployment keeps going up. I know of quite a few people who have been dropped from the official "unemployment" numbers because their eligibility has expired, but they still remain unemployed. They are giving up their homes/apartments and moving in with relatives and friends.
Foreclosures and bankruptcies are escalating. Many people are teetering on the edge, trying to avoid going over. Not that they don't exist, but I have met no one in California that has successfully managed to refinance or modify their mortgage without having at least 30% equity.
People are letting their landscapes die off to save money on utilities, never mind the expense they will have to incur in the future to restore them.
Raises in private sector companies, excluding the bailout recipients, healthcare industry, and deeply-troubled banking and insurance industries, are non existent with some businesses actually implementing pay cuts. Bonuses? Good luck! In my neck of the woods, many employers put their personnel on reduced work weeks in the hopes of retaining long-time and well-trained employees so we don't have to start from scratch after this is over. Other large and small companies are requiring forced quarterly 1 to 2-week unpaid "vacations". Parking lots on our and neighboring streets are virtually deserted on Fridays.
Companies are requiring larger contributions from their employees toward their healthcare premiums, which are still increasing excessively (11% last month for us). Others are changing benefits by reducing coverage and increasing deductibles and co-pays, so employees necessarily spend more out of their own pockets.
Commute traffic is non-existent unless there is an accident (with less traffic than after the Dot.Com bust).
Wineries in Napa and Sonoma, formerly with allocation limitations and long waiting lists for their wines, are quietly going under or being sold at huge losses.
My friends and I now buy $10 to $25 bottles of wines and savor the few remaining $100+ bottles stockpiled during more prosperous times. We have dropped our symphony, opera, sports event season tickets, museum and gym memberships, etc. Those $200+ per-person dinners in San Francisco have become distant fond memories. I walked by Aqua (mostly empty) a couple of weeks ago to meet friends at a significantly less expensive restaurant next door, at which 2 of us were poisoned. This restaurant was full. We really miss the Aqua's, Mina's, etc., but do not anticipate visiting them anytime soon.
Around here, business was still going at a pretty good clip in the Q4 holiday season last year. My business was working off a fairly large backlog and my distributor customers were still ordering to work off their backlogs. Things didn't really fall off of a cliff until March/April. Being in California, almost everyone was basking in "hope and optimism" after the election. Most were still spending sizeable amounts for Christmas, including buying themselves a toy or two, expecting the new "savior" to quickly turn things around.
The point: this is how the majority of non-Politician, non-Wall Street middle and upper middle class Americans now live. Maybe my friends and I are all idiots, just being average working stiffs without ivy league MBAs, but unless the super wealthy and banksters start spending a lot more to make up for the rest of us, we expect much of inventory currently being produced to remain on the shelves this holiday season. The vast majority of people seem to be tightening their belts, not loosening them. I do not comprehend how this will benefit business in the first half of next year. After extracting record amounts from us all with their monopolistic privileges, I think that Goldman Sachs employees (and other bankers) owe it to the rest of us to spend every single penny of their $5 billion+ bonuses this holiday season and empty those retail shelves. After all, they are part of the group that is largely responsible for creating this mess (Greenspan only enabled them) and they were able to keep their mansions, yachts, luxury cars, millions and billions that they obtained form their *******(can't think of a polite word) activities. With very few exceptions, they have suffered little, if any, consequences for what they helped perpetrate on the rest of us. What happened to jail terms like Enron, Adelphia, Worldcom, etc? I guess being a banker automatically get you a free stay-out-of-jail pass, and a bonus reward for your "good deeds".
I haven't read Keynesian economics since college and, in my youth and ignorance, dismissed it at the opposite of common sense. Since the hard drive in my brain no longer retains any recollection of how it works, I fail to understand how the current "quantitative easing" and deficit spending will rescue us all. I had fun trying out deficit spending in my 20s and almost went bankrupt. So, how does it work beneficially when the government does it, without defaults or printing gobs of money? I am not smart enough to understand. Someone, please explain?
I just have a bunch of questions. When will the economy improve? When will unemployment stop growing? What will the stock market do in the next 2 to 3 months and in the first half of next year? When will inflation kick in? When will the FED raise rates? So what do I do with my money, most of which is locked up in an IRA and 401(k), restricting my options? How do I win over inflation when it comes? Will the dollar collapse and when? If so, what should I be in if we all have to convert over to SDRs or some other currency? If someone knows or has a crystal ball, please educate me?
Hello Anonymous, thank you for responding.
