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Is The Federal Reserve Buying Greek Bonds?
With Geoffrey Batt
With everyone's attention drawn to each and every step the IMF takes, while contemplating the imminent Greek bailout, which without exception and with the grace of a drunk 3-ton bull in a China store, leaves nothing but annihilation and currency boards in its wake, is the popular opinion once again getting the Houdini treatment courtesy of the mainstream media? One thing learned over the past year is that everything is a distraction for something else, and that something else, quite usually without failure, ends up being the Marriner Eccles building on Constitution Avenue in D.C. What we refer to is disclosure from a paper written by none other than the Maestro Jr, in 2004, titled "Conducting Monetary Policy at Very Low Short-Term Interest Rates" (oddly appropriate). In this paper, Bernanke discusses not only the possibility of purchasing corporate assets (bonds and stocks), but emphasizes that one other security class which the Fed may be inclined to acquire under conditions such as those today, and has an explicit authority to do so, are foreign government bonds. After singlehandedly rescuing every Wall Street bonus in the prior year, is the Fed now the shadow backstop for the Greek economy as well?
Cutting straight to the chase, and to Bernanke's musings:
Central banks typically hold a variety of as- sets, and the composition of assets on the cen- tral bank's balance sheet offers another potential lever for monetary policy. For example, the Federal Reserve participates in all segments of the Treasury market, with most of its current asset holdings of about $650 billion distributed among Treasury securities with ma- turities ranging from four weeks to 30 years. As an important participant in the Treasury market, the Federal Reserve might be able to influence term premiums, and thus overall yields, by shifting the composition of its holdings, say, from shorter- to longer-dated securities. In simple terms, if the liquidity or risk characteristics of securities differ, so that investors do not treat all securities as perfect substitutes, then changes in relative demands by a large purchaser have the potential to alter relative security prices. The same logic might lead the central bank to consider purchasing assets other than government securities, such as corporate bonds or stocks or foreign government bonds. (The Federal Reserve is currently authorized to purchase some foreign government bonds but not most private-sector assets, such as corporate bonds or stocks.)
We hope that some enterprising congressman will find the courage to ask Bernanke on the record tomorrow whether the Fed has at any time in both the far and recent past, purchased Greek Government Bonds in order to artificially inflate their prices. Because if the Fed has the ability to do something, it usually does, especially if it means extending the bankrupt global status quo by at least one more day. And even if the Fed has not bought any GGBs at yields of 6.8%, will it do so when yields hit 8%, or 10%, or when bondholders finally start dumping GGB in industrial amounts and the only available buyer becomes Mr. Ben "Endless Reserve Currency Pockets" Bernanke himself? And with Goldman one of the biggest sellers of Greek CDS (forget that AIG BS, the Goldman boys now are directly taking on lack of novation risk), how long before the MTM for Goldman quickly works out against them and those hotline into Bernanke's office start flashing. Oh but don't worry, at that point the Federal Reserve will join the EU in blaming all those other pesky CDS speculators (Goldman, of course, excluded), whom it was the Fed's patriotic duty to defend against. And, after all, with only about 200 people understanding the mechanics of every lie involving CDS, the opportunity cost for yet more acts of treason are ever so low.
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I was pondering this very issue this morning
Im pondering if dillinger wrote this, too many bolds and underlines.
=)
dillinger... denninger... ah, probably the same guy anyway
Sweet Jesus no! I'm having a mental of Zimbabwe Ben atop a pile of treasury paper from the PIIGs...and in my vision he is mooning me and laughing...
even if they were buying bonds...they are not about to tell anyone
Greek bonds are the new subprime.
Any Greek bonds owned by Pimpco, the squid, et al will be purchased first. The squid. does. not. lose.
ok, sorry for a coupla dumb questions: who is this ubiquitous "squid" and what's a "quant."
Now 65 and suddenly got lotsa cash and no clue. Velobabe did me a great favor asking my exact question about what to do with such in a comment on FDIC article. THANKS!
Love ZH though it's scary.
squid - vampire squid - goldman sachs (term coined by Matt Taibbi in Rolling Stone article)
quant - usually a math whiz who writes algorithms for computer trading
Welcome. Get an identity. Come play.
Done. Should I divorce my wife now or later?
Hang on to her. You may need a reference.
+100
How does a Financial Analyst become a Quant, well you get your masters in Computational Finance;
http://www.tepper.cmu.edu/master-in-computational-finance/index.aspx
The dynamics of modelling, to a great extent depend on the overall strategy of the firm, and its "access". Both in terms of information and speed. Obviously, if you front run your customers, you do not really need a quant.
Quants try to produce a pricing model which can be effective at producing a gain, or perhaps to look at spreads (reactive or non-reactive) generally confined to sectors, or specific quantities. If you have cornered a market, oil futures for example, you do not need a quant. The big gee wiz moment for the quants was, in my opinion, the structured finance land of, risk may be distributed, if... and if... and if...., but oh this only really works on an obviously increasing asset class. I think at some point the beneficial idealistic quantisms, were corrupted by the ability of banks and corporations to use derivative to manipulate their financials and reduce tax burdens by hiding behind complexity. Because with complexity you can do a lot in court. Especially, when there is no precedence.
Mark Beck
what a great geek moment in history - luv it - gimme more. i told my momma that one day i was going to own the world and now it has come to pass. the only thing left for me to do is to figure out how not to leave crumbs of cheetos on my kybd. this 2 will pass - i geek swear it!
Honestly, I think that phucker Bernanke would buy anything.
While I agree with TD about the foreign bond question being asked in the upcoming Congressional hearing (a greek tragedy, if you will) and I very much hope one of the critters asks, I still see Bernanke either lying or obfuscating. Bottom line is under the emergency powers provision he can probably buy whores and cocaine.
Is there a whistleblower or 2 at the Fed who will come out and please get the facts to the American people? please email tips at zerohedge dot com for your best chance at bringing this out into the open.
I feel the same way. NOTHING this guy does would surprise me. This is quite worrying, that it is certainly not outside the realms of possibility that this ass-clown running the Fed here would actually do something like this.
The man has no respect for the currency he is supposed to protect. He is a cheap-money Princeton whore that should be cast out of office and into prison.
I'm most confident that during Bernanke's little campaign to get renominated it was made clear by Obama and Reid that Bernanke WILL continue to buy Treasuries no matter what.
It will be a long time before there is a failed auction because of this in my view.
DH - If he'll buy and monetize unused frequent flyer miles what won't he buy, with our money?
"What won't he buy, with our money?"
Honest communications about the state of the world's economy.
Loans to communities to down size and localize their way of life.
Ad programs promoting sustainable farming, industries, and living practices.
Excellent prosecution teams to hunt down and jail all those responsible for breaking the laws as they currently exist on the books.
Treatment centers for our Vets who have been physically, mentally, and spiritually injured by going to war on behalf of this country. De-programming for same.
Let me catch my breath, I know there is more...
Ahhh yes. The macro vs micro on globalization.... and how to merge the two with a bit of harmony. My round outs are posted from yesterday for you.
What is a round out? Screenname unworkable here. U know front part? Wait, post, then erase?
well said MsC.....
Unless you audit the FED, you will never know if they are propping up Greece, or the PIIGS, or any other country.
Can the fed buy muni's too? If so, there is hope for Cali yet! Nothing would make me happier than to know the Fed was the owner of the sewer system of Stockton.
I'm surprised it took you this long to come to that question. The Fed (and Treasury) will do ANYTHING to maintain US stability in the here and now ... and damn the future real cost (hyperinflation versus soverign default with no in-between).
Good read.
Somebody "big" was keeping NBG afloat today. Note how it still has not been able to take out last week's low....
By the way, I Googled "Greek Girls", and this is what I got....
LOL....
RobotTrader,
Don't get me started on what goes up.
1, 4, 5, 2, 3
I'm sure you googled them...
Don't look like Greek girls to me, but they certainly do
represent a massive amount of debt!
Robo...2.5 million shares at less than 4 bucks per share.....not much money at all. it's trading like a small time junker.
Try it again Robo, with safe search "Off" this time!
I was hoping to see Bernanke in this pic.
The one we want to see of Ben would have been taken at Barney's place (I don't mean the purple dinosaur, more of a purple people eater).
Not only has or will Benron buy GGB's, he is very likely also involved in the Dubai mess, means he gave guarantees to Abu Dhabi or sent them the check.
Why not? They've been giving it to the American taxpayer Greek style for almost 100 years. Might as well buy any steaming pile on the planet.
Outstanding TD, thanks!
I always knew there was a little Greek in Benizelios Bernakis. Don't worry, unlike agency paper, at least the Fed won't lose money on Greek bonds. :)
Predictable.
Given everything they've done already - how
could they not be buyers? sad for the US
taxpayer - add another straw to their back.
Please Greece - DEFAULT before our Fed
buys more of your bonds! PLEASE!
Global moral hazard courtesy US taxpayers. Nice. Thanks Uncle Ben!
HA! I have struck again! It is I, SI
http://www.zerohedge.com/article/frontrunning-february-22#comment-240135
No way he would buy Greek debt outright.
But there is surely some shady dealing w/the IMF or another structure that would lump the transactions into the "other" category.
Agreed.
I expect the IMF to emerge as the middleman, as well.
TPTB are running out of credible operatives.
Lighten up, what's so bad about a few Greek Bonds at 8%+. Great vacations to examine your holdings, fronted by the NBG; Greek girls, the ones above are nice but the real thing, rather than Greek fraternity pledges, might be even nicer; and finally prove the real generosity of Uncle Sam to all those hot babes who will never have anything to do with the stingy Krauts, forever after, what's not to like?
SS
In an interview I saw on CNBC last week, Ron Paul was talking about auditing the fed. He specifically mentioned that he would like to know if Bernanke was buying Greek bonds. He better ask.
http://www.eurosavant.com/2010/02/21/cds-just-another-evanescent-bubble/
Will AIG Force The US To Bail Out Greece?
AIG is the newest name to be linked with Greece as the bailed out insurer has emerged as a source of CDS on the troubled state.