Bernanke seems to be a magician of sorts. It will be interesting to see if he can hold those reserves indefinitely. I can certainly understand why he is cranky. If he doesn't help the Administration spend like money grows on trees, he will just be replaced by someone that will, maybe Summers. And the "end the FED" movement won't go away. I just think that if we ended the FED, who would be in charge of our fiscal policies and the dollar? Would it be Congress? Pelosi? That though scares the hell out of me. Or would it be the same FED bankers, just in another guise?
Also, you could certainly be right about a battle between Ben and Sheila. I had never thought of that. My guess is that Sheila will lose unless some other solution is arrived at.
Your statement: "If they buy the securities from the banks but instantly get the money back, they could, in theory, do that infinitely", reminds me that I read somewhere that he may have purchased them from foreign central banks to ease some of the anger toward our "irresponsible fiscal policy". I have no idea if this is true. I wonder if the foreign central banks list the CUSIPs of the Treasuries and Agencies they sell? I never looked. Your theory is certainly interesting - money just going around in a big circle.
Sorry if I am slow, but I still don't see how inflating the balance sheet indefinitely doesn't result in inflation and devaluation of America's savings and retirement accounts, particularly under the current scenario. To me, it looks like Bernanke actually "borrowed" the entire amount of the TARP (to be picked out of the taxpayers' pockets) from the banking system as well as the funds he had them raise from investors through secondary offerings, plus some. This enables him to get around the laws prohibiting the FED from issuing its own debt. I also thought that maybe some of the money Goldman has been extracting from our retirement accounts and investments with the aid of predatory algos, co-location, flash trading, SigmaX, SLP rebates, etc., was also ending up at the FED (as excess reserves on deposit) and being passed to the government by buying its debt. GS does not call out how much they have on deposit at the FED in their K's and Q's, unless I missed it somehow. The taxpayers are being put into astronomical debt by our government, which cannot continue indefinitely without serious consequences. It seems clear to me that Bernanke and Geithner are aiding and abetting the government in extracting as much money as it can from it citizenry so it can be redistributed in any manner they see fit, including sending large amounts of it out of the country to corrupt foreign governments through the U.N. and IMF.
Having been a CPA/auditor earlier in my career, and having slogged through countless legal contracts and complex transactions, I have a tendency to try to quickly cut through all the crap and machinations and get down to the crux of it (the substantive "economic reality"). I want to protect my retirement so my percentage of the pie does not shrink, but am having a hard time figuring out how to do that because of all the distortions, miss-information, manipulations, government interference, business-killing legislation, etc. Us Californians and our business get a double whammy from both governments, making it even harder.
The markets are very disconnected from the underlying values of the stocks, economy or business conditions. Common sense still worked in January 2008 when I moved all of my personal and business investments into CDs, and then again by buying back in during Spring when the stock market thought the world would end. So at least I didn't lose any money in the last 2 years and managed to make some. Everything is as clear as mud right now and yesterday I moved back to earning less than 1% interest. This is not going to prevent my percentage of the pie from shrinking.
The economic reality does not appear anywhere near as rosy as the press and Administration portrays. What little green shoots there might be, appear to be temporary, maybe brought about by all those happy animal spirits emanating from D.C. My small manufacturing business in Silicon Valley, and others around me and in my industry, are not seeing a significant recovery. The pop in business after Labor Day appears to be partially seasonal (getting products through the pipelines so they can line the retail shelves for the upcoming consumer holiday spending spree) and partially a recovery from businesses snapping out of the deer-in-the-headlights, frozen-stiff-with-fear mode that pervaded the Valley this past spring and summer.
So, being an uneducated idiot, I just don't see how consumer spending can improve over last year or come anywhere near Wall Street's expectations. In fact, my faulty common sense would indicate quite the opposite. As I drive around and speak to friends, associates, customers, vendors, etc., these are the "realities" that I observe, or maybe they are just mirages:
New "for lease" and "going-out-of-business sale" signs keep popping up and old ones are not being taken down. Landlord are negotiating rents downwards in attempts to retain their tenants.
Stores that never had sales in their existence seem to have permanent sales signs in their windows. Parking at malls is readily available close to the entrances. During the week, malls are morgues.
Unemployment keeps going up. I know of quite a few people who have been dropped from the official "unemployment" numbers because their eligibility has expired, but they still remain unemployed. They are giving up their homes/apartments and moving in with relatives and friends.