Two reports this weekend, both based on a German newspaper article, cited the U.S. government owned firm as a key supplier of CDS on Greek debt.
This could pull the U.S. into the Greek bailout as a means of protecting these firm’s assets.
Yeah, thanks again for ZH and the Internet ,MSM blackout!
Why is the USTaxpayer bailing out Greece?
If true, this is illegal, yes?
Legality is whatever they say it is.
I am not as well versed on terms as I would like to be. Let me run this by you.
Could the dollar, as the world's reserve currency, be set up as a kind of "bad bank" that buys everything, and then defaults? Let the dollars flow through the system, paying off everything else. Could that actually "save" everyone else some how?
If this is a yes, I have many more questions.
The Bad Bank is not the biggest bank...
But I'm sure the Greeks are aware that there is a lot of bad debt in the EU looking for a home...
*fapfapfapfapfapfap*
I may not have said this well. Let dollars flow through the system, making everyone else "whole." Then they go to their own currencies, getting rid of dollars. When everyone agrees they are done with dollars paying off everything (real estate mess, govt. debt.), everyone dumps them at the same time and, being valueless, the default is built into the solution, without anyone having to formally declare a default. Kind of hyperinflation 1. All dollars come rushing back to us, flooding us. 2. Dollar is meaningless/currency crisis. Both kinds of inflation.
You'd have to do it really fast, or else the torches and pitchforks would come out at home. I don.t think you could push that much money that fast. Conceptually it's interesting, but in practice I don't think they could pull it off. It's such a massive amount of debt that not even they could hide it...
I've had similar musings for a while now, whether that might somehow be the strategy.
Actually I would see it as the FED attempting to own everything. Think about it, if they are proping the stock market, mortage market, and multiple governments they kind of have already become defacto land lords of US and large stake owners of companies. Sure the dollar could inflate but heck if idiots are still willing to accept it for tangable goods then Ben will just keeping printing as long as he can keep getting free stuff.
And you know what hyperinflation would happen but look at what the FED would own in the end. Now keeping it in that case would be another matter :)
It is a private for profit business...maybe not crazy far fetched. Own some olive trees, London bridge, some vineyards, sh!++y houses in MI, CA, FL, NV, AZ, oh dear...
Heh...I think the 'crony capitalism' system we currently suffer under has no intention of bailing out *everyone*. The real money masters will not hesitate to even throw the Fed under the bus, imho, as long as there is profit in it.
Isn't this kindof what happens when foreign CBs own US Treasuries? Like, say, China?
Hi Ms Creant--looks like this is already happening--like one big ponzi scheme that is run by now, many world governments.
That is a fantastic question/thesis.
By the way, MsCreant, you can add me to the large list of posters/lurkers here at ZH who have a secret internet crush on you!
I am tempted to be bad. It is so much fun. But this is nice. Thanks.
I agree with Uros Slokar, it is a fantastic thesis. It makes a bit more sense if you take it slightly further, after your default: Since everyone is/was using the USD as reserve currency, they will need something else, and that will be the prime moment for the newly-minted/newly-christened international monetary/financial authority to swing to the rescue by plugging us all into the massive surveillance matrix it will use to manage its globo-dollar.
Bernanke has his hands full with the Real Estate lobby defiling his "shining city on the hill" right now. he never thought his problem with his "solution" would be potty training...oh well. lot of financial "babies" in the good old USA. Greece is DEFINITELY secondary to the Fed right now. Treasury on the other hand IS sitting on hundreds of billions thanks to the "world panic." this is real money so if the boys in the intel complex are looking for some play they can get it anytime they want and they know it. we also apparently almost had a coup in Turkey. this Greece story has all the hallmarks of "a big one" and is therefore far larger than about money. needless to say the "moneychangers" are everywhere...for now. but this does involve two very large standing armies and one (the muslim one) should not be there. in other words that Greek army has to be paid for....stay tuned on this one.
In the Tom Cruise remake of H.G. Wells' War of the Worlds, note that at minute 87, just when Tommy Boy is beginning to get the upper hand, there is reference made to some government institution buying Martian War Bonds. Well, I think we all know who that was.
Is The Federal Reserve Buying Greek Bonds?
YES!
Ben doesn't look like the type to dislike the faint odor of fecal matter.
WSJ says:
U.S. Investors Leery of Planned Greek Bond Sale
http://online.wsj.com/article/SB10001424052748704188104575083963408504510.html?mod=WSJ-economy-LeftTopHighlights
You are such a hot head.
seems like the Fed id supporting evryone
They are all criminals
no different to the mafia
but we cannot say anything as they are all Zionist jews.
That would be racist to suggest they are like the mafia
it seems
Ya see, we had this thing where Jews got gassed and toasted, and folks let it happen. We also had this slavery gig. We did some bad stuff with Japanese during WWII. Got lots of genocide going on as I type this. It's just a good policy not to overgeneralize. Bet there are some folks who are Zionist Jews who you would meet in person that you would really like.
Or a hot Zionist babe? And she wants you? Eh? Eh? See what I'm saying?
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