Foreclosures and bankruptcies are escalating. Many people are teetering on the edge, trying to avoid going over. Not that they don't exist, but I have met no one in California that has successfully managed to refinance or modify their mortgage without having at least 30% equity.
People are letting their landscapes die off to save money on utilities, never mind the expense they will have to incur in the future to restore them.
Raises in private sector companies, excluding the bailout recipients, healthcare industry, and deeply-troubled banking and insurance industries, are non existent with some businesses actually implementing pay cuts. Bonuses? Good luck! In my neck of the woods, many employers put their personnel on reduced work weeks in the hopes of retaining long-time and well-trained employees so we don't have to start from scratch after this is over. Other large and small companies are requiring forced quarterly 1 to 2-week unpaid "vacations". Parking lots on our and neighboring streets are virtually deserted on Fridays.
Companies are requiring larger contributions from their employees toward their healthcare premiums, which are still increasing excessively (11% last month for us). Others are changing benefits by reducing coverage and increasing deductibles and co-pays, so employees necessarily spend more out of their own pockets.
Commute traffic is non-existent unless there is an accident (with less traffic than after the Dot.Com bust).
Wineries in Napa and Sonoma, formerly with allocation limitations and long waiting lists for their wines, are quietly going under or being sold at huge losses.
My friends and I now buy $10 to $25 bottles of wines and savor the few remaining $100+ bottles stockpiled during more prosperous times. We have dropped our symphony, opera, sports event season tickets, museum and gym memberships, etc. Those $200+ per-person dinners in San Francisco have become distant fond memories. I walked by Aqua (mostly empty) a couple of weeks ago to meet friends at a significantly less expensive restaurant next door, at which 2 of us were poisoned. This restaurant was full. We really miss the Aqua's, Mina's, etc., but do not anticipate visiting them anytime soon.
Around here, business was still going at a pretty good clip in the Q4 holiday season last year. My business was working off a fairly large backlog and my distributor customers were still ordering to work off their backlogs. Things didn't really fall off of a cliff until March/April. Being in California, almost everyone was basking in "hope and optimism" after the election. Most were still spending sizeable amounts for Christmas, including buying themselves a toy or two, expecting the new "savior" to quickly turn things around.
The point: this is how the majority of non-Politician, non-Wall Street middle and upper middle class Americans now live. Maybe my friends and I are all idiots, just being average working stiffs without ivy league MBAs, but unless the super wealthy and banksters start spending a lot more to make up for the rest of us, we expect much of inventory currently being produced to remain on the shelves this holiday season. The vast majority of people seem to be tightening their belts, not loosening them. I do not comprehend how this will benefit business in the first half of next year. After extracting record amounts from us all with their monopolistic privileges, I think that Goldman Sachs employees (and other bankers) owe it to the rest of us to spend every single penny of their $5 billion+ bonuses this holiday season and empty those retail shelves. After all, they are part of the group that is largely responsible for creating this mess (Greenspan only enabled them) and they were able to keep their mansions, yachts, luxury cars, millions and billions that they obtained form their *******(can't think of a polite word) activities. With very few exceptions, they have suffered little, if any, consequences for what they helped perpetrate on the rest of us. What happened to jail terms like Enron, Adelphia, Worldcom, etc? I guess being a banker automatically get you a free stay-out-of-jail pass, and a bonus reward for your "good deeds".
I haven't read Keynesian economics since college and, in my youth and ignorance, dismissed it at the opposite of common sense. Since the hard drive in my brain no longer retains any recollection of how it works, I fail to understand how the current "quantitative easing" and deficit spending will rescue us all. I had fun trying out deficit spending in my 20s and almost went bankrupt. So, how does it work beneficially when the government does it, without defaults or printing gobs of money? I am not smart enough to understand. Someone, please explain?
I just have a bunch of questions. When will the economy improve? When will unemployment stop growing? What will the stock market do in the next 2 to 3 months and in the first half of next year? When will inflation kick in? When will the FED raise rates? So what do I do with my money, most of which is locked up in an IRA and 401(k), restricting my options? How do I win over inflation when it comes? Will the dollar collapse and when? If so, what should I be in if we all have to convert over to SDRs or some other currency? If someone knows or has a crystal ball, please educate me?
Ironically, Wells Fargo is hassling me to get my savings account money in a "higher yielding" savings account at.97% Interest. I get 50 bucks a month for 100k of savings. WOOWOWOWOW
I'm not laughing at you friend, but I am laughing...
That is what I call a high risk investment to boot